1. Oil: Trump Just Lit the Match Again
Oil is surging this morning — Brent just crossed $109 a barrel and WTI is trading around $111 — after President Trump’s prime-time address last night made clear there’s no off-ramp coming from the Strait of Hormuz crisis.
Oil price dropped a bit on hopes of ceasefire and off-ramp. Again, twenty percent of global oil supply runs through the strait. Let that sink in. Gas just crossed $4/gallon in the U.S., and in Canada we are now closing in on $2.00/litre. That’s a tax on every consumer, and it doesn’t care about your political views.
This oil shock is no joke.
Also, notice the difference between Brent and WTI? Don’t ignore this.
2. The S&P 500 Is a Headline Machine Right Now
S&P 500 futures are down over 1.4% this morning — a sharp reversal from the relief rally that we got over the past few days.
It is very important you understand that this market is completely hostage to whatever comes out of Washington, the Middle East, and what happens to oil price. One day it’s a ceasefire, the next it’s escalation.
I’m keeping very close tabs on the 200-day moving average; S&P 500 got close to it, and this moving we are seeing selling. Trend continues to be down.
And, the earnings estimates and all haven’t even changed yet!
3. Gold Still Loved — Silver Is the One to Watch
Gold is trading around $4,650 as I write this. It’s pulling back slightly on the day but remains well off the lows we saw recently. Trend here is intact and won’t be shocking if there’s positioning here – energy inflation on the table, geopolitical uncertainty, and risks all over. Reasons for people to buy.
But, gold is also still very reactive to stocks and oil. That’s something that shouldn’t be overlooked.
Silver is the more interesting story right now — it closed above $75.00 yesterday, the morning, its in $70 range. March was one of the worst months in history for silver. Why? People are really questioning global industrial output here.
But, bad headlines = you must look.
The gold-to-silver ratio is sitting at roughly 65.
4. The Story Apparently Everyone Is Missing…
China. Trump is expected to visit China to make a “deal.” The visit is currently scheduled for May 14-15th.
The visit was pushed back. Originally planned for March 31st– April 2nd.
Now, with this war with Iran and everyone essentially saying U.S. has handed the east side of the world to China – what happens at this meeting if it does happen? Will China be the one that ends this war as a gesture of good negotiations? If yes, then we have a well documented case of a new superpower. Or China isn’t a major player here.
Also, Nike’s earnings yesterday told a story of slowing China. Keep a tab on this sort of story – what happens to other consumer brands doing business there.
5. Dollar Index at 100 — The Squeeze Is Back?
There’s a trade in place: where stocks drop, dollar pops, oil soars, and US 10-year yield rise. Did Trump reinforce this trade last night? I think “higher-for-longer,” just got reloaded. But! This crushes demand so at the back end of it, do we have at least near-term deflation? At Zulfiqar Research, we think its possible.
Fed now has less room to cut. This means, everyone else in the world is getting squeezed too and can’t cut. Big picture: we are getting into a very messy situation – oil shock is real. The longer it remains, the worse the outcome will be.
Canada: energy exposure is giving it a cushion, but don’t mistake that for broad strength. Provinces like Ontario and BC will be in world of hurt.