Making sense of this crazy world
It’s not been a good week!
Is there a World Cup on? How disappointing Wednesday was!
Not helping my sentiment is the pain from the knee replacement I had done on Tuesday too. I will soon turn the corner, I’m sure. I can’t be as optimistic though about the outcome of the Iranian conflict. Stock and bond markets reacted negatively as escalating military tensions around the Strait of Hormuz forced investors to turn the pages of the script, yet again.
This has led to downbeat forecasts from analysts and investors who had recently been optimistic about the war ending in the Middle East. Economists are now projecting slower global growth.
Brent oil rose above $85 a barrel for the first time in time in a month as Trump reinstated a blockade on Iranian ships. At the start of the week, he was demanding a 20% fee on all cargo but did an about-turn within 24 hours on advice from many quarters. It appears, at times, that he throws a number of punches and just hopes a few of them land!
Technology stocks have once again come under significant pressure. The Nasdaq Composite dropped 1.5% on Thursday as a fresh wave of volatility weakened markets. Memory and computer storage makers faced heavy losses. The disruption extended to Asia, with the Nikkei 225 index falling by 5%. Markets in South Korea, which have faced the most volatility from the AI trade, were closed.
Economically there was some good news for the US with inflationary pressures easing. It appears that despite the changes around the rising oil price, consumers are still spending and employment figures are strong.
A number of investment banks delivered fantastic earnings this week. There is a close correlation between the momentum of tech stocks and the valuations of investment banks.
Whilst the news flow this week has generally been negative, we take a look again at China through the lens of Ben Kumar from 7IM.
Domestically, the markets are focussed on who will be the next Chancellor. Shabana Mahmood is widely reported as the favourite and in many quarters, she is thought to be a continuum of Rachel Reeves. The markets certainly don’t seem to favour Ed Miliband.
This weeks content:
- Iran conflict escalates
- Tech stocks sell-off
- Good economic news for the US
- Investment banks, a proxy for tech stocks?
- China is making a comeback
- Who will be the next Chancellor and why does it matter?
- Conclusion
Iran conflict escalates
The number of oil tankers moving through the key energy chokepoint has diminished to a trickle because of the fighting.
Oil prices rallied as strategists warned the Strait of Hormuz hasn’t been open long enough for countries to restock oil inventories. The price of precious metals also dropped on the prospect of more inflation fuelled interest rate hikes leading to an economic slowdown (Source: Bloomberg).
Stocks and bonds fell as a result.
Continues…
Want to get this in your inbox?
Our CEO, Gary Neild, writes engaging Market Commentaries every week. If you would like to receive the full version straight to your inbox every Friday, please join our communications list.
Risk warning
Please Note: This communication should not be read as giving specific advice regarding your personal circumstances. This would only be given following detailed assessment of your individual needs. The value of investments may fall as well as rise; you may get back less than invested. Past performance is not necessarily a guide to future returns.