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Real Vision: Finance & Investing
Navigating Markets Amid Middle East Conflict ft. Jared Dillian
Oct 9, 2023
Jared Dillian, editor of the Daily Dirtnap newsletter, talks about the impact of the Middle East conflict on energy sector risk and broader market implications. They also discuss the spike in bond yields and this week's inflation data. They highlight the potential rally in oil due to geopolitical risk, analyze industrial metals, and predict a decrease in rates and a steepening of the yield curve.
32:22
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Quick takeaways
- Investors should adopt a mindset similar to tail-risk hedge funds, buying bonds, gold, and oil while selling stocks.
- The market appears complacent and not adequately pricing in the risks of a worsening conflict in the Middle East.
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Summary of Market Analysis
Despite the ongoing conflict in the Middle East, the markets showed surprising resilience, with stocks and gold experiencing a squeeze. Fed speakers' consistent messages about the impact of long rates on tightening influenced these market moves. The futures market, as bonds were closed due to Columbus Day, saw an uptick in demand for safe-haven assets, such as TLT, which traded on expectations of future bond market openings. There was an observed dislocation between cash bond markets and derivative positions, likely due to liquidity and pricing issues. While the VIX remained relatively low, some believe it is being mispriced given the level of geopolitical risk. Consequently, the overall sentiment is that investors should adopt a mindset similar to tail-risk hedge funds, buying bonds, gold, and oil while selling stocks.
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Discover
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