Wall Street ended lower on the week as elevated US – Iran tensions remained in focus—with officials signaling the conflict could extend several more weeks—while President Donald Trump seems to insist that the war will be over soon. Secretary of State Marco Rubio indicated to G7 foreign ministers that hostilities are expected to persist for another two to four weeks as Iran’s closure of the Strait has become a headache for the White House, as gas and oil prices have skyrocketed.
Prior to the US attack on Iran at the end of February, economic indicators were already suggesting precarious economic conditions. A dismal February jobs report showed the economy unexpectedly lost 92,000 jobs in the previous month, defying estimations of a 60,000 job increase and dashing hopes of a labor market recovery. Moreover, the unemployment rate is edging toward 4.5% coinciding with decelerating wage growth, particularly for lower income Americans. With high oil prices, the prospect of a recession is rearing its ugly head once again.
For the week, the S&P lost 2.1%, while the Nasdaq slid 3.2%, and the Dow fell 0.9%. The Nasdaq and the Dow are in correction territory.
Future Wealth’s View
The Strait of Hormuz has become the strongest point of leverage for Iran as it fights the U.S. While Trump said there were “productive” conversations with Iranian leaders to ease the pressure on oil prices, Tehran reportedly maintained that “no dialogue” has occurred between the two nations. The administration then followed up with sending a 15 point plan to Iran which was summarily rejected the next day. But, one wouldn’t know it listening to Trump who said that “Iran wants to make a deal”. Truth seems to have become an undervalued quality as President Trump wanders through a litany of exaggerations.
With Trump as President and spokesperson for the US, we are now in a position of having to believe that the enemy’s version of events is more likely to be true than our own. Trump has become Baghdad Bob. Baghdad Bob – whose real name is Muhammad Saeed Al-Sahhaf, served as Saddam Hussein’s minister of information during the Iraq War. He became a source of worldwide ridicule for his bogus claims and brazen lies about his government and the war. Who would have thought our President would come to replace him?
For investors, the United States finds itself in familiar territory. An overstretched stock market, an open ended war in the Middle East, national debt at record levels, rising inflation and collapsing trust. This could get really ugly if Iran does not open up the Strait soon.