Good morning,
There is not much in the way of fresh market insight this morning. For now, two variables are largely in control of market performance: the peak price of oil and the duration of the conflict—how high oil goes and how long it stays there. How long the war ultimately last. Both variables appear to have moved incrementally higher with each passing day since the conflict began.
The result has been predictable: higher commodity prices (oil now above $80/barrel), higher yields (the U.S. 10-year Treasury up roughly 20 basis points), and lower equity prices. Of the three, equities have behaved relatively well. The S&P 500 Index is down only about 0.68% this week through last night’s close. Perhaps the equity market still believes the conflict will end sooner than current estimates suggest.
This morning’s employment report came in surprisingly weak; a potential drag on economic growth at the same time oil prices are spiking. That combination edges the macro environment closer to stagflation—not an ideal backdrop for any new Federal Reserve Chair. One data point does not make a trend, but in a week already dominated by geopolitical events, futures are pointing lower this morning (roughly –1.35%).
Market signals have not collapsed, and for now, it still pays to remain calm—even when those around us may not.
Be well,
Mike