Summary
This week’s macro outlook centers on rising US/Iran geopolitical risk and its impact across global markets. We analyze potential outcomes for oil, gold, equities, the US dollar, Treasury yields, and Bitcoin, highlighting key technical levels and catalysts. With the S&P 500 stuck in a range and crypto facing multiple headwinds, markets remain cautious while awaiting a decisive trigger.
Market Watch
Economic Data
📚 Deep Dive 📚
WEEKLY MACRO REPORT
Macro Overview
Markets remain focused on the potential for a US/Iran military conflict. Until an actual strike is confirmed, base case assumptions remain unchanged and markets will continue to trade headlines.
Scenario Analysis
If the US attacks or invades Iran:
- Oil likely spikes sharply
- VIX expands on risk aversion
- Gold rallies as a safe haven
- Equities initially pull back on geopolitical shock
If the US and Iran move toward a diplomatic resolution:
- Oil, VIX, and gold likely retrace
- Risk appetite improves
- Equities should move higher in a relief rally
US Equities – S&P 500
The S&P 500 has been range-bound since December 15th, characterized by back-and-forth price action without sustained leadership. Mega-cap technology has not provided enough upside momentum to trigger a breakout, while rotation into industrials and energy lacks sufficient index weight to meaningfully move the benchmark. The market appears to be waiting for a catalyst.
US Dollar
Barron’s recently featured a cover story on the falling US dollar. Historically, when major publications highlight a consensus narrative, the opposite outcome often follows.
The dollar is sitting on a multi-year trend line. A bounce would likely pressure commodities and weigh on equities. The key variable is velocity. A gradual rise could create manageable pressure, but a sharp spike would likely disrupt equities and crypto simultaneously.
10-Year Treasury Yield
Mortgage rates are declining and are at three-year lows. However, the US 10-year Treasury yield has struggled to decisively break below 4 percent, even with Federal Reserve bond purchases.
The 3.8 percent level is critical, representing the September 2024 lows. Real estate investors and bond traders are closely watching this threshold.
Gold
Gold remains highly sensitive to US/Iran headlines. Trading above 5100, it remains elevated following prior months’ sharp rally. A retest of recent all-time highs is possible, but sustained upside likely requires renewed geopolitical capital flows. Dollar strength presents a headwind.
Crude Oil
Oil price action is directly tied to US/Iran developments. Technically, price is attempting to break a downward trend line on the daily chart, but demand has not been strong enough to sustain a breakout.
Energy stocks are contributing to S&P performance, but a crude rejection could trigger rotation out of the sector.
Bitcoin
Bitcoin continues to show positive correlation with IGV and broader software equities. The 60,000 level remains key support. If software stocks weaken further, Bitcoin is likely to follow.
A dollar spike would add additional downside pressure. Legislative progress on crypto could provide a catalyst, but in a midterm year that path appears difficult.
Current bias remains cautious with multiple headwinds in place.
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