Rising interest rates and stretched tech valuations signal a potential exit warning as indices flirt with record highs. Geopolitical tensions in the Persian Gulf pressure shipping costs while Microsoft hardware supports drone defense.
Warning signs have built up for months - rates most recently; excess price levels for mega-cap tech even before. So many are prepared for downside; but apparently not upside, which is what the market generally tries preferring.
Meanwhile Friday's market action was satisfactory ... especially considering the outsized 45k expiring ONDS Call options (high for just a weekly Expiration).
Some discussion Friday about the U.S. having blundered with the prior 'MOU' Agreement; but not delineating control aspects (or lack) of the Hormuz Strait; and for now we are waiting out Iran by squeezing financially; and that's about all. It's not an acceptable 'state of affairs' for 'customer' countries (we are not a customer of them; and might be viewed as competition especially in LNG); so you have the Gulf states and the (mostly Asian) customers upset about it.
Shipping risk remains extreme.. both Persian Gulf and Red Sea lanes are for sure the bane of insurance costs. We (America) can wait this out; most others are not of the same inclination. Iran has not moved 'at all' from what I can see in the various comments emerging from New York (everyone there for the UN) this week; and there might be a 'take a chance' revolt 'by' Persians against all the mullahs and IRGC within the next few weeks; 'if' they perceive impotency from the American Congress should there be a Democrat sweep. I haven't an opinion on that; just reiterating what's being discussed in global press about it.
Market X-ray: you know the pattern; with more new lows along with fewer new highs, even as key Indices flirt with (and sometimes make) new records. In some situations, especially with global interest rates on the rise, that's an exit warning; and may be (or in this case those seeking to do so did long ago).
That might be why the market holds up so well; and we're not complaining.. even as we disdain chasing expensive stocks, we care about the backdrop being at least copacetic enough for the new-era tickers to behave on their own merits (or trading shuffles) essentially minimally-related to that of the broader and/or bigger-cap market. More next week.
Bottom-line: we're watching for end-of-Quarter finales in-terms of 'use it or lose it' Federal 2026 'fiscal year' spending awards; though it's uncertain if some Government entities are even thinking that way (I suspect so; but never know).
Just hearing that Microsoft (MSFT) 'X-Box' controllers are so far doing a decent job managing drones for the US Navy in the Persian Gulf region is an example 'both' of simplicity of operations as well as opening one's thinking to what could be done with a truly purpose-built controller (ask Unusual Machines; they have those too). Obviously we need hardened equipment and all that shows is that the Navy was well prepared for prior warfare and not exactly geared-up for drone warfare. I have pondered that before; given years of war in Ukraine, plus Israel's long experience intercepting drones should have let our Forces be equipped better (and at lower cost) for intercept air-defense.
Disclosure:
This is an excerpt from Gene's Daily Briefing (distributed nightly), which typically includes videos as well as more charts and analysis.
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