I’m undertaking a 1000-day reinvention project, blogging here daily to track my progress. In Monday Money, I write about money management.
The U.S. stock market seems to be mostly shrugging off the long-term consequences of the United States / Israel attack on Iran over the weekend. As of right now, S&P 500 futures are down about one percentage point, and the Nasdaq composite one and a quarter percent.
Meanwhile, gold and silver are up a little, and crude oil is up almost 8%. The U.S. 30 year treasury bond yield is up about .7%, suggesting that markets are pricing in more inflation. Bond yields go up when investors demand more compensation for holding long-term bonds when they expect the principal to be eaten away by inflation. The dollar is up against major currencies, reflecting a flight to safety (not seen in U.S. treasuries) and that oil and most global trade is priced in dollars. Crude oil, not surprisingly, shows the biggest change: WTI front month future up 8%.
I am somewhat positioned for this situation, holding pretty significant allocations to gold in all my accounts and a moderately sized speculative position in silver. I have more energy that most investors do, although I sold a large midstream position last fall after watching it slowly deteriorate throughout the year.
Today is my portfolio buy/sell day so I have a chance to adjust my portfolio should I think that the market is not pricing in the reality of what we are facing. Or I could just assume that this is going to be over quickly given the current presidential administration’s love of quick wins (or at least declaring quick wins even when they didn’t get one).
I don’t think this is a “buy the dip” day for U.S. large caps. They’ve gone mostly nowhere since last November (while there were large moves under the surface), and I expect that to continue. Equity valuations fall slowly when there’s inflation, and this attack seems likely to boost the likelihood of inflation due to disruption of the oil trade.
I do think this situation provides more tailwinds for precious metals, and they haven’t reacted very sharply to the war news, so that might be something to buy today.
And, I believe that the rotation out of U.S. stocks into rest-of-world stocks will get back into gear soon. So today could be a day to pick up rest-of-world stocks (though I imagine things will get worse for them before getting better).
I’m going to end this by saying I’m not sure what I’ll buy or sell today. It seems to me that precious metals and energy are probably the best place to be right now, but is it too late to add more?