S&P 500 set to advance after a bout of selling on FridayEfforts are underway to head off a full-blown Middle East war.
What’s Happening Now:
A tense calm prevailed in the Middle East after Iran’s missile and drone attack on Israel. Global markets showed signs of stability on speculation the conflict will remain contained.
Iran said there wouldn’t be further attacks as long as Israel didn’t react aggressively, but Benjamin Netanyahu warned, “Whoever strikes Israel, we will strike him.”
A diplomatic race is underway to help ensure any retaliation doesn’t raise the stakes too high.
“It’s right to price more geopolitical risk premia into assets, but at the end of the day equity markets are still only about 2% off all-time highs,” said Timothy Graf, head of EMEA macro strategy at State Street. “This was a well-telegraphed geopolitical development. A lot of the bad news is in the price already.”
As we can see on the chart, the index is still trading in the tight diagonal canal which once broken a higher liquidity impulse can be expected. With the current situation of repricing rate cuts, higher inflation, and war tensions rising I am strongly expecting a quick 3-7% test to the previous lows.
