Iran War
So today was a bad day for the portfolio with every position down, ostensibly on Iran v. Israel war fears.
What this reveals more than anything is how market participants were positioned. You had a lot of longs of gold and equities get caught covering, same with TLT shorts.
Objectively speaking these “War!” headlines don’t have longterm influences on markets. Just look at the Ukraine war.
The point is, the market overreacted a bit to the news. Markets overreact, and under-predict, and that is one of the biggest ways in which they violate the efficient market hypothesis.
Over the weekend we might get an escalation. But I find it unlikely. Iran gains little from overt conflict with Israel, and has a lot to gain from the current status-quo.
So I allocated a bit more dry powder today and I’m expecting this Iran v. Israel news to fade into the background if escalation doesn’t come soon.
What to think about this weekend?
Obviously, Iran war escalation should be top of mind. Some change in the tenor of the rhetoric from Iran, new info coming out from the White House, and actual on-the-ground escalations are all important datapoints. Barring anything getting worse I would expect we go back to regularly scheduled program on Monday.
We have to try to digest what all the PA is telling us, and mostly this week that is “Volatility!” Even without the Iran war threat it was always destined to be a volatile week.
We want to see things returning to trend on Monday to tell us that markets are digesting inflation, fiscal policy, etc. in a way that is complimentary to our portfolio. If they don’t, we will have to digest that new info.
This weekend let’s all touch some grass, forget about the money that was lost and pray for peace and our portfolios.
Please also always remember... none of this is financial advice. I’m not a professional. I quite literally don’t know what I’m doing.