Global headache

We are starting the third week of the conflict and Hormuz is still effectively closed. Even though Iran says that ships that are not American or Israelis can cross, insurance companies have not changed their position, as the risks continue to be too high. Oil is slightly down today, but is up 16% over the last week alone. As you can see on the table below, Emergy is now the leader sector of the S&P500. And this creates a conundrum: if the conflict eases and oil flow is re established, perhaps oil will go down, and the Energy sector will correct. But what sector will lead the U.S. stock market? The Mag 7 are not in a position to regain the lead, banks are too concern with Private Credit to lead, and are also negative YTD. Will it be the defense sector, Healthcare or Consumer staples? Depending on who the leader becomes, we can see what the prospects are for the rest fo the year. We will see if investors are playing defensive or are on the attack. If this wasn’t enough, on Wednesday, the FOMC will likely leave rates unchanged, perhaps on the back of the oil spike as well, and rumors on a potential delay with the meeting between Xi and Trump due to the Iran conflict will also affect the trade negotiations between the two powers. The 21 miles in Hormuz are becoming a global headache.

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