By Rick Schwerd |
Our investment team remains committed to sharing updates and market insights to keep you informed. Please look for
our next update on April 3.
Iran War Weighs on Markets
Iranian attacks have continued to effectively shut down the Strait of Hormuz and target oil and natural gas
infrastructure in the Middle East. As a result, global equity markets have moved lower. We have not seen panic
selling in markets, but with the uncertainty of the situation and with little else for investors to focus on,
markets have been grinding lower. With first-quarter earnings season still nearly three weeks away and with recent
economic data coming in neutral to slightly negative, markets are likely to remain biased to the downside until we
gain more clarity on the path forward.
The S&P 500 has lost 5 percent over the last month and is down
more than 4 percent year-to-date. The more value-oriented Dow Jones Industrial Average has fared worse, down 7
percent over the last month and now 4.5 percent lower year-to-date. The tech-heavy Nasdaq has also fallen, down 4.5
percent over the last month but remains the laggard year-to-date, down 6 percent.
Oil Price Surge
Not surprisingly, the price of oil has surged since the start of the war. West Texas Intermediate (WTI) crude oil is
currently trading just below $95 per barrel, up 44 percent since the start of the war and 67 percent year-to-date.
Brent crude oil is 52 percent higher since the beginning of the war, currently trading at $109 per barrel. WTI is the primary benchmark in North America, whereas Brent is the
primary benchmark for Europe, Asia and Africa.
Petroleum is used throughout the economy for transportation, energy generation, manufacturing and more, so the higher
cost will result in higher inflation. How much will depend on how high prices climb and how long they remain
elevated. Prospects for higher inflation have pushed back the timing and number of potential Federal Reserve rate
cuts. Prior to the war, economists were predicting one to three 0.25 percent cuts this year, likely to start around
June or July. Now, expectations are for one or no rate cuts, with any cut not occurring until fall at the
earliest.
No Changes at Fed Meeting
The Federal Reserve held its March meeting this week, with no changes announced. Their commentary was measured, still
slightly on the dovish side but fully aware of the uncertainty of the current environment. Chairman Powell freely
acknowledged the Fed does not know how this will unfold. So this measured, even dovish take is only an interim
update, and the Fed posture could shift as it learns more. Twelve of 19 officials still predict at least one cut
this year.
Keep Calm, Stay the Course
At times of uncertainty, it is normal to be concerned about your investments and retirement assets. We continue to
remind clients to maintain a long-term view and not to make emotional decisions. The S&P 500 has averaged a 10
percent annual return over the last 100 years. We do not need to detail all the difficult periods and doomsday
scenario predictions during those 100 years. However, maintaining a diversified portfolio, with an appropriate
allocation to equities, remains one of the best ways to beat inflation and grow wealth over time.
Have a great weekend and happy first day of spring. As always, if you have any questions or concerns regarding
markets or your financial planning needs, please reach out to us at (518)
415‑4401.
About the Author: With almost three decades of financial industry experience, Rick serves as a
Senior Investment Officer at Arrow Bank. He oversees individual and corporate retirement plans, personal trusts,
investment management accounts, foundations and not‑for‑profit relationships.