Stocks ended their worst week in a month with more losses Friday, marking the third straight daily loss for the Dow Jones average and the fourth for the S&P 500, weighed by spiking Treasury yields and concerns that Israel’s conflict with Hamas could escalate into a wider Middle East war.  Also adding to the gloomy atmosphere on Wall Street was hotter-than-expected retail sales data along with mixed commentary from a host of Federal Reserve speakers, chief among them being chair Jerome Powell’s remarks at an event at the Economic Club of New York.  For the week, the Dow dropped 1.6%, the S&P slipped 2.4%, and the Nasdaq Composite closed down 3.2%.

Israel’s defense minister told the US to brace for a “long war” against Hamas just as Secretary of State Antony Blinken returned to Israel for further talks amid a global push to prevent the conflict from spreading. This could take the US into another war that would drive up deficits even further from current levels.

Markets are growing jittery and it is hard to believe that we are actually in a bull market since October 2022 when the stock market hit bottom.

Future Wealth’s View

In a seminal moment when good news is bad news – Treasuries sold off sharply early Tuesday after Sept. retail sales figures came in much stronger than expected driving yields higher and prompting a sell off in stocks. The rationale, of course, was that treasuries with higher yields offer a safe sanctuary than stocks notwithstanding the fact that when retail sales stay robust, the economy remains strong which means US companies will benefit from strong growth.

There is no doubt that world leaders are worried. With no end in sight and potential escalation looming, the conflict between Israel and Gaza could arguably erupt into a wider war in the days and weeks to come. Even as economists raised their US growth projections through early 2024 and trimmed recession odds to a one-year low as consumers continued to spend, the prospect of the US entering another unending war has investors shifting to safety in treasuries and in the process curbing the pace of growth in the nascent bull market.

But, make no mistake, we are clearly in an environment where economic growth is bound to improve. All it requires is some patience. Here is something we tell our children but is one we need to practice as well – Patience is a virtue.