Updates on the markets and middle east and what else:

I’m providing an updated commentary here from Raymond James’ strategists that provides updated thoughts.  A Raymond James report is likely more helpful than my own comments, I admit, but I will add in a few here anyway. . .

We mentioned how the Straight of Hormuz is so integral to what happens.  First of all, the prices of OIL and natural gas and fertilizer are integral to what happens. . .and these are very much affected by the Straight of Hormuz being either open or shut down.  One the recent news of it being opened, you saw the Dow Jones rise over 1000 points.  While we don’t draw our energy needs to any substantive degree from the Straight, a stifling of shipping through that area for sure affects the global picture and, thus, when closed off we had a massive runup in the price of oil.  This affects us in multiple ways, but most notably at the gas pump and it is, effectively, a cold hard TAX on consumers.  When news broke that the straight was open, Oil dropped from near $100 to $84 a barrel. (I am rounding) And the stock market rallied substantially. 

With the global picture looking somewhat bleak or, at best, unnerving, I have been asked multiple times why the stock market is recovering, of late. We can speculate a bunch here, but I see primarily two reasons:  First, because lower fuel prices help all of us directly – from the gas pump to lower airline and other travel costs, and other ancillary ways. (I’m stating the obvious) But second, is that old adage that the stock market is MOSTLY about corporate earnings. . .and earnings, almost across the board, were UP for the 1^st quarter and still forecasted to be UP for the 2^nd quarter.  This may be the more difficult one to get a grasp of, but somehow corporate earnings just keep plugging ahead as if very little is happening to defy things.

We now stand to see, this summer, what effects all this will have on earnings.  Here is where some additional risk reappears: If earnings are unaffected, then the markets forge ahead. However, if all these very strong earnings forecasts come under dips and revisions (and lower real numbers), then markets could struggle again.

These have been resilient markets, without question, and we’ve much enjoyed it.  Maybe things will simply forge ahead and brush off the minor wounds of recent. (from an old movie: “It’s merely a flesh wound!”)    Time will tell and caution remains important.

See the article here, and as always, let me know what conversations can come from it.

With good regards,

Key