The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
No Answers
We experienced another reasonably quiet day in markets. The morning’s news was uninteresting and the S&P traded slightly higher early. The yield curve steepened some. Crude was down but started climbing. Around noon, news of a new positive step in the US/Iran negotiations broke. Crude dropped immediately and stocks popped. Yields fell a bit. As the day progressed the S&P quietly stayed in the +25 to +35 point range. Crude climbed some. The yield curve shifted lower. The front end continued its morning momentum. The back end reversed it.
The Iran news was the key event of the day. The crude market embraced it immediately, as did stocks. I suspect that stocks are taking their cues from oil but the lead-lag relationship is not clear. It could be effectively simultaneous. The point being that oil markets and stock markets are pricing the Iran situation similarly. They are pricing positive developments as more likely in response to the headlines.
The Treasury market is a bit trickier. Bonds did react immediately to the Iran headline with a drop in yields but it was undone within a couple hours and then re-done, and then some, thereafter. The bond market believed, rejected, then returned to the faith within a handful of hours. Why?
I don’t know. I also don’t know why oil and stocks are so trusting of these positive noises from the Middle East. The promise of pending peace agreements has been common since the beginning and they all been empty.
What do markets do from here if the latest peace promise is yet another disappointment? What do they do if it actually happens?
Seems like we’re going on a ride, regardless.
See you Monday. Have a great weekend.
-Mike
Visdom Market Commentary
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