Over the weekend Trump threatened to massively raise the stakes by bombing Iranian energy plants if the Strait of Hormuz (which had been closed for 24 days and counting) wasn’t open by Monday night, alarming Asian markets and US stock and bond futures. Just three hours before markets opened in the US on Monday, however, he posted that there were direct negotiations going on between an unidentified “top person” in Iran and the US that had been productive and he was postponing such attacks by five days since Iran “is begging to make a deal”.

News that any peace talks were happening at all was a surprise not only to Wall Street but also apparently to the Iranians, who quickly denied any such dialogue or an inclination to end the conflict.

A confused and increasingly war-weary stock market is clearly not enjoying having its chain yanked by a small number of social media accounts that increasingly feel like they are trying to manipulate asset prices via tactical releases of not always entirely accurate information.

Nevertheless, traders still backed off some of their more pessimistic bets and the stock indexes whip-sawed higher with a wild 3%+ swing in the S&P 500 from the pre-open lows to late-morning highs and closed deep in the green, although well off session highs, as oil prices, interest rates and gold all dropped meaningfully lower.

Monday’s cautious optimism failed to extend into Tuesday’s session with no let up in missile strikes in the region and the brief sharp decline in oil prices and interest rates came to a swift halt. The stock indexes meandered around aimlessly trying and failing to read mixed and sometimes contradictory war signals, eventually closing a touch lower.

Oil prices drifted lower overnight and continued to set the tone for stocks which jumped higher again on Wednesday morning, as some traders began positioning for possible conflict resolution with both sides apparently floating (vastly different) proposals.

Stocks have had a tendency of late to recover quickly and violently from geopolitical shocks and getting caught on the wrong side of such a move by acting on excess pessimism has proven to be painful in many cases. It was this notion that kept prices higher through the close.

However, ceasefire hopes began to fade on Thursday as each side laughed off the other’s proposal and anchored to their extremes. Oil prices and interest rates resumed their climb and stocks sank again as the reward vs. risk calculation of putting on additional long positions ahead of what could be a volatile weekend started to deteriorate.

Trump’s increasingly unconvincing attempts to paint a rosy picture at a cabinet meeting failed dismally to impress Wall Street and in response the stock indexes plunged further to levels not seen since September last year (albeit on relatively light volume), with the tech-heavy NASDAQ leading the nosedive and falling into official correction territory, to complete what was a truly horrible session for stocks.

After the closing bell, Trump delivered yet another of his now-famous TACO moments (they do always seem to occur right after a bad day in the stock market), extending his energy attack deadline by ten days. This did nothing to stem the bleeding however and the indexes (once again led by the NASDAQ) continued to crap out on Friday to close out another torrid week of losses. The five straight weeks in the red is the S&P 500’s worst streak since the Russian invasion of Ukraine in early 2022.

Some other things I’m thinking about ..

* Last week highlighted the current schizophrenic market reaction to the war; traders are afraid to be uninvested or short in case markets scream rapidly higher on some kind of resolution while they are also afraid to go risk-on as the odds increase that the fallout could be extensive and long-lasting. Which of these two positions seems to be the most reasonable changes literally from day to day, with the latter more in vogue than the former right now.

* Trump may be steadily losing control of the situation, as most observers feared he would. As the quote below from Neil Dutta suggests, there are three major players involved in this conflict: the US, Iran and Israel. While the US may be keen on a ceasefire and a victory lap for its own domestic reasons, it’s not guaranteed that i) Israel will agree or abide by a cessation of hostilities, or ii) Iran will agree or abide by it. Case in point, Israel is continuing its ruthless operation in Gaza, has now opened a new invasion front in Lebanon and is bombing Iranian energy infrastructure. Unlike with tariffs, Trump cannot just flip a light switch here.

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ARTICLE OF THE WEEK ..

How to trade the war. Don’t.

.. AND I QUOTE ..

”You can’t TACO when you’re not the only party involved”

Neil Dutta, Head of Economic Research, Renaissance Macro Research

LAST WEEK BY THE NUMBERS:

Last week’s S&P 500 market color courtesy of finviz.com

Last week’s best performing US sector: Energy (two biggest holdings: Exxon-Mobil, Chevron) for the fourth week in a row ⬆︎ 5.5% for the week

Last week’s worst performing US sector: Communication Services (two biggest holdings: Google, Meta) ⬇︎ 4.6% for the week

* SPY, a US Large Cap ETF, tracks the S&P 500 index, made up of 500 stocks from a universe of the largest US companies. Its price fell 2.2% last week, is down 7.0% so far this year and ended the week 9.1% below its all-time record closing high (01/27/2026).

