Wall Street ended the week substantially lower as concerns about the conflict in the Middle East lingered and oil prices stayed higher at around $100 per barrel. Meanwhile, the Federal Reserve announced its decision to keep interest rates unchanged, as widely expected. The Fed cited the uncertainty of the Middle East conflict weighing on the economy and projects that higher energy prices could raise inflation.
In addition, the February Producer Price Index (PPI) came in hotter than expected, increasing by 0.7% month-over-month, compared to the expected 0.3%, and Core PPI, excluding foods and energy, was up 0.5% month-over-month vs. 0.3% consensus. The Consumer Price Index (CPI) – the key indicator of inflation, is expected to follow the PPI numbers and show an increase in its reading.
Treasury yields rose significantly this week due to renewed concerns about the near-term path of monetary policy after the Fed’s decision to keep rates steady sending gold and other commodities into a tailspin. For the week, the S&P lost 1.9%, while the Nasdaq dipped 2.1%, and the Dow fell 2.1%.
Future Wealth’s View
The stock market had largely recovered from the disastrous tariff announcement last April only to be subject to another whipsawing from the same impetuous decision making source – our President. Three weeks into the war with Iran, Trump is finding himself in a situation very different from his earlier effort at regime change in Venezuela. With thousands dead, a widening war and spiking oil prices, he is now seeking help from other NATO countries to open up the Strait of Hormuz. Leaders of NATO countries are now simply ignoring him after a year of his non-stop abuse and debasement of NATO leaders on TV and social media. Trump is now looking for $200 billion from Congress for the US to fight the war alone even as the US surpassed $39 trillion in debt this week, with the latest $1 trillion added in the past five months.
As long as war continues, investors are left with an energy crisis, and one that appears to be getting worse. Stocks could continue to slide as every sector with exception of energy is on a free fall. With higher treasury yields, bonds are no longer safe haven and neither is gold and other commodities as inflation inches higher.
There is no place to hide for now until TACO (Trump Always Chickens Out) Trump ends or pulls the US out of the war.