Short On Time… Executive Summary
The market is stuck until Iran is resolved. The media and markets are so focused on oil, nothing else can move. Fortunately, diversified portfolios aren’t off a tremendous amount. If you just own the tech-heavy S&P 500, you’re down over 7% this year. More balanced allocations are close to flat. Thus, the case for diversification. I think we are at a point now where we just want the situation in Iran to come to full resolution as quickly and safely as possible. I don’t see how it is resolved without troops on the ground. Hopefully there is none to minimal loss of life when that happens. If you aren’t familiar with Kharg Island, familiarize yourself. Just Google Kharg Island. U.S. troops there seem inevitable. If this happens, oil will spike more and then should finally settle down as this seems a necessary domino to fall to bring all of this to a conclusion. Whether or not one supports this Iran incursion is of no matter at this stage. You cannot run by and punch a bully in the face and keep running. The bully will track you down. You have to finish the job. Unfortunately, that is just where we are now.
Now the good news, the economy is still hanging in there. All the talking heads love to tell you how we will have a recession when oil hits this price or that. They have no clue. Remember last April when the tariffs and down market were going to cause an inevitable recession. But, they didn’t. I suspect once the inevitable outcome from the paragraph above takes place, oil will settle down and markets will move on to the next crisis du jour. Until then, take what you hear in the media with a grain of salt. I was at the mall over the weekend. It was full. Restaurants are full. The airports are busy. Take it from the man on the street, the economy is holding the line. We’ll keep an eye on unemployment. As long as people have jobs, they spend money.
This is also holiday shortened week. Markets are closed Friday for Good Friday. So, Thursday could bring about volatility as the weak hands may be nervous to own stocks over the long weekend. This too, shall pass.
The Week On Wall Street
Stocks ended a challenging week lower as investors' attention shifted from updates on ceasefire talks to concerns about the economic impact of a protracted conflict.
The Standard & Poor’s 500 Index lost 2.12 percent, while the Nasdaq Composite Index fell 3.23 percent. The Dow Jones Industrial Average slid 0.90 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, ended the week flat (-0.05 percent).
Challenging Week
Stocks opened higher to start the week as fresh optimism for a resolution to the Middle East conflict permeated market sentiment, and no further news on Iraq’s force majeure declaration appeared to help momentum. Both the Dow Industrials and S&P 500 booked their best day since early February as the White House reported "very good and productive conversations" to end hostilities. Markets were under pressure on Tuesday but staged a recovery rally midweek amid reports that Pakistan was mediating ceasefire talks. All three major averages posted solid gains, though it appeared that retail investors remained on the sidelines. The upbeat sentiment was short-lived. Markets were under steady pressure Thursday despite news after the close of trading that the White House was extending the previous pause on military strikes on Iranian energy infrastructure by an additional 10 days. The selling picked up on Friday. The Nasdaq and Dow Industrials fell into correction territory, while the S&P suffered its longest weekly losing streak in almost four years.
Sector Spotlight
Some investors have turned to energy stocks during the volatility. At the close of trading, 19 energy stocks in the S&P 500 traded at their 52-week highs.
This Week: Key Economic Data
Monday: New York Fed President John Williams speaks.
Tuesday: S&P/Case Shiller Home Price Index* (Jan.). Consumer Confidence. Job Openings. Fed speeches: Austan Goolsbee (Chicago), Michael Barr, Michelle Bowman.
Wednesday: Retail Sales* (Feb.). ADP Employment Report. Business Inventories* (Jan.). PMI—Manufacturing. ISM Manufacturing. EIA Petroleum Status Report. Fed speeches: Alberto Musalem (St. Louis), Michael Barr.
Thursday: Weekly Jobless Claims. Trade Deficit (Feb.). Fed official Lorie Logan speaks. Factory Orders. EIA Natural Gas Report. Motor Vehicle Sales. Fed Balance Sheet.
Friday: Employment Report. PMI—Services.
This Week: Notable Companies Reporting Earnings
Wednesday: Nike, Inc. (NKE), McCormick & Company, Incorporated (MKC/MKC.V)
Stay tuned...
