1. No Iran Deal, The Best Deal Maker Can’t Make A Deal, And Oil Knows It
WTI crude is up nearly 4% this morning, pushing past $93 — Brent is cracking $106.
Trump warned Iranian negotiators to “get serious, before it is too late,” and there’s apparently a 48-hour window before the US deadline on striking Iranian energy infrastructure expires. This is a live geopolitical risk, not background noise. And oil is reacting.
Also funny, the best deal maker isn’t able to make a deal.
What you should know: higher oil means higher inflation — and neither the Fed nor the Bank of Canada has room to cut right now. Don’t be surprised if this gets worse before it gets better.
Also don’t forget: economy isn’t doing too well to begin with. So, stagflation is a real outcome here.
2. Private Credit Is Breaking…At Least Seems That Way
The main headline around private credit is how “retail investors,” are panicking.
But, there are some serious problems that need to be discussed too. Redemptions getting capped isn’t making things look good either.
Problem: rates aren’t going down, private credit borrowers carrying negative free cash flows, collateral issues, AI adding more gas on fire, and credit ratings getting cut. Again, this is not just “retail investors,” panicking.
Watch for default related headlines. And, if someone major is exposed to this. Almost $2.0 trillion market, probably tons of derivatives as hedges, hard to think this is all backed by retail investors.
3. Gold and Silver Getting Punished — But Zoom Out
Gold is down almost $100 as I write this to around $4,450. Big level to watch is $4,400 for now. Below that if it happens, $4,100.
Silver is off nearly 5% today. Big level to watch is $70-$72 and how it reacts there.
Both metals are technically in bear market territory — down over 20% from highs.
But zoom out: Gold is still up ~49% year-over-year. Silver is up over 111%.
What’s driving the pullback is rising yields — the US 10-year is at 4.37% — and some forced selling as portfolios rebalance. Paper is being sold; physical is being held. And, potentially some sort of liquidity issue as well.
4. The Stock Market Is Concerned…
S&P 500 is has been choppy.
They key level to watch is 200-day moving average. It’s acting as a resistance level – you see S&P 500 test it and fail. This is showing that stock market is concerned. And the trend is pointing downwards.
Like have been saying, very rarely stock market recovers above this moving average before causing some decent amount of damage. A lot of people watch this moving average. Will this time be different?
Have you looked at VIX lately? It hasn’t dropped below 20 since March 2nd.
But, it doesn’t mean there aren’t opportunities out there. No matter what the market/economy is doing, there are always opportunities. If you want to be in the loop and know where the opportunities are, check out the Trade Ideas page. First issue goes out April 1st.
5. “Why Aren’t You Talking About Economic Data?”
Economic/Investing 101: market tries to look ahead.
Prior to this war, the trends in economic data weren’t really pointing to anything good – job losses, slower growth, struggling consumer, sticky inflation and all. For Canada, you also had trade war related issues too. But this war has changed a lot of things.
At Zulfiqar Research, we are paying attention to data and aren’t ignoring it (if we aren’t mentioning here, doesn’t mean we aren’t looking), but we also know that move is based on headlines these days (on the overall market), and data will change. For instance, January/February inflation data will not account for oil shock we are seeing these days.
Goal right now is to figure: what we are seeing is temporary or this is a structural/long-term issue. If the latter, a lot of adjustments will be needed.