Collateral Damage Grows

A bruising week for the major averages as the war with Iran drags on and the collateral damage grows. Oil broke $90 a barrel, a 2.5 year high. That will spike the inflation metrics for March should it hold. Since last Friday the S&P 500 shed 139 points or just over 2%, the NASDAQ lost 280 points or 1.24% while the DOW dropped 1,476 points or about 3%. The markets don’t like uncertainty, and they don’t like war either.

Economic Data

For the week continued the recent trend of mixed despite the endless MSM Chicken Little narrative that the sky is falling. Better get a hard hat, because a recession is coming. Highlights for the week included strong services sector data. Mortgage rates hit multi year lows, despite the Feds ongoing refusal to cut rates. Continued strong personal income growth in spite of a disappointing February BLS payrolls report and a slight uptick in unemployment to 4.4%. Mixed but still decent retails sales data for January. Similar story with inflation though I expect it to spike in March compliments of the Iran war driven jump to $90+/barrel.

A Confidence Trick

Most economic activity comes down to exactly that. Confident people spend money, make investments and pursue growth strategies for their personal lives, careers and businesses. Fearful people don’t, it’s as simple as that. This is why the constant drumbeat of negativity from the mainstream media is so corrosive. They were spectacularly wrong last year about the economy, tariffs and the markets. Despite the war with Iran that I expect to spike the CPI and PPI inflation metrics short term. From the initial analysis the war will not prove durable as it appears that Iran’s ability to fight is degrading rapidly.

AI Demons Circle

Despite the Iran war dominating the headlines. Fears of AI driven disruption persisted into March as the collateral damage spreads. With rising anxiety – particularly around job losses, white-collar disruption, and questions about whether massive AI capex will deliver sustainable returns or instead fuel a cycle of layoffs and reduced consumer demand. Evolving from abstract hype to tangible “AI doom” or “vibecession” narratives, with real-world layoffs and spending debates keeping the pressure on. Can the markets and traders climb the wall of worry and push the markets higher next week? Time will tell. In a world where a carpenter’s son can raise from the dead, anything is possible. I wouldn’t count out Mr. Market just yet.

Have a great weekend. I’ll be back next Friday.
Caleb