Mike’s Morning Brief – January 8, 2020

What’s going on in the world…

Market will open with a temporary sigh of relief. Iran responded. The missile attacks launched by Iran that targeted military bases in Iraq, which American troops occupied, were intentional. It seems as the intention was to send a message but not kill any Americans. That, in and of itself, is significant. It provides an offramp from escalation to outright war. It is an important redline that was drawn. Iran toed that line and sent the message. They apparently shot to miss. The Iranian Foreign Minister said the missile launch concluded its proportionate response and does not seek further escalation. How the US responds will mean everything to this situation. President Trump is expected to address the nation this morning. The Futures Market, which was sent sharply lower as news broke, recovered significantly overnight with the possibility of de-escalation. The S&P fell 2%. So did the DOW, which translates to over 500 points. They have since recovered. Global markets were mixed overnight. Some European markets are actually in the red as I type. The price of Oil spiked overnight, but has since retreated lower. Same goes for Gold. Both are safe havens and have proved to be good hedges from Market risk. Both remain elevated and that is expected to continue. The direction of today’s session will likely depend on the US response. President Trump will make a statement this morning, but tweeted last night that “all is well” and seemed to suggest there is a path to diffusion. These are serious and dangerous times. There are no easy solutions. This Market is so tightly wrapped with risk. Its resiliency has been legendary. But how much more can it take? And what’s next? The issue with Iran is not going away. It will certainly have great influence in the Presidential election. Earnings Season begins next week in earnest. It will provide the snapshot of the true health of Corporate America. Expectations are pretty high for an acceleration of growth. We will get the initial Q4 GDP report at the end of the month, to see how strong the US Economy really is. Brexit talks are picking up, with clarity still unknown. The Federal Reserve continues to inject massive liquidity into the Market, namely in the form of backstopping the essential overnight repo market. The Stock Market remains near its all-time highs. Things just don’t feel right. Expect many more bumps ahead. 2020 is going to be an eventful year. Just a week in, it already has been.

Have a great morning,

Mike Frazier

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