Stocks rallied on Monday because President Donald Trump postponed his 48-hour ultimatum on Saturday to "obliterate" Iran's power plants if the country doesn't fully open the Strait of Hormuz. Yesterday, he extended the deadline by five days, until Friday, while talks with Iran continue.
Investors and traders recall that stocks soared on April 9, 2025, an hour before the stock market closed after Trump postponed his Liberation Day tariffs. That morning before the stock market opened, Trump tweeted, "THIS IS A GREAT TIME TO BUY!!!DJT." It was great advice.
On Monday, Iran denied that any talks were underway. Trump responded: "I’m not sure what [the Iranian media] is talking about... we had discussions last night, and there could be a deal with Iran in five days or sooner... You're going to see those oil prices fall soon, they're already coming down, and they're going to keep falling." That could turn out to be timely advice again! Tonight, oil prices fell by about $5.00 a barrel after Trump reiterated this afternoon that Iran agreed that it will never have a nuclear weapon.
Meanwhile, the US and Israel didn't stop obliterating Iran today. In addition, the Pentagon announced that approximately 3,000 elite paratroopers from the 82nd Airborne Division are deploying to the war zone. These "Global Response" forces are designed for rapid entry and can be on the ground in under 24 hours. That's in addition to the 2,200 Marines who will arrive on Friday.
Interestingly, defense-related ETFs have been down slightly during the war (chart). That might imply that investors expect a short war. Or else, they figure that spending millions of dollars on weapons that can be destroyed by cheap drones isn't a good idea.
On the home front, the odds of a US recession remains around 35%, according to Polymarkets.com, despite the huge jump in gasoline prices, which might depress consumer spending (chart).
In any case, the Redbook Retail Sales weekly index rose solidly by 6.7% y/y during the week of March 20 (chart). So far, consumers are still spending in line with this index.
