Inflation Fears, Geopolitical Tensions Rattle Investors (Weekly Cheat Sheet)

.This week, the stock market took a tumble as investors grappled with a perfect storm of market-moving events. Echoing the wise words of the legendary investor Benjamin Graham, “The intelligent investor is a realist who sells to optimists and buys from pessimists.” And this week, it seems the pessimists had the upper hand.

The downward spiral was fueled by a triple threat: a surge in market rates, a recalibration of rate-cut expectations, and heightened geopolitical tensions. The cherry on top of this anxiety-inducing sundae? Reports of a potential Iranian attack on Israel left investors on edge over the weekend, unable to react in real time to any potential developments. All eyes are now on Israel’s response.

But the negative sentiment had already taken root before these reports surfaced. The market reacted with disdain to a hotter-than-expected March Consumer Price Index (CPI). Total CPI increased 0.4% month-over-month, surpassing the expected 0.3% increase, while core-CPI, which excludes food and energy, also rose 0.4%, defying expectations of 0.3%.

The Producer Price Index (PPI) offered hope, coming in cooler-than-expected at 0.2% month-over-month versus the 0.3% estimate. However, the total PPI still accelerated to 2.1% in March, up from 1.6% in February, fueling worries about ongoing hawkishness from the Federal Open Market Committee (FOMC) and prompting investors to rethink rate cut expectations. The probability of a rate cut at the June FOMC meeting plummeted to a mere 27.7%, a far cry from the 69.3% just one month ago.

Treasury yields reacted sharply to the data and a series of weak Treasury auctions. The 10-year note yield jumped 12 basis points to 4.50%, while the 2-year note yield, most sensitive to changes in the fed funds futures rate, soared 15 basis points to 4.88%.As the market navigates these turbulent waters, one thing is clear: the intelligent investor must remain vigilant, adaptable, and prepared for whatever curveballs the market may throw their way.

US Market Highlights

A few key developments stood out in the US markets this week:

  • Credit card delinquencies hit the highest on record according to a new Fed report. Almost 3.5% of card balances were at least 30 days past due as of the end of December, the highest figure going back to 2012.
  • Consumer inflation came in hotter than expected for the third straight month as the CPI rose 3.5% in March (est. 3.4%) while core CPI jumped 3.8% (est. 3.7%). Traders pushed the first expected rate cut out to September.
  • Biden forgave another $7.4 billion in student loan relief for 277,000 borrowers and rolled out his new massive student loan forgiveness do-over plan for 25 million Americans.
  • Ford announced a recall of over 40,000 SUVs due to gas leaks that can cause fires, affecting Bronco Sports from 2022 and 2023, as well as Escapes from 2022. Notably, Ford’s remedy will not include repairing the fuel leaks.

Global Highlights

On the global front, a few key stories caught my eye:

  • China’s exports contracted sharply in March, slumping 7.5% during the month, much worse than the 2.3% expected decline. This highlights the stiff task facing policymakers as they try to bolster a shaky economic recovery.
  • The ECB and BOC both held interest rates steady and signaled that rate cuts could make sense starting in early summer. The Bank of Canada kept its key rate at 5%, while the ECB left its own at 4%.
  • Iran launched drone attacks against Israel in a major escalation in the conflict between the two nations. Iran accused Israel of executing a strike on its consulate in Damascus and pledged to retaliate.
  • Microsoft announced plans to invest $2.9 billion in Japan to boost its AI and cloud infrastructure. They will install advanced chips at two existing facilities and create a new research lab focused on robotics and AI.

Investor Takeaways

So what does all this mean for investors? Here are a few key takeaways:

  1. Stay diversified. With geopolitical tensions on the rise and economic indicators sending mixed signals, it’s more important than ever to maintain a well-diversified portfolio. Don’t put all your eggs in one basket.
  2. Keep an eye on inflation. The recent CPI and PPI reports suggest that inflation may be stickier than many had hoped. This could impact the Fed’s rate decisions and, in turn, the stock and bond markets.
  3. Don’t panic. Market volatility can be unnerving, but it’s important to keep a long-term perspective. As the famous investor Peter Lynch said, “The real key to making money in stocks is not to get scared out of them.”

Commodities & Crypto


Oil prices continued to rise, underpinned by geopolitical tensions in the Middle East, where observers expect Iran to retaliate against Israel. These frictions overshadowed bearish factors like rising inflation in the United States, the sharp rise in US weekly inventories, and mixed forecasts from the International Energy Agency.


Gold remained resilient, setting a new record at $2,400 per ounce. The quest for safe havens and geopolitical frictions fueled the buying flow, despite the latest inflation data pushing back the deadline for a Federal Reserve rate cut.


Bitcoin stabilized below $70,000 this week, up 0.7% since Monday. However, capital flows into Bitcoin Spot ETFs fell sharply since the beginning of April compared to the previous month, with ETFs recording net negative flows of $28 million. Investors are now looking ahead to Bitcoin’s Halving Day, scheduled for April 18-19, which will halve the number of Bitcoins issued for each transaction block.

Calendar & Movers

Looking ahead, geopolitics will hold the focus of markets to start the week after Iran’s attack on Israel. Israel’s response will be the big market mover for many sectors.

The economic calendar will continue to garner attention following the recent spate of hotter-than-anticipated labor market and inflation indicators. Investors will be focusing on the March retail sales report scheduled for Monday and a reading on U.S. industrial production on Tuesday.

The first quarter earnings season will also pick up pace next week, with streaming giant Netflix (NFLX) reporting on Thursday. Other major companies reporting include Goldman Sachs (GS)Morgan Stanley (MS)Bank of America (BAC)UnitedHealth (UNH)Johnson & Johnson (JNJ)Travelers (TRV)Procter & Gamble (PG), and American Express (AXP).

Remember, successful investing is about staying informed, staying disciplined, and staying the course. Until next week, happy investing!

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