Stocks and Bonds Advance on Hopes of Iran Conflict Resolution

Good morning.  We hope that everyone had a wonderful Passover and Easter holiday weekend.

The Dow (+3.0%), NASDAQ (+4.4%), S&P 500 (+3.4%) and EAFE (+3.6%) all exhibited strong gains last week.  Similarly, taxable bonds gained 0.9% and tax-free municipal bonds gained 0.6%.  The 10-year Treasury yield fell 0.12% to finish the week at 4.30%.

It’s difficult to reflect on last week, as it seems like ancient history when every passing day and hour is filled with news and changes regarding the conflict with Iran.  Each time there is a sign that the conflict may end soon, the markets rally sharply.  That suggests that the markets “want” to move higher.  Clearly, the biggest financial impact is the flow of oil through the Strait of Hormuz, which represents about one fifth (20%) of the world’s oil supply.  Oil prices have risen to $110 per barrel, and are driving gasoline prices over $4.00 per gallon, which impacts nearly all Americans daily.  While this is expected to be temporary, the longer this lasts, the greater the threat to inflation.

Masked almost entirely by the daily and hourly news from the Middle East, strong economic data was reported last week.  Retail sales exceeded economists’ expectations, as well as the Institute of Supply Managers (ISM) Manufacturing report, except that the Prices Paid index rose sharply again for the second consecutive month.  Lastly, the March jobs repot also came in stronger than expected, with a 178,000 gain in jobs, well above expectations of 59,000, and the unemployment rate fell to 4.3%.

Have a great day and terrific week!

^{Source:  Yahoo Finance}

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^{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.}