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Markets Tread Water in Environment of Rising Geopolitical Tension…

Dumaine Investments Weekly Market Update – October 17, 2023

• US stocks have traded flat over the past week as investors digest a host of new earnings and economic data, as well as attempt to assess the implications of the conflict in the Middle East. Markets moved down modestly after last week’s CPI reading came in largely in-line with expectations, before rebounding on Monday with no clear catalyst. Heightened geopolitical tensions together with a less than favorable global macroeconomic picture create an environment of extreme uncertainty and asymmetric risks in our view.

• Israel’s defense minister told the US to brace for a ‘long war’ against Hamas amid a global push to prevent the conflict from spreading. President Biden will travel to Israel on Wednesday to meet with Israeli leaders. US officials are worried about the potential for regional escalation by Hezbollah should Israel invade Gaza. On Monday, Iran said that an expansion of the war between Israel and Hamas was increasingly becoming unavoidable. More than 600,000 Palestinians have left northern Gaza on warnings from Israel and amid a bombing campaign that has killed thousands.

• The bond market continues to be marked by extraordinary volatility, including the highest levels of turbulence in the 30-year yield since the peak of the pandemic-era panic. For traders, the focus keeps shifting between rising geopolitical risks, an impending supply glut, concern over deficits, and expectations that the Federal Reserve’s interest-rate hiking cycle will tip the economy into recession.

• Looking forward, the next week will be full of potentially market-moving events. As earnings season kicks into full gear, technology and communication majors will begin to report, as well as several large industrial and financial firms. Johnson & Johnson reported Tuesday, Netflix and Tesla report Wednesday with American Express reporting on Friday. Ahead of the blackout before the central bank’s next decision, Federal Reserve Chairman Jerome Powell will speak in New York on Thursday.

DISCLAIMER: The information provided in this blog post is for informational purposes only and should not be construed as financial advice. Investment decisions should be based on individual financial goals, risk tolerance, and consultation with a qualified financial professional.