If January and February felt calm, the past few weeks have reminded us how quickly things can change. One phrase you’ve heard us say before is that “markets hate uncertainty,” and that has certainly been the theme lately as geopolitical tensions in the Middle East -particularly the war in Iran – have dominated headlines the past few weeks.
One of the most immediate impacts has been in the energy markets, where oil prices have risen significantly since the joint attacks began. How many of you have tanked up your car lately? While not at the same levels, filling up my car the other day sort of reminded me of when we saw gas prices last surge during the rebound after the pandemic. I started to feel like I was having ‘car-owner virus’ all over again!😊. Much of this concern centers around the Strait of Hormuz, one of the most important shipping routes for global oil supply. When traders begin to worry about disruptions in that region, oil prices tend to react quickly. Higher energy prices can ripple through the global economy, which is why the stock market has been paying such close attention.
As a result, the broader market has started to show some weaknesses after spending much of the past year moving steadily higher. Recently, the S&P 500 has tested some key support levels that technicians watch closely. Another indicator that has deteriorated in recent weeks is market breadth, which is a measure of how many stocks are rising versus falling. In other words, more stocks have been participating in the pullback rather than just a few large companies.
So, it’s no surprise that we’ve seen volatility pick up. As of this writing, March 16th, the VIX index – often referred to as the market’s “fear gauge” – finished just below 25. For your reference, a VIX reading of 25 is considered high, representing elevated fear and increased uncertainty. While it doesn’t necessarily mean a major downturn is imminent, it does suggest things will be bumpy in the short term until uncertainties and concerns subside.
But despite the recent turbulence, it’s worth remembering that longer-term market signals have not yet shifted dramatically, with many indicators still showing the broader trend intact even if short-term conditions have become more unsettled. This is exactly why we rely on a disciplined, data-driven process rather than trying to predict headlines or guess where markets might go next.
As always, our approach remains the same: we monitor the data, follow our tactical strategies, and allow our managers to adjust as conditions evolve. While the headlines may feel intense in the moment, periods like this are not unusual in the history of the markets; markets will always go through periods of uncertainty – that’s normal. The key is to stay disciplined and that’s what we do. But if you do have any concerns or would like to revisit, please don’t hesitate to reach out. Otherwise, we’ll continue doing what we always do – letting the data and process guide the way.
