Good morning,
I had a refreshing one-week break—thank you. The market, however, did not follow suit.
The S&P 500 has now declined for four consecutive weeks and is on track for its worst month in the past year. The central question remains unchanged: when does the Strait of Hormuz reopen? If and when it does, I suspect the market will declare the conflict effectively over—well before any formal agreement is reached. The Iranians likely understand this dynamic as well.
History shows a remarkably consistent pattern of positive equity returns following geopolitical crises. In this case, however, the Strait appears to be Iran’s primary leverage—and deploying it against Trump introduces an added layer of unpredictability. The market’s patience is wearing thin. Notably, equities have continued to sell off this week despite oil prices sitting below last week’s levels.
Looking ahead, the more pressing question is what comes after the conflict. The longer this drags on, the greater the probability of recession. Just a month ago, expectations for global economic growth were strong—resilient enough, in fact, to absorb a temporary disruption in Middle East oil supply. But without a clear timeline, confidence is beginning to erode. And confidence remains the critical dividing line between continued expansion and a potential recession later this year.
Four weeks ago, market signals leaned constructive. While we are not yet in outright bear market territory, conditions have clearly deteriorated. At this pace, it likely won’t be long before indicators shift more decisively into cautionary mode.
Be well,
Mike