Good morning,
The notable developments this week have been firmer inflation data and what appear to have been productive U.S.-China meetings — although few would have predicted Taiwan would emerge as the central issue rather than Iran’s nuclear ambitions and the Strait of Hormuz. Through yesterday’s close, the major equity indices were modestly higher for the week, though this morning’s weakness in Futures (down roughly -1% pre-market) would erase those gains if a softer open holds through the day.
While equity markets have moved relatively little overall, the real action this week has been in the bond market. Government bonds around the world have come under pressure (prices lower / yields higher) amid growing concerns that war-driven inflation could force central banks to maintain higher interest rates for longer. There is also some quiet rumbling — though not yet outright alarm — that rising borrowing costs could eventually challenge the recent advance in equities.
I continue to believe this bull market is likely to endure a pullback, potentially a meaningful one, tied to efforts to force Iran’s hand on its nuclear program and the Strait of Hormuz. At the moment, President Trump would appear to have broad international support on that front. Still, my view remains — and market signals continue to support — that the powerful, earnings-driven bull market ultimately resumes once the geopolitical dust settles in the Middle East.
Hope you have a nice weekend.
Be well,
Mike