Stock investors are treading carefully as they continue to monitor the Israel-Iran situation. For now, “no news” is “good news” even as Israel’s next steps remain a mystery.

Bulls believe that if things stay quiet and both countries cool their strongman talk, investors will quickly move on. Bears aren’t so sure, however, as the US is getting ready to hit Iran with new sanctions. The government hasn’t provided any details but Treasury Secretary Janet Yellen yesterday said “all options to disrupt terrorist financing of Iran continue to be on the table.” Yellen would not confirm whether the options included tightening existing restrictions on Iranian oil exports but said it remains “a possible area that we could address." Meaning global oil supplies could tighten further right as the world is forecast to be headed toward an oil deficit in the second half of the year.

Bears are also quick to point out that higher energy prices will ultimately equate to higher prices and could take Federal Reserve rate cuts off the table for this year. Bears point to Federal Reserve Chair Jerome Powell’s comment yesterday that there has been a “lack of further progress” on inflation this year and “recent data have clearly not given us greater confidence” that inflation is moving toward the central bank’s target rate.

Powell also predicted it will take longer than expected to achieve that confidence. Wall Street has mostly taken the possibility of a June rate cut off the table with the September policy meeting now seen as a more likely first rate cut if at all this year. Traders are pretty evenly divided between September and November, though odds for both are less than 50%.

Bulls point out that the stock market didn’t have much of a reaction to Powell’s comments as he was only confirming with what most on Wall Street have already come to terms with.

Bulls also argue that higher-for-longer rates may not have the negative impacts that so many once feared. They point out that the labor market, consumer spending, and overall US economic growth remain strong and even seem to be strengthening in some areas.

Additionally, S&P 500 companies have delivered positive earnings for two quarters in a row now under the current interest rate levels, and are expected to make it three in a row with Q1 2024 earnings.

Bulls are especially counting on big tech earnings to generate some excitement with both stellar Q1 results and strong forward guidance stemming from new AI revenue streams.

Bears aren’t so sure that tech margins are going to hold up as strongly as they have in the past due to the heavy investments being directed toward those AI efforts.

While any hit may only be temporary, it could still lead investors to reassess current outlooks.

Today’s earnings highlights include Abbott Labs, ASML Holdings, Citizens Financial, Crown Castle, CSX, Discover Financial, Kinder Morgan, Las Vegas Sands, Prologis, The Travelers Companies, and US Bancorp.

The only economic data of note is the Fed’s “Beige Book.” As an investor, I'm still in no hurry to be a big buyer of the stock market at this elevation or to add aggressively to my current long-term positions.

Understanding the Bitcoin Halving... Projected to Happen Late this Week:  Bitcoin mining is the process by which people use computers or mining hardware to participate in Bitcoin's blockchain network as transaction processors and validators. Miners receive rewards and transaction fees. About every four years, on the halving day, or every 210,000 blocks, Bitcoin, by design, cuts the reward in half for mining more Bitcoin. This means that when Bitcoin halves again, the reward given to the contributors securing the network is reduced by 50%, directly impacting the rate at which new Bitcoins are introduced into circulation. Bitcoin last halved on May 11, 2020, earning miners 6.25 Bitcoin or roughly $450,000 today. After this next halving, estimated to be on or around April 20th,  the miner will only earn 3.125 Bitcoin. To date, about 19.7 million Bitcoin have been mined, with 1.3 million to go, but it will take many decades for those last ones to be released  Source The Block

The Income Everyday Americans Earn in Each State: In 2023, the median annual wage for all U.S. workers was $48,060, according to the Bureau of Labor Statistics, which means Americans in around half the states earned less than that benchmark, while workers in the other half earned more. Massachusetts tops the rankings with the highest median wage of $60,690 for individual workers, while Mississippi has the lowest median wage in the country at $37,500. Source CNBC


What If Fed Rate Hikes Are Actually Sparking US Economic Boom? As the US economy hums along month after month, year after year, minting hundreds of thousands of new jobs and further embarrassing a long line of experts repeatedly proven wrong on recession calls, some on Wall Street are starting to entertain a fringe economic theory. What if, they ask, all those interest-rate hikes the past two years are actually boosting the economy? In other words, maybe the economy isn’t booming despite higher rates but rather because of them. It’s an idea so radical that in mainstream academic and financial circles, it borders on heresy. But the new converts (along with a handful who confess to being at least curious about the idea) say the economic evidence is becoming impossible to ignore. By some key gauges—GDP, unemployment, corporate profits—the expansion now is as strong or even stronger than it was when the Federal Reserve first began lifting rates. This is, the contrarians argue, because the jump in benchmark rates from 0% to over 5% is providing Americans with a significant stream of income from their bond investments and savings accounts for the first time in two decades. These people — and companies — are in turn spending a big enough chunk of that new-found cash, the theory goes, to drive up demand and goose growth.  Source Bloomberg

IEA Sticking to Its “Peak Oil Demand” Forecast: The International Energy Agency is offering fresh evidence for its estimate that global demand will peak this decade. The future of oil carries huge stakes for producing economic growth, powering clean tech firms, and protecting the planet. And the agency's latest commentary comes as some politicians and analysts say IEA underestimates the persistence of demand growth.  Steep demand growth as nations emerged from COVID has run its course, IEA's Toril Bosoni and Ciarán Healy write. They also see China's outsized role in boosting petro-thirst over the last decade easing. IEA projects slower economic growth there in 2024 and 2025, and fast Chinese uptake of electric vehicles and other tech that displaces demand. And IEA sees other "structural" reasons for slowing demand growth post-2025, such as Middle East countries using less oil for electricity. Absent stronger climate policies and investment, the post-peak decline will be very gradual, they write. Source Axios

Are Fund Managers Giving Up on Bonds? Fund-manager allocations to bonds dropped by the most in more than 20 years as they become more optimistic about growth while becoming less convinced the Fed will succeed in fighting inflations, a monthly survey published Tuesday showed. Bank of America’s April poll of fund managers found a 20-percentage-point drop in bond allocations, to take them to the most underweight since November 2022. Only 38% expect yields to be lower in 12 months, the lowest since Oct. 2022, with 41% saying higher inflation is the top tail risk in markets. A net 11% expect a stronger economy in 12 months, a switch from the net 12% that expected a weaker one just one month ago. That’s because investors had the biggest allocation to stocks since Jan. 2022, and the biggest three-month drop in cash since Dec. 2020. There also was a record jump in allocation to commodities. As these traders became more enthusiastic about commodities, they bought materials, energy and industrial stocks. The publication is a closely watched gauge of what professional investors are doing, and it’s used — even by Bank of America itself — to come up with ideas for contrarian investors. Bank of America says contrarian ideas stemming from the survey include going long bonds vs. short stocks, long cash vs. short commodities, long China vs. short Japan, and long staples vs. short industrials.  Source Market Watch


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