The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Iran situation
The S&P 500 fell a bit today, opening down about 5 points and wandering around in the red all session. Concerns about what the US might do to Iran have been bouncing around for a week but today they became more significant. President Trump stated that we’d know if a deal with Iran would be struck in the next 10 days. Trump has already moved significant military assets into the area so naturally the world is wondering whether a US military strike will happen or not. The market isn’t terribly worried, US Treasuries only rallied small and the stock market fell small. These are risk-off moves in miniature. As the tension increases, risk-off will continue. How bad will it get? That’s the question of the moment.
Considering how the US and Israel attacks of last year played out, the market is not too concerned about a poorly executed attack nor a dangerous counterattack nor longer-term blowback. There’s always the risk of things going wrong so markets are a bit jumpy but investors aren’t getting caught up in their emotions either. I’m sure some are already speculating on regime-change in Iran and the consequences of that… but the catalyzing events have to play out first. The dip-buyers will be vindicated only after the smoke clears and things look promising.
While we wait, it’s likely that stocks will be range-bound. I highly doubt markets will push stocks up with this obvious risk hanging out there. Considering how confident the market is in either an Iranian agreement or a successful US strike, I don’t think there’s much downside either. The downside risk, from this latest US/Iran situation, lives in some surprise outcome that is very negative for the US.
I don’t know what that could be. I doubt many of us do. At this point, it’s just an unknown *bad* outcome. Hopefully it never happens, but if it does, that’s how stocks could drop significantly.
We are *mostly* a one-issue market right now. Iran is the issue. Certainly other things could show up and hog the spotlight, a Bitcoin collapse, a private equity/credit panic, a concrete AI-scare…. Or some other recent risk returning… but unless something major happens all those simmering risks are quietly on the back burner.
It’s Iran until it’s not Iran.
See you tomorrow.
-Mike
Visdom Market Commentary
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