Yesterday, we talked about the upward revisions that were made on the economy by the government's Bureau of Economic Analysis (on the five-year period through this first quarter of this year).
It was good enough to assuage some of the concerns Jerome Powell has had on the growth data he and the Fed have made policy decisions around.
With that, markets closed out the third quarter with the S&P near record highs and with tailwinds of a Fed easing cycle underway.
Today, we start the first day of the fourth quarter with an Iranian attack on Israel (and related global war threat escalation) and a supply disruption from a port worker strike which is compounded by already stressed logistics and supply issues from Hurricane Helene.
Markets went into risk aversion mode.
Where does capital flow in times of global risk aversion? U.S. Treasuries. Gold. The dollar.
All were up today. Stocks were down.
It started with this headline just after the market opened this morning …
Stocks did this …
So, clearly the big geopolitical risk here is that it pulls in Western allies of Israel, namely the United States, and a global war erupts.
That said, this risk was also contemplated back in April.
And it happened to be right at the open of the quarter.
Let's revisit that timeline.
Israel bombed the Iranian embassy in Syria on April 1st. Stocks topped.
Iran retaliated with strikes inside of Israel on April 13th.
It de-escalated on April 19th after Israel attacked targets in Iran. Iran said it wouldn't retaliate.
That was the turning point for markets, after a 7% decline in stocks, and 9% rise in gold (over 15 trading days).
In the current case, we should expect, at the very least, escalation from this morning's attack.
That should keep markets in de-risking mode and provide more fuel for the commodities bull market.
