Market opens lower again as tensions build between the US and Iran. Risks are rising in the region and throughout the globe. Dangerous rhetoric from the President and leaders in Iran suggests this is not going away anytime soon, and an escalation, even if unintentional, could occur. This is coming when our alliances are shaky. Iran doesn’t really have any allies though. Iran said it would no longer comply with the uranium enrichment limits under the 2015 nuclear deal. How Europe responds will be important. This comes as no surprise, and is actually a pretty savvy move by the Iranians. Iraq passed a vote to kick out the US military yesterday, increasing the uncertainty. President Trump was on Twitter all weekend, and responded by saying that sanctions would result and Iraq would pay for the American support over the last two decades. Oil and Gold continue to climb as safe havens. Gold hit a 7-year high this morning. Bonds are catching a bid too. Interest rates are sliding, with the 10-Year Treasury yield below 1.8%. Global markets were lower overnight. Europe is down roughly 1%. Japan was down nearly 2%. I’m actually surprised the US Stock Market is not down more. The Bulls continue to focus on de-escalation of trade tensions, renewed central bank balance sheet expansions, hints of global economic stabilization and a rebound in earnings growth. Bears continue to point to elevated valuations, skepticism about the ability of a phase one US-China trade deal to boost growth/investment, overly optimistic earnings expectations, monetary policy fatigue, fiscal constraints, geopolitical uprising (particularly Iran and North Korea) and 2020 election uncertainty. The Bulls have had the upper hand. This is another test. The US Stock Market does not seem to be pricing in much of any of these issues and risks. Earnings Season begins next week. That will provide some certainty. Expectations are pretty high with the Stock Market still near all-time highs. The VIX is back above 15. Keep those belts buckled.
Have a great morning,