Major US stock indices were higher this week and are back in positive territory for the year on investor optimism that the conflict in the Middle East may be nearing an end. On Monday, the world’s largest asset manager, BlackRock, raised its outlook for US stocks, reasoning that contained impacts from the Iran war and strong corporate earnings will create a favorable backdrop.
While bonds have also rebounded, they remain relatively flat for the year. In the chart below, US treasury bonds are red and corporate bonds are pink. For stocks, the Dow Jones Industrial Average is dark blue, the S&P 500 is green, and non-US stocks are light blue.
Throughout the conflict markets have been reluctant to panic due to an understanding that the Trump administration has no appetite for an extended military engagement in a mid-term election year. Positive messaging from the administration has kept investors on board so far.
“The market has remained very resilient in the face of the war and has rallied strongly on the prospect that it will be resolved,” said Mark Zandi, chief economist at Moody’s.
As much as the Trump administration is looking for a more lasting end to hostilities, the clock is ticking for Iran as well. Its economy was already in shambles before the attacks, and is much worse off now.
https://www.yahoo.com/news/articles/iran-crumbling-economy-regime-greatest-194151423.html
Additionally, Iran was already running out of water due to drought and decades of mismanagement. In fact, last year President Masoud Pezeshkian even floated the notion of evacuating Tehran if rain does not arrive soon in needed quantities.
It appears there is a lot of motivation on both sides to move beyond a temporary cease fire to a lasting agreement of peace.
Have a great weekend.
Jack C. Harmon II, CFP®, CIMA
Principal, Harmon Financial Advisors
Registered Principal, Raymond James Financial Services
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