What we learned last week:
“There ain’t no sunshine when she’s gone, it’s not warm when she’s away… – Ain’t No Sunshine, Bill Withers, 1971
Wall Street’s three major indexes all finished the week substantially lower, marking the fourth week in a row of declines.
Rays of light will come when investors’ fears over oil prices remaining higher for longer are put to ease.
Several economic events to note in this week’s Monday Market Compass however last week markets were mostly impacted by events coming out of Iran, specifically the strait of Hormuz and volatile oil prices.
Fast moving events and information are part of the reason for high degrees of volatility.
Monday President Trump talked about a desire to obtain a collation of countries willing to escort commercial ships and oil tankers through the Strait of Hormuz. By Tuesday there was a discouraging Truth Social post from Trump stating most NATO countries do not want to get involved in the U.S. military action in Iran. Thursday brought a report from Axios that seven U.S. allies announced in a joint statement their support of a potential coalition to reopen the strait of Hormuz.
Adding to concerns in the region last week was attacks on Iranian natural gas infrastructure by Israel. President Trump was quick to publicly state he had told Israel not to repeat these attacks which was an escalation on valuable energy infrastructure.
Turning to the U.S. economy several events underline a bearish investor sentiment. Inflation, interest rates, and the labor market are all under the microscope. Last week it was inflation and interest rates raising investors’ concerns.
First, looking at inflation, the Producer Price Index (PPI) rose 0.7% in February over the previous month, up from January’s 0.5% gain and more than double economists’ expectations. On a year-on-year basis, prices rose by 3.4%, well above estimates for 3%. Higher inflation dampens the Fed’s ability to cut interest rates.
Speaking of the Federal Reserve and looking at interest rates, Wednesday the Fed met expectations when it announced it would hold interest rates steady but sees fewer cuts this year than originally expected.
Concern over inflation and the potential for rate hikes this year, not cuts, caused treasury yields to climb.
For the week ahead events out of Iran and oil prices will continue to drive markets. The week is quite with corporate earnings and economic data putting more of focus, if possible, on any positive or negative information.
What’s ahead this week:
Economic Events
- Quite week on the economic events calendar. S&P services and manufacturing Purchasing Managers’ Index (PMI) reports economic growth or contraction activity for the month of March
- Initial jobless claims for the week of March 21 will be in focus for signs of a weakening labor market with any notable increase in unemployment claims
- Friday’s University of Michigan consumer survey and sentiment index will be looked at for any indications of a weakening consumer.
Earnings
- No earnings reports of note this week.
My goal is for you to feel educated and informed about variables we do and don’t have control over and find ourselves working within. I hope to do it in an informative and relatable way. As always, I value your relationship and planning objectives – my door is always open for conversation.
