Boy what a week.
I thought I was used to Trump flip flopping by now – but this week was a new low even by Trump standards.
We started the week with comments that Trump was willing to end the war even without a Strait of Hormuz deal – and that other countries had to get the oil themselves.
And ended the week with the US-Israel bombing civilian infrastructure in Iran, and Trump threatening attacks on power plants if Iran doesn’t cut a deal.
Despite all that news though, the market reaction was actually not as bad as you would expect, and suggests that for investors it may be worth thinking about when to start buying this sell-off.
So I wanted to share latest thoughts in this article – Is the Iran war over? Time to buy Stocks, REITs and Bitcoin?
Recapping the sequence of events this week
Trump is willing to end the war – even without a deal?
Let’s recap the sequence of events quickly.
We started the week with comments from Trump that he is willing to end the war even without a Strait of Hormuz deal – and that other countries had to get the oil themselves.
Pete Hegseth (US Secretary of War) then gave a press conference which largely suggested the US was preparing to wind down the war.
This led to a huge rally in US stocks on Tuesday trading:
What does Iran think?
Iran of course, is used to Trump by now.
Remember Trump had “pretended” to negotiate with them in January and February while using the cover of diplomacy to amass massive US firepower in the Middle East.
So they assumed that this was just more tricks from Trump (and you know what by end of the week they were proven to be right).
What do the other Gulf States think?
Interestingly – the Gulf States were not pleased with this talk of the US leaving the war just like that.
Both UAE and Saudi Arabia came out with comments that they don’t want the US to exit this war without reopening the Strait of Hormuz on which their economies depend on.
It’s critical not to ignore the views of other Gulf States in this war, because unlike the US which sits half a world away, these are the guys who have to pick up the pieces when the war is over.
The fact that UAE and Saudi Arabia seem to be gearing up for a hard fight to reopen the Strait of Hormuz, is a worrying sign.
Trump vows to hit Iran extremely hard
And then on Wednesday, Trump gave a press conference at 9pm.
In hindsight, the fact that he scheduled the press conference at 9pm after close of trading is probably a signal that it wasn’t going to be good (good news tends to be announced before market open for maximum impact).
In that speech, Trump effectively tried to justify the war to Americans, said that it would last 2 – 3 more weeks.
And that during this 2 – 3 weeks, the US would hit Iran “Extremely Hard”.
For more colour on the comments from Trump, here’s one on blasting Iran “back to the Stone Ages”.
Here’s the bombing of civilian infrastructure (an Iranian bridge), with threats of more to come:
Here’s a comment that if Iran doesn’t cut a deal, electric power plants are next:
Chaos within the Trump administration
At the same time, it’s pure chaos within the Trump administration.
Pam Bondi (Attorney General) was fired this week.
While the US Army Chief of Staff was also fired this week.
Firing your Army Chief of Staff when you’re fighting one of the most complex wars the US has been in for decades – that just reeks of internal chaos.
This is an FH Premium article that I am releasing to all readers, in the hopes that it helps you in your decision making. It will not be updated going forward.
My latest macro views, as well as my full stock watch and personal portfolio, are shared on FH Premium.
What was the market reaction?
Now what was the market reaction to all this?
Interestingly – not that bad.
The S&P500 had a huge rally on Tuesday after the 2 – 3 weeks timeline set out.
You would have thought that the market would plunge after Trump’s comments on escalating the war.
But actually the market held on to a good chunk of its gains on Thursday – although that was on very low volume.
Meanwhile US interest rates have gone from below 4% at the start of the war, to as high as 4.5%.
But like the S&P500, it looks to have topped out after the news that the war would be over in 2 – 3 weeks.
Bitcoin is not buying it at all though.
Bitcoin sits at 66k, which is well below the high of 75k when it genuinely looked like this war was going to end.
I’ve been observing Bitcoin’s price action throughout this war very closely, and Bitcoin looks to be the “smart money” so far, responding very intelligently to the war news.
So the fact that Bitcoin is not rallying despite S&P500 rallying, suggests to me the S&P500 rally could be a dead cat bounce.
And then we have oil.
Oil is another market that is hard to fool because at the end of the day – somebody needs to deliver the physical oil.
