Precious opinions

Daily update

Iran’s missile strikes against US Gulf military bases pushed oil prices modestly higher. It is a reminder of the challenge for investors—Iranians are clearly setting the agenda in the Gulf war, and investors do not know how to analyze the motives of the Iranian military. This constrains investors’ ability to price in plausible scenarios, and leaves little other than the default optimism bias to influence markets.
The Federal Reserve meets, with Fed Chair Warsh refusing to offer markets a framework within which to consider policy. Does the Fed care about inflation expectations in a world of social media hysteria? What second-round inflation effects matter? Does the upcoming “adjustment” of consumer price inflation calculations (lowering inflation) affect policy? Warsh is channeling Gollum and crooning “my precious” over the Fed’s framework, risking volatility and higher risk premiums in markets.
The equity market technology convulsions continue, with less ferocity. We are still far from the levels that would likely alter consumer behavior. To the extent that this sell-off has been motivated by AI customers’ increased reluctance to spend, the move might signal more funds available for more conventional investment.
UK June consumer credit data is reliable, but rather dull. German import price data was not especially alarming.