TheBRRR’s Thoughts

And that’s a wrap on a volatile week.

Leading the story was inflation data that shifted back expectations of interest rate cuts. We’re now down to 2 cuts by end of year with the first one expected in September.

The odds of a June rate cut have fallen from 51% to 26% since last Friday.

Even President Boden Biden weighed in after the inflation data hit, saying he still expects cuts later this year.

This shift extinguished the rally in risk assets as the Nasdaq fell 0.5% for the week after losing 1.5% today alone.

Bitcoin fell by 3% for the week after collapsing by 4% today.

To keep these moves in context, the Nasdaq is still up 8% for the year with bitcoin up by 55%.

Oil and gold moved higher as Iran sparked WW3 fears, announcing imminent retaliation against Israel. We’re covering this story in our featured content below.

I do hope the US takes a leadership role to negotiate peace in Ukraine and Gaza, but I’m not holding my breath.

These wars have escalated too far at a time the world needs to revert to the basics and focus on productivity.

Overall it’s shaking up to be a wild year in the US, headlined by the November presidential election.

There is no end in sight to the out-of-control spending single-handedly supporting the job market and creating headwinds in the battle against inflation, so there is no end in sight to our view that you need to own risk assets - large cap tech and leading crypto assets - in the current environment.

Don’t invest more than you’re willing to lose, have a long-term view, and expect volatility.

When you’re fearful, it helps to zoom out and look at the long-term charts of the Nasdaq and bitcoin. They represent technology in the midst of multi-year network adoption trends. They broadly move in one direction.

Iran to US: Stay Out of Our Beef With Israel

WHAT HAPPENED:

• Tensions are escalating dramatically between Iran and Israel, with Iran threatening significant military retaliation following an Israeli attack on its Syrian embassy. Iran has warned the U.S. that any interference in its retaliatory actions could lead to strikes on U.S. bases in the region. The situation has prompted heightened military readiness in Israel and significant geopolitical concern globally.

• Gold and Oil Prices Spike:

  • Gold: Prices climbed to a new monthly high, reflecting its status as a safe haven amid market uncertainty.

  • Oil: Crude prices jumped over 5% this week, driven by fears of supply disruptions from escalating tensions in the Middle East and potential sanctions impacting oil exports.

WHY IT MATTERS:

• Geopolitical Instability: The threats from Iran come amidst a broader context of strained relations and ongoing conflicts in the Middle East, potentially leading to a significant escalation in regional violence. This instability affects not only the direct nations involved but also has global implications, particularly in terms of oil markets and international security.

• US and Global Response: The U.S. has responded by reinforcing its military presence in the Middle East and coordinating closely with Israel. The possibility of a direct Iranian attack on Israeli territory has led to international alarm and preparations for broader military engagement.

• Market and Economic Impact: The escalating tensions are likely to influence global markets, especially with changes in oil prices and potential disruptions in major financial markets.

ADDITIONAL INSIGHTS:

• Military Preparations: Both the U.S. and Israel are preparing for possible attacks, with Israel putting hospitals on high alert and the U.S. deploying additional military assets, including an aircraft carrier, to the region.

• International Diplomacy and Travel: Several countries, including the UK and France, have issued travel warnings, and there are broader calls for diplomatic efforts to de-escalate the situation.

• Security Measures: The increased security readiness includes a robust military and intelligence collaboration between the U.S. and Israel, highlighting the serious nature of the threats and the potential for a rapid escalation into a wider conflict.
  
  Zerohedge

Stock Market Falls on Friday

WHAT HAPPENED:

• On Friday, major U.S. stock indices plummeted, with the Dow Jones falling by 475 points and the S&P 500 experiencing its worst day since January. The sell-off was driven by renewed inflation concerns and disappointing bank earnings, particularly from JPMorgan Chase. Geopolitical tensions also contributed to market jitters, as reports suggested potential military escalations in the Middle East.

WHY IT MATTERS:

• Inflation Concerns: The resurgence of inflation worries, highlighted by recent economic data showing persistent price pressures, has dampened investor sentiment. This has led to a broad recalibration of expectations around the Federal Reserve's interest rate policy, moving away from hopes for aggressive rate cuts.

• Banking Sector Weakness: Significant declines in major bank stocks, triggered by JPMorgan's warning about net interest income and inflation's impact on the economy, reflect broader concerns about the financial sector's health amid high interest rates.

• Geopolitical Risks: Rising oil prices and the potential for increased conflict in the Middle East have added another layer of uncertainty, exacerbating the risk-off mood in global markets.

ADDITIONAL INSIGHTS:

• The broader market sell-off was not isolated to a few sectors but was widespread across all major indexes and sectors, indicating a general aversion to risk among investors.

• Despite the downturn, certain stocks like Apple showed resilience, suggesting a selective approach by investors focusing on specific growth or stability prospects.

• Market analysts remain cautious, signaling that the recent volatility might not be an aberration but could indicate more fundamental shifts in market dynamics, particularly concerning inflation and interest rates.

Got feedback? Follow the writer on Twitter @frank_locascio and send a message.

The BRRR is meant for informational purposes only. It is not investment advice. Please consult with your investment, tax, or legal advisor before making any investment decisions.ll