Key insights
- Geopolitical uncertainty surrounding Iran and the upcoming long weekend are creating risk aversion in the market. The market's sensitivity to headlines, particularly those related to potential escalation or de-escalation of tensions, is driving volatility. The lack of market feedback during the weekend adds to investor anxiety, potentially leading to increased selling pressure before the market close.
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Investors are heading into the first long weekend since the war in Iran began, and they have reason to be anxious.
“Nobody wants to hold risk into the weekend,” Alli McCartney, managing director at UBS Private Wealth Management, told CNBC late last month. The reason, she said, “is anything that happens over the weekend is going to change the flow.”
With markets closed tomorrow for Good Friday, the risks of being caught off guard by developments in Iran are even higher this weekend.
The U.S. has sent thousands of additional troops to the Middle East, a move that investors can’t be sure is a negotiating tactic or preparation for escalation. The U.S. has repeatedly ramped up operations and threats on weekends—the first salvos of the war came late on a Friday night, and President Trump’s threats to target Iran’s energy infrastructure landed on a Saturday. Contradictory messages out of the White House—and Iran’s public denials of nearly everything the Trump administration says—add to the confusion.
Over the past year, President Trump has repeatedly adjusted policy in response to market movements, often moderating positions that caused bond and stock investors to panic. For that reason, investors have found weekends, when markets are closed and that feedback channel is shut off, especially unnerving amid the war in Iran.
Thursday’s session made clear that nothing is clear. After two days of big gains fueled by hope the war will end soon, stocks tumbled at the open after President Trump in a televised speech on Wednesday night threatened to bomb Iran “back to the Stone Ages.” Then, oil pared their gains and stocks rebounded following reports from Iranian state media that Iran and Oman were developing a plan to jointly monitor traffic through the Strait of Hormuz, boosting hopes that the oil supply shock could ease.
The market “is so headline dependent,” Gina Martin Adams, chief market strategist at HB Wealth, told Investopedia late last week. “Investors are looking for clarity where it doesn’t seem like clarity is really possible.” The Cboe Volatility Index (VIX), otherwise known as the "fear index," rose Thursday, but remains below last Friday's year-to-date high.
Adding to the anxiety ahead of the long weekend is the Friday morning release of the March jobs report. Investors were surprised to learn in the last report that the U.S. lost an estimated 92,000 jobs in February; economists had forecast an addition of 50,000 jobs. The major indexes all dropped at least 1% the day of that report. Economists are again predicting the U.S. added jobs last month; investors are hoping they're right this time.
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