This Week
Trading activity across all asset classes is going to be extremely volatile. Whereas we typically begin with a recap of the prior week, developments over the weekend warrant flipping the order.
Global equities initially sold off after the U.S. and Israel carried out strikes against Iran, killing senior leadership figures, including Ayatollah Khamenei, and calling for regime change. Iran responded by launching missiles at multiple targets around the Gulf and attacking tankers in the Strait of Hormuz, briefly disrupting global oil flows and sending oil and gas prices sharply higher. Gold rallied as investors moved into traditional risk-off assets.
However, markets have recovered meaningfully this morning as investors assess the situation as contained (for now) and energy prices have pulled back from their overnight highs. While tensions remain elevated and headline risk is significant, equity markets are attempting to stabilize after the initial shock.
We suggest continuing to hold the assets that are working, while only trimming growth equities if you are over your target allocations.
On the economic front, the February jobs report due on Friday will be in focus.
Last Week
Trading began in the red after President Trump imposed a 15% global tariff in response to the Supreme Court ruling that most of his “Liberation Day” tariffs were illegal. As the week progressed, news concerning Artificial Intelligence, Inflation, and Iran dominated the headlines. None of it was particularly good, and the equity markets responded by moving marginally lower.
Shares of Nvidia (NVDA) came under pressure following the stock’s fiscal fourth-quarter results and forward guidance. The 7% slide in Nvidia’s share price contributed significantly to the 1% and 0.4% losses in the Nasdaq Composite and S&P 500, respectively. NVDA has a 7.6% weighting in the S&P 500 and 9.2% in the Nasdaq Composite. The equal-weighted S&P 500 rose 0.4%, although declining issues outnumbered advancing issues by a 5-4 margin, and the Russell 2000 index of small-cap stocks sank 1.2%. The Technology sector posted a 2% loss, with the Financial industry dropping 1.8%. Risk-off trades were in fashion, with the Utility sector the biggest winner, finishing 2.8% in the green, while Gold surged over 3%. Bank, brokerage, and wealth management stocks slumped Friday as investors worried about disruption from artificial intelligence, the potential ramifications of resurgent inflation, and possible troubles in private credit.
A hotter-than-expected Producer Price Index report added to negative sentiment, yet, despite those inflation concerns, the 10-year Treasury yield slipped 12 basis points to 3.97%, its lowest level since Thanksgiving. The PPI rose 0.5% month over month in January, exceeding the consensus estimate of +0.3%.
Adding to the risk-off sentiment was the looming prospect of a war in the Middle East, as negotiations between the U.S. and Iran seemed destined not to reach an agreement over Iran’s nuclear program.
The stocks mentioned above may be holdings in our mutual funds. For more information, please visit www.nsinvest.com.