1. The Strait of Hormuz Is…Still Closed
Oil was supposed to drop this morning as Trump spent the weekend telling anyone who’d listen that a US-Iran deal was “largely negotiated” and the Strait of Hormuz would reopen soon.
Then the US military struck Iranian missile sites and boats in southern Iran overnight, Iran vowed retaliation, and here we are. WTI is down to $92.90 compared to Friday’s close. WTI is still pricing in some of Trump’s deal optimism, but Brent jumped 3% on the new strikes and trading near $100.
Watch carefully: the strait is still effectively closed, and almost no tanker traffic is moving through it. Don’t be surprised if oil whips back hard if the ceasefire fully breaks down. But there’s also hope out there.
2. The Bond Market Is Screaming — Is Anyone Listening?
The US 10-year yield hit 4.60% few days ago.
Meanwhile, Japanese Government Bonds have climbed to 30-year highs, with Japan’s 10-year now around 2.78%. Probably one of the most important stories in global finance right now that’s getting ignored. The Bank of Japan has held rates near zero for decades; the carry trade has funded trillions in global positions. As Japanese yields rise, that trade has a risk of unwinding.
Yields across the board are elevated. U.K. is another place worth looking.
Canadian 5-year yields remain above 3%.
3. Gold – Lots Of Good News But Price Isn’t “Moving”
Gold is at $4,525 this morning,
There’s a lot of good news out there for gold: Iran tensions, central bank demand etc.
But if you look at the price, gold has been grinding for months now. Recently, 50-day moving average has been acting like a reactive level – sellers coming in around then.
Why? Out view is that higher yields and somewhat stronger dollar are holding back gold a bit. The tone has changed recently, and everyone is calling for a rate hike now. This sort of noise generally does impact gold price.
But, make no mistake: the lower it goes, the better opportunity it will become. If you believe we are headed for a period of more money destruction, government spending recklessly… its hard not to have some exposure to gold for the long-term.
4. Private Credit: The FSB Just Waved a Red Flag
The Financial Stability Board published a warning recently that the private credit market is showing genuine cracks.
A lot of private credit borrowers now have negative free cash flow and the in-kind payments are growing. Default rates are still “low,” but they are trending higher.
Keep in mind: private credit market is super opaque. We only find out problems once the show up right in the face. Keep a watch on this story. Higher yields and noise about rates going higher can bring more pain to this market.
5. Expectations Are Getting Ridiculous
When a company posts (NVDIA for example) the best quarter in semiconductor history and gets sold, the market is showing its hand — the expectations baked into mega-cap tech are so extreme that “great” isn’t good enough anymore.
Memory names are catching a bid this morning, and could they potentially see another move higher? MU and SNDK are trying to make a case for it.
Have you looked at the VIX lately? There’s not fear in the market.
Remember: trend is your friend, but stops help you from getting run over once that trend turns.