Inflation data surprised to the downside, shifting the rate narrative. Consumer Price Index(CPI) came in at 3.8%, a drop from 4.2% last month signaling that inflation pressures are easing, even as energy volatility remains a wildcard.
In just 24 hours, on another Tuesday, Donald Trump reversed his threat to potentially violate international law by demanding a 20% fee for passage through the Strait of Hormuz. It was TACO (Trump Always Chickens Out) Tuesday all over again. Trump said US allies in the Persian Gulf urged him to drop the plan, and claimed his fee would be replaced with unspecified investment deals. But everyone, including Iran, had already dismissed his threat as unworkable and unlikely to be implemented. And, of course, no one believes anything that Trump says anymore.
Earnings season started to matter more as a support for equities. All the banks reported strong results and good loan growth as well as robust investment banking activity spurred on by the Space X IPO and several more to come in the months ahead. But, IBM and Netflix disappointed in their results and guidance, driving the tech segment lower and taking the Dow, S&P 500 and the Nasdaq with it.
For the week, the S&P dropped 1.5%, Dow declined 1% and the Nasdaq fell 2.9%.
Future Wealth’s View
The Iran war has been nothing but a disaster. Four months into the war, the Trump administration still has not identified an effective strategy to reopen the strait. Instead, Trump simply asserts that the Strait of Hormuz is open or under U.S. control — over and over again. Trump shifts abruptly between claiming the strait would open soon, claiming the strait was already open, and claiming the strait was closed only because he decided to close it. At no point were any of these claims accurate. The Trump administration’s failure to anticipate Iran’s response to a U.S. attack will go down as one of the biggest military blunders in recent history.
Disappointing results from IBM and Netflix only reinforces our view that the market is rotating away from technology onto other areas that have been ignored for a while. We believe that rotation into Financials, Healthcare and Industrials has already begun and those investors who hold onto their technology positions will likely feel the pain as the earnings season progresses with several tech companies scheduled to report this week.
It is always better to take profits than see it vanish.