“If Iranian leaders are, as Donald Trump says, ‘begging’ him for terms to end the war, they have a very odd way of showing it.”
Bloomberg
I recently read a written piece by a very smart and well-respected, former Wall Street strategist comparing the war in the Middle East and the upcoming world energy shock to COVID. The point of the piece was that investors were complacent with the early stages of the war, much like the early stages of COVID when investors didn’t seem worried as the initial cases started rising. Then the cases multiplied exponentially, people started dying and then everyone panicked. Fast forward to today’s Middle East conflict, we all know about the upcoming fuel issues, we all see the prices at the pumps rising on what seems to be a daily basis. The Strait of Hormuz is closed, resulting in more than 15 million barrels of oil, not including other products that have stopped flowing. Predictions are that some countries are struggling to conserve fuel and that some countries might even run out of certain fuel types. Scary, right? I also read articles and listen to commentators speaking about how the U.S. consumer is in great shape, consumer spending is great. The AI revolution and the Industrial Revolution will continue forever. And being an optimist and a big fan of the greatest country on earth, I tend to lean towards the resiliency and innovation of the Americans and the United States. But the truth of the matter is that no one knows, not even my Magic 8 ball knows. I have no idea how the conflict in the Middle East will end. What I do know is that it will eventually end. But I do know this… Please look at the chart of the S&P 500 below:
Fact Set: S&P 500 monthly
The chart above is a monthly chart going back to January 1, 2000. Since then, investors have witnessed:
- The Great Financial Crisis
- The Dot-Com Bust
- S. credit downgrade in 2011
- September 11th terrorist attacks
- COVID-19
- Too many more events to list
So, do you get the big picture? The real story is that the markets are higher despite all the scary headlines, market-moving events and the pundits giving all their short-term advice. Investors that stayed with their plans, allocated properly according to their specific goals, risk tolerance and objectives, and that didn’t let headlines and short-term events change their investment plans have been rewarded. As my good friend and advisor Bobby G. would say, “it’s all about time in the markets, not timing the markets.”
Below are a few short-term concerns that we feel need to improve that will help stabilize markets and reduce some of the daily volatility in markets we are experiencing:
- Crude oil prices will need to stop moving higher.
- S. Treasury yields/interest rates need to stop moving higher and begin to retrace to lower levels.
- The U.S. dollar needs to stop moving higher.
- The Volatility Index needs to stop moving higher.
These concerns tend to reduce liquidity in markets and lead to lower market prices.
Conclusion:
As we navigate this difficult time, it’s important to speak with your advisor to review your plan and adhere to your goals. As always, your confidence and trust in us are much appreciated and if you have any questions, concerns, would like to chat, or throw us a referral, please do not hesitate to reach out.
Thank you,