Weekly Market Update & SPY Technical Analysis
Markets ended lower last week as tensions in the Middle East escalated, sending major indexes down and oil prices higher. Long sworn enemies Israel and Iran are bombarding one another with military strikes, and many predict that the U.S. is either already involved or will get involved, raising questions on whether or not the government can support another war. Trump’s promise to bring peace between Russia and Ukraine hasn’t exactly gone to plan, and now the Israel-Iran tensions will put even more pressure on the administration.
How does war impact stocks?
Markets have a history of shrugging off war news in a relatively short timeframe. The Ukraine-Russia war at its start caused a similar fearful reaction, but markets recovered despite the ongoing war. However there was a deeper impact of Russia’s invasion of Ukraine, an impact that contributed to rising prices across the globe, especially with Ukraine being a major exporter of agricultural products. The deeper impact of the Middle East unrest is likely to reflect in oil prices, the regions biggest export. Rising oil means higher gas, which will impact transportation and shipping, which can domino into prices of everyday goods. These possible results won’t be seen immediately, but investors should keep an eye on economic reports in the coming weeks to gauge how the key indicators are responding.
To add some fun to the mix, markets are bracing for the Fed’s interest rate decision this week. The Trump administration has repeatedly pressured The Fed to cut rates, which Trump suggesting as much as a 1% cut recently. The Federal Reserve was established to be without political influence in order to maintain their focus on what’s best for the economy, not the president, but markets are also growing impatient with Fed Chair Powell’s reluctance to lower rates. The Fed claims that the fight against inflation is not yet over and lowering rates too soon may push prices back up, which is a valid argument, but higher rates are also limiting many Americans’ buying power and businesses. There is no right or wrong action, but any move must be studied carefully.
Now all this is happening while the U.S. is still discussing trade deals with countries around the globe and tariffs still driving major uncertainty in markets. Although it seems like the market is looking past tariffs, all it takes is one bad development to shock investors.
With all that being said, there’s a lot to watch right now and traders must stay vigilant. The media is full of noise so we’ll be weeding out the fluff and focusing on what matters and what could influence stocks. We can’t control what’s happening around the globe or in the U.S., but we can control our reaction. We have to stay patient and get creative to capitalize on wherever capital flows next, our watchlist is a good place to start. You can review some of our latest picks here.
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