Trump can talk all he wants, but if there is no oil coming out of the Strait of Hormuz, then there is no oil, fullstop.
Oil has generally traded much more in line with Trump’s comments, plunging on news that the war would be over soon, and rallying on news of escalation.
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Is the Iran war over? Or are we nearing the end of the war?
The price action is very interesting.
Interest rates and the S&P500 are suggesting that the war may indeed be over soon. Markets are forward looking, so as long as the markets believe that the war will be over in 2 – 3 weeks, stocks can bottom today.
But then on the flip side, Bitcoin and Oil are not buying it.
Do I believe stocks and interest rates, or do I believe Bitcoin and oil?
My personal views?
Boy this is a really tricky one.
This is not like COVID where Jerome Powell came out to announce “unlimited QE”.
Printing unlimited money, that was a straightforward bottom signal of policy makers panicking.
And when policy makers panic, the markets stop panicking.
In today’s case, it’s just blatantly obvious to everyone watching that Trump is desperately begging for a deal from Iran.
His comments this week have made it obvious that he desperately wants the Iranians to come out and agree to a deal that would reopen the Strait of Hormuz and allow him to end this war.
The problem now, is that the Iranians are not offering this offramp.
And I am completely sympathetic to the Iranian point of view here.
Trump acted in bad faith to use the cover of diplomacy to amass US war assets in the Middle East.
And on top of that, he assassinated their Supreme Leader and bombed a children’s school on day one of the war.
I mean who does that and expects a peace deal 1 month later.
And this comes after Israel effectively committed genocide in Gaza with US backing.
If I were an Iranian and I look objectively at the facts that are playing out, I am inclined to think that this is truly a war of survival for Iran.
Roll over now and surrender, and risk ending up like Gaza down the road.
And I mean frankly, if you are Iran, these are the comments coming out of the leader of the country that is bombing you.
Are you really going to surrender to this?
Just like Ukraine, I suspect the Iranian pain threshold here is much higher than Trump is expecting.
Will I buy the dip?
That said, it’s easy to pontificate about the war.
But in investing, I need to put money where my mouth is.
Would I buy stocks here, or would I not.
From a pure technical analysis point of view – this week’s price action was textbook.
We have the S&P500 in a very oversold condition before this.
Then we had a huge rally from oversold conditions, on news that the war could be over soon.
The news was the trigger, but don’t confuse cause and effect.
The market was already deeply oversold, and any news could have set off that big countertrend rally.
From a technical analysis point of view, we just don’t have enough information to call a meaningful bottom here as it’s only been a few days (we would want to see meaningful breadth and a potential retest of the bottom).
What happens next is the key.
Does this rally hold, or does this not.
On the macro front, nothing much has been resolved.
For as long as the Strait of Hormuz remains closed, oil price remains high, feeding into inflation, preventing rate cuts.
To believe the bottom is in, you have to believe that the Strait of Hormuz will be reopened some time in the near future.
Based on what I’m seeing, it’s hard to make that call with a high level of confidence.
So what will I do?
I don’t believe in the need to buy the bottom perfectly.
I rather miss the bottom by a few days, get confirmation that the market is trending up again, then I buy.
I don’t need to squeeze every drop of returns out of the markets.
I think we are at the negotiation phase of the war, which is good news at parties are listing out demands, and there are attempts to talk.
This is an improvement from the start when nobody was talking.
But hey Ukraine and Russia have been talking for 4 years and they are still at it.
With all the uncertainty in play, I would rather just let things play out a few more days.
If we see meaningful signs of ceasefire discussions, I buy then.
No need to catch this bottom perfectly.
What to buy?
And then of course we have the question of what to buy.
The exact list of names I am looking at is set out on FH Premium’s stock watch.
But big picture, I like:
- US Tech
- REITs
- Bitcoin
- Copper
Most of these have sold off to varying degrees because of the war, and with a meaningful end to the war I could see a nice rally.
TThis is an FH Premium article that I am releasing to all readers, in the hopes that it helps you in your decision making. It will not be updated going forward.
My latest macro views, as well as my full stock watch and personal portfolio, are shared on FH Premium.
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