The global macro picture is shifting. Tech earnings fueled gains in US equities, with the QQQ ETF rising 1.12% and the IWM small-cap ETF climbing 0.94%. However, broader market sentiment remains cautious amid escalating geopolitical risks and persistent inflation concerns. The SPY ETF also saw gains, up 1.02% to $669.03, while the DIA rose 0.83% to $470.30.
Concerns about global inflation intensified after the Reserve Bank of Australia (RBA) raised its official cash rate to 4.10%. This split decision reflects the uncertainty facing central banks worldwide as they grapple with managing inflation while supporting economic growth. Simultaneously, geopolitical tensions are adding to market anxieties. Anthony Scaramucci warned that Iran's closure of the Strait of Hormuz constitutes economic warfare, potentially disrupting global oil supplies and supply chains. Brent crude gained 2.68% to $102.89 as the Strait of Hormuz closure impacts oil supply.
These global events have implications for US markets. Heightened inflation concerns could pressure the Federal Reserve to maintain a hawkish stance regarding future interest rate policy, potentially impacting US equities. The situation in Iran also presents risks to global supply chains, which could further exacerbate inflationary pressures in the US. Prediction markets are assigning a 12% probability to Iran losing control of Kharg Island by March 31st.
Escalating geopolitical conflicts, such as the situation in Iran, present risks to global supply chains, potentially leading to further inflationary pressures in the US. Macro regimes don't change overnight—but when they do, it matters.