Markets Skyrocket After Iran Ceasefire; Bonds Also Gain
Good morning,
The Dow (+3.0%), NASDAQ (+4.7%), S&P 500 (+3.6%) and EAFE (+4.4%) all exhibited sharp gains last week. Similarly, taxable bonds gained 0.3% and tax-free municipal bonds gained 0.8%. The 10-year Treasury yield rose 0.02% to finish the week at 4.32%.
As with the past several weeks, the main driver of the markets has been the war with Iran, because it manifests itself into a disruption in 20% of the world’s oil supply that runs through the Strait of Hormuz, which is under the control of Iran. A 2-week ceasefire was established, which caused oil prices to quickly fall and stock prices to rise sharply. However, long term peace negotiations failed over the weekend, which has raised risk of the conflict lasting longer than hoped. As a result, oil prices are rising again, and pushing above $100 per barrel.
Outside of the Middle East conflict, key inflation gauges were reported in line with expectations and comparable to the prior month. To be clear, though, the Fed-favored Personal Consumption Expenditures (PCE) was reported for the month of February, as the data is still lagging from the gov’t shutdown. The more commonly known Consumer Price Index (CPI) was for the important month of March, as it incorporated the rising energy prices as a result of the Iran war that began on February 28. In fact, core inflation fell from February, but energy prices jumped 10.9% to push the overall (headline) inflation up by 3.3%.
We are now entering quarterly earnings season, which is expected to be a good one. However, it seems that investors will be focusing less attention to earnings from the prior quarter, and more on the impacts to corporations due to the sharp rise in energy prices, and the trickle-down effect it can have on consumers. So, like we’ve seen since the beginning of the Iran conflict, don’t be surprised if earnings are masked by the headlines surrounding the US / Iran conflict.
Have a great day and terrific week!
Source: Yahoo Finance
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. Government bonds and Treasury bills are guaranteed by the US government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.
