So, Brent rallied from $96 to $113 between May 7 and May 18. Equities started weakening in the middle of last week. Bonds are being sold off, and the US 10-year yield has risen to its highest level since last February, while the 30-year yield hit 5.18%, a fresh 19-year record. Both consumer and producer prices are on an upward trajectory in the US and elsewhere. Estimates put the cost of the Iranian war at around $72 billion.
It is difficult to confirm whether Donald Trump is playing brinkmanship with markets rather than Iran. Last week he said, “The only thing that matters when I’m talking about Iran is they can’t have a nuclear weapon, I don’t think about Americans’ financial situation”. In a sea of half-truths, or worse, in his second term and peppered with an in ordinate number of gaffes, this one has curiously found little press or challenge.
A soundbite or catchphrase has been permeating Wall Street these days, weeks and months, which some might call cynical or even arrogant. It goes along the lines of: “The biggest risk to equities currently is that there is not enough risk-taking.” Well, a reality check duly arrived on Friday, which some might find surprising and others long overdue. All the major stock indices lost value on Friday and over the week. The MSCI All-Country Index retreated 1.5% on the last day of the week, the same as the Nasdaq Composite Index.
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