The dollar or Treasury did not rally on Friday following the bombing of Iranian nuclear facilities. Has both lost their “safe haven status,” the result of Washington’s fiscal recklessness? Or was it the result of the inflationary surge in both oil and gold?
Equites pared most of their early morning losses, perhaps an indicator of the complacency embedded in the markets but then reversed course as Iran retaliated late in the afternoon sending shares below their morning lows perhaps under the guise of no one wanting to be long going into the weekend.
Is the narrative about to make a radical change where geopolitical events become the predominate market determinate? Perhaps the answer to this question may be the events of the coming days and weeks.
Commenting on the University of Michigan Sentiment Survey, confidence rose by the most since January 2024 as concerns about the economy eased and short-term inflation expectations showed a marked improvement. Consumers expect prices to rise at a 5.1% rate over the next year, down from 6.6% in the prior month and the steepest monthly drop since October 2001.
Consumers are expecting costs to rise at an annual rate of 4.1% over the next five to ten years, compared with 4.2% in May.
Speaking of inflation, the FOMC meets this week. No change in monetary policy is expected. However, will there be any new comments about the tariffs and as to why inflation has not yet risen by the amounts expected? Will the Committee opine about Iran, the events that may be extremely fluid?
The economic calendar is comprised of retail sales, import/export prices, several housing statistics, the Index of Leading Economic Indicators, Capacity Utilization/Industrial Production and the FOMC meeting.
Last night the foreign markets were up. London was up 0.52%, Paris up 0.74% and Frankfurt up 0.37%. China was up 0.35%, Japan up 1.26% and Hang Seng up 0.70%.
Futures are up about 0.5% as oil prices nominally subsided. The 10-year is off 8/32 to yield 4.43% on inflation concerns. So much for the proverbial safe haven. Perhaps some of the pundits are correct that the UST has lost its safe haven allure due to Washington’s fiscal recklessness.
