Markets responded to recent events abroad this week. Will there be more volatility in coming weeks or will markets block out the noise?
Monday
S&P 500 0.04% | NASDAQ 0.36%
Markets started the week with significant losses after strikes in Iran. There has been a heightened level of caution surrounding supply chain disruption for energy markets. Markets reversed early losses to close in the positive as tensions eased.
Tuesday
S&P 500 0.94% | NASDAQ 1.02%
Markets feared escalation in the Middle East, prompting large declines in risk-on asset classes. The U.S. Dollar strengthened on the day as investors diversified their risk. With the early morning sell-off, and a late-stage comeback, markets are attempting to get directionality in a time of uncertainty.
Wednesday
S&P 500 0.78% | NASDAQ 1.29%
Markets attempted a rebound and pushed strongly through the close on the back of positive economic data. Private employers (from ADP reports) showed stronger hiring in February than anticipated. The services industry data also proved to be resilient for last month.
Thursday
S&P 500 0.56% | NASDAQ 0.26%
Markets plummeted early as strikes intensified in the Persian Gulf, sending oil prices higher. During times of military conflict, markets can be unpredictable and often swing more during the early stages. Energy prices do not directly impact all spending categories but will certainly be watched closely at the pump.
Friday
S&P 500 1.33% | NASDAQ 1.59%
Stocks fell further as the unemployment rate rose to 4.4%. If layoffs become more of the trend month-over-month, equities will take note. The hiring landscape will be top of mind as companies tend to ramp up staffing ahead of the summer months.
Conclusion
S&P 500 2.02% | NASDAQ 1.24%
This week saw heightened volatility with meaningful swings back and forth. Volatility measures jumped as markets assessed the impact of overseas military operations. It is important to note that many unknowns are still on the table. The U.S. will more likely focus on any potential impact on price increase stress in the near-term. If price pressure were to go higher then the possibility of another rate cut could be pushed until later in the year. Additionally, economic data will be imperative to determine direction moving forward. As always, it is important to maintain diversification to allow portfolios to mitigate downside risk. Recent events do not change that approach but will be tested in the weeks to come.
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