* IWM, a US Small Cap ETF, tracks the Russell 2000 index, made up of the bottom two-thirds in terms of company size of a universe of 3,000 of the largest US stocks. Its price rose 0.3% last week, is down 1.2% so far this year and ended the week 10.5% below its all-time record closing high (01/22/2026).

* VXUS, a Global Non-US ETF, tracks the MSCI ACWI Ex-US index, made up of over 8,500 of the largest names from a universe of stocks issued by companies from around the world excluding the United States, in both developed and emerging markets. Its price was unchanged last week, is down 1.0% so far this year and ended the week 11.4% below its all-time record closing high (02/25/2026).

INTEREST RATES:

* FED FUNDS RATE * ⬌ 3.625% (unchanged from a week ago)

* PRIME RATE ** ⬌ 6.75% (unchanged from a week ago)

* 3 MONTH TREASURY ⬇︎ 3.73% (3.74% a week ago)

* 2 YEAR TREASURY ⬌ 3.88% (3.88% a week ago)

* 5 YEAR TREASURY ⬆︎ 4.06% (4.01% a week ago)

* 10 YEAR TREASURY *** ⬆︎ 4.44% (4.39% a week ago)

* 20 YEAR TREASURY ⬆︎ 4.99% (4.97% a week ago)

* 30 YEAR TREASURY ⬆︎ 4.98% (4.96% a week ago)

Data courtesy of the Federal Reserve and the Department of the Treasury as of the market close on Friday

* Decided upon by the Federal Reserve Open Market Committee at periodic meetings 8x a year. Used as a basis for overnight interbank loans and for determining high yield savings interest rates.

** Wall Street Journal Prime Rate as of Friday’s close. Tending to move in lockstep with the Fed Funds Rate, this measure is used as a basis for determining certain consumer loan interest rates such as credit cards, auto loans, personal loans, home equity loans/lines of credit and securities-based lending.

*** Used as a basis for determining mortgage interest rates.

AVERAGE 30-YEAR FIXED MORTGAGE RATE:

* ⬆︎ 6.38%

One week ago: 6.22%, one month ago: 5.98%, one year ago: 6.65%

Data courtesy of the Freddie Mac Primary Mortgage Market Survey

INTEREST RATE EXPECTATIONS:

Where will the Fed Funds interest rate be after the next rate-setting meeting on April 29th?

* Unchanged from now .. ⬆︎ 96% probability (88% a week ago)

* 0.25% lower than now .. ⬇︎ 4% probability (12% a week ago)

With six more rate-setting meetings in 2026, what is the most commonly-expected number of remaining 0.25% Fed Funds interest rate cuts this year?

* ⬌ Zero (unchanged from a week ago)

Data courtesy of CME FedWatch Tool as of the market close on Friday.

All data based on the Fed Funds interest rate (currently 3.625%).

PERCENT OF S&P 500 STOCKS ABOVE THEIR OWN 200-DAY MOVING AVERAGE:

* ⬇︎ 43%

One week ago: 44%, one month ago: 66%, one year ago: 40%

Data courtesy of MacroMicro as of Friday’s market close

This widely-used technical measure of market breadth is considered to be a very robust indicator of the overall health of the S&P 500 index.

A high percentage (above 70%) generally suggests broad market strength and a bullish trend, while a low percentage (below 30%) may indicate market weakness and a bearish trend.

FEAR & GREED INDEX:

“Be fearful when others are greedy and be greedy when others are fearful.” Warren Buffett.

Data courtesy of CNN Business as of Friday’s market close

The Fear & Greed Index from CNN Business can be used as an attempt to gauge whether or not stocks are fairly priced and to determine the mood of the market. It is a compilation of seven of the most important indicators that measure different aspects of stock market behavior. They are: market momentum, stock price strength, stock price breadth, put and call option ratio, junk bond demand, market volatility and safe haven demand.

Extreme Fear readings can lead to potential opportunities as investors may have driven prices “too low” from a possibly excessive risk-off negative sentiment.

Extreme Greed readings can be associated with possibly too-frothy prices and a sense of “FOMO” with investors chasing rallies in an excessively risk-on environment . This overcrowded positioning leaves the market potentially vulnerable to a sharp downward reversal at some point.

A “sweet spot” is considered to be in the lower-to-mid “Greed” zone.

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