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DJIA: 42,172
The Middle East… making tariffs look good. Imagine where the market might be in a world without a crisis. Imagine, because it’s not reality – there’s always something. However, were we to just suppose, the market itself seems in a happy place. That April correction of some 15% is history, and the recovery is itself remarkable. The major averages already have recovered to within 5% of their highs. Historically prices moved higher in the following 3 to 6 months, and with little meaningful drawdown. Sure, the Geopolitical backdrop, World War III or is it IV, could disrupt things, but likely to a much lesser degree than if the technical background was less healthy.
The problems in the Middle East haven’t gone unnoticed by the Oil stocks. The fact is the stocks have been acting better for some time – the energy ETFs are up more than 15% from their April lows. While that’s not altogether special, considering the lack of good news here it becomes a bit more impressive. Strength in the Oil stocks always gets our attention for a somewhat unique and important feature — no one owns them. With a market cap of only about 3% of the S&P, a strong breeze could rally them.
Frank D. Gretz
PLEASE NOTE: Unless otherwise stated, the firm and any affiliated person or entity 1) either does not own any, or owns less than 1%, of the outstanding shares of any public company mentioned, 2) does not receive, and has not within the past 12 months received, investment banking compensation or other compensation from any public company mentioned, and 3) does not expect within the next three months to receive investment banking compensation or other compensation from any public company mentioned. The firm does not currently make markets in any public securities.
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