“Unconditional surrender is the demand of a conqueror, not a liberator.”
— Senator Robert A. Taft
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No, with today’s subtitle we do not refer to President Trump’s chest-banging tweet towards the Iranian regime asking for “UNCONDITIONAL SURRENDER”. But rather, we pose it as a question. Will Fed Chair Jerome Powell provide UNCONDITIONAL SURRENDER to Trump tonight and lower interest rates?
Futures markets think no:
Neither does the Fed Whisperer Nick Timiraos indicate a rate cut is coming:
So, all eyes on the update Dot-Plot and all ears on Powell’s press conference this evening.
But, of course, is Trump’s sudden harsh rhetoric towards Iran of importance and increasingly pointing to a US involvement in the conflict. The market is for now still uncomfortably complacent about the situation. Of course, is Iran likely no match towards a joint US-Israeli intervention, but if the US is looking to get rid of a violent regime with violence, the path will not be a bed of roses (closure strait of Hormuz, attack on US bases in the region, scorched earth, etc.)
Anyway, as mentioned, equity markets are still pretty much relaxed about the whole situation. Whilst the S&P 500 and the Nasdaq gave back about a percentage point in yesterday’s session (non-shaded aread), they did catch a breath in after-hour trading (shaded area) and currently seem to be pushing higher again:
Yet, the sell-off was pretty broad yesterday, with only sector up (surprise, surprise: Energy) and over 80% of the S&P 500 constituents lower on the day:
One segment that quite literally got their lights shot out yesterday, were Solar stocks, after the Senate proposed ending wind and solar tax credits by 2028. The Invesco Solar ETF (TAN) lost 9% on the day, whilst some of the stocks included in the index saw much deeper retreats:
But to finish the equity observations on a half cheerful part and in the spirit of “there’s always a bull market somewhere”, Global Defense stocks, as proxied by the Global X Defense ETF (SHLD), continue to rip higher:
The (interest) rates segment was relatively calm, with duration slightly bid on the back of geopolitical tensions. Today should remain calm to in expectation of aforementioned FOMC meeting tonight.
The US Dollar was bid versus all its other G-10 peers,
but again I would point out that the ‘rally’ is weak in comparison to other moments when the US was on the brink of entering a war.
Gold has largely not reacted to the most recent developments in the Middle East, but is becoming a nail-biter as we wait for the resolution out of the triangle:
However, Silver was sharply up yesterday with some follow-through this early Wednesday:
And finally, Oil jumped yesterday, though remains under the panic highs of last Friday:
As I’ve mentioned in Monday’s Quotedian (click here), the best play on Gold was to remain long volatility:
Time's up, more tomorrow - May the trend be with you!
