The US airstrike last night killed Qassem Soleimani, an Iranian General who commanded Iran’s Quds Force, while he was operating in Iraq.  The financial markets have responded with:

  • S&P 500 (SPX) Futures down over 1%
  • West Texas Intermediate Crude up almost 4%
  • And the 10-year US Treasury Bond Yield down to 1.81%

 

As you know, we have been expecting a correction due to the overbought and highly optimistic condition of the market, and this certainly provides and excuse for one.  The significant gains in the SPX toward the end of 2019 has dragged a lot of investors into the market that we consider to be “weak holders” because they were just following the momentum.  When the momentum changes they are quick to come out because there really isn’t any fundamental conviction – and they haven’t had a chance yet to react yet.

 

It is impossible to ascertain what this means to the market until we see a response from Iran but for now we see no reason the jump into the first whoosh in a market that is historically overbought.  I wouldn’t be surprised to see some initial “dip buying”, but doubt it holds until more clarity from the Iranian conflict emerges.  Our core fundamental thesis remains positive and we will be looking to be more aggressive when our key tactical indicators suggest it, but even after the morning weakness they are historically overbought.

 

Oh, and in the background we have the release of the December ISM Manufacturing report and the Minutes from the last Fed meeting.

 

Past performance is not a guarantee of future results. Index returns are unmanaged and do not reflect the deduction of any fees or expensesAll data points are sourced from Bloomberg as of 01/03/2020 unless noted otherwise.

 




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