“Anal”ysis from CNN about how “everyone is reading the market wrong” (my bad for having to link even a syndicated article from them) which is an overgeneralization. Yes, that predictive aspect is a known component of the stock market along with the “wall of worry” and “trading on emotion” aspects (because trades where buyers and sellers are matched, is what creates that market at a very simple level). The “rigged” components sit on top of that with the “pump and dump” market manipulation (often times obfuscated especially within high frequency trading algorithms that can move market trades extremely fast).
The issue I have here is the circumstances with this particular war in Iran and the geopolitical ramifications it is having. It was a self-created disaster involving poor planning and ridiculous terroristic threats by Israel and the U.S. involving things like crude oil, fertilizer, helium, etc that are critical for the global economy. All of that supply interruption has latent impacts where the long term negative impacts do not get fixed quickly.
The U.S. regime itself is not negotiating in good faith. The longer the war and blockades continue, basic logic kicks in where that timeframe expands out even further to a point where there is no real visibility into that timeframe. No crystal ball is that good to predict how well a business will be doing that far out into the future (especially when there are global impacts involved).
Bringing this back to the U.S. economy, if that is being sustained by this AI bubble (CapEx on AI contributing 2% to GDP and exceeding consumer spending), what does logic entail when a known factor is how AI requires vast amounts of energy which cannot be completely sustained by renewable energy and where this war in the Middle East is contributing to a global energy shock that hasn’t fully manifest itself (because of that latent component). Logic dictates costs will rise for operating those data centers.
Many of us are also familiar with corporate and market inertia. The market going up today based on that premise that the market is already pricing this all in for that huge windfall of profits at some future date, is at a point where there is even less visibility into that future timeline because the dominoes have yet to even start falling based on the slowdown and near complete stoppage of shipping in the Strait of Hormuz.
Logic further dictates this energy shock will impact EVERYONE. Aviation is already being impacted (air cargo will be impacted which means increased costs across the entire supply chain). Some will have the means to absorb the increased cost of most goods and services while the larger majority of global consumers won’t. Some governments are providing subsidies (Iran’s regime just did, Japan is subsidizing some fuel costs for vehicles)
That likely means consumer spending will take a massive hit. These market moves can’t seriously be pricing in all of these global impacts on an economy that is based on an AI bubble. It’s a level of denialism and/or willful manipulation (in order for the “smart money” to dump positions). In short, the market reactions have been “hopium” in overdrive and/or trying to sell a sense of optimism so that those who already have gains, can lock them in by selling to suckers who are buying at these levels based on “pump and dump” analysis.
