Forecasting the weather is easier than forecasting the timeline and outcome of a war. The expression "the fog of war" is a bit confusing because fog often lifts within hours. Wars last much longer. Today, we had "a break in the weather." The war is ongoing, but there were sighs of relief in the energy and financial markets. That's because some tankers are getting through the Strait of Hormuz, especially those heading for China and India. We said we needed to see that happen to lift the stock market (and our spirits). We've often observed that geopolitical crises are buying opportunities in the stock market. We were expecting a 10%-15% correction in the S&P 500, but the 5% decline from the January 27 record high through Friday's close might be the extent of the damage.
Also uplifting is this week's cover story of The Economist titled "An Attack on the World Economy." For contrarian investors, a bearish cover story is a very bullish signal. Our recommendation to Go Global might make a comeback sooner rather than later.
Financial markets were mixed today as investors weighed easing oil prices against renewed enthusiasm for the AI buildout:
(1) The S&P was up for what feels like a nice change, rising 1.01% today. It rebounded off its 200-day moving average (chart).
According to Polymarkets.com, the odds of a recession this year edged down to 31.0% today (chart). The S&P 500 tends to be inversely correlated with this series.
