Comfortably Numb

As the World Cup draws to a close, a welcome distraction from the conflict in the Middle East disappears with it. Commercial shipping through the Strait of Hormuz remains severely depressed, with only four vessels transiting on Sunday and similarly low activity continuing into Monday. Not surprisingly, Brent is creeping relentlessly higher, standing at over $88 per barrel this morning.

Rather surprisingly, the S&P 500 still has not got the memo and continues to hover just a couple of percent below its all-time high. Perhaps the rather uninspiring quality of the football on display in the final has lulled investors into a state of being comfortably numb. Or perhaps it is the ingrained expectation that Trump will eventually back down, given the obvious and immense costs of continued escalation.

The bond market certainly seems less convinced. Yields are up across the curve, and “higher for longer” is no longer the concept investors fear most: it is the actual bill from months of sustained disruption to global supply chains. In the currency markets, the dollar has barely moved, save against the Japanese yen, which has even bigger problems of its own, including how to finance a 250% debt-to-GDP ratio.

There are some signs of nervousness beneath the surface, with money flowing into staples and technology companies that are not betting the ranch on AI, otherwise known as Apple. The VIX was also up on Friday, something you rarely see ahead of a weekend, when investors have two days’ worth of premium to pay. Then again, earnings season is now in full swing, and all signals are not created equal.

Gold, silver and Bitcoin are neither here nor there. Well below their all-time highs, but still very far from their lows of old, they too appear firmly on the fence. Perhaps the stock market is right: this will all blow over, the juniors are in charge, volumes are about to disappear and everyone else has already departed for lands where once we walked seamlessly through electronic gates, but now queue for hours so that someone can put a stamp in our passports.