- Yardeni noted that even if the U.S. claims the war is over, Iran and Israel may not view it that way, with Iranians potentially continuing to cause disruptions in the Strait of Hormuz.
- Goldman Sachs last week cited the ongoing war in Iran as it lowered its fourth-quarter U.S. economic growth forecast.
- The firm warned that the surge in crude oil prices caused by disruptions to flows through the Strait of Hormuz has become the main channel of economic risk for the U.S.
Economist Ed Yardeni, president of Yardeni Research, on Monday reportedly stated that the contrarian stock buying strategy, “Buy the Dip”, may not work amid the fog of war due to the Iran conflict.
During an interview with Bloomberg, Yardeni stated that, from a contrarian perspective, a declining sentiment increases the likelihood of a good buying opportunity ahead.
“It’s worked very well for me in the past. It may not work now,” he said.
Why Is This Time Different?
Explaining why this time may be different, Yardeni said past declines in investor sentiment were typically tied to weakening economic fundamentals, developments that often resulted in monetary or fiscal policy support.
This time, however, the uncertainty stems from the Iran war, a geopolitical shock that policymakers have little ability to counter directly.
“We’re talking about the fog of war, we’re not talking about something that US policymakers can respond to and turn around,” Yardeni added in the interview.
The economist noted that even if the U.S. claims the war is over, Iran and Israel may not view it that way, with Iranians potentially continuing to cause disruptions in the Strait of Hormuz.
Goldman Trims US Economic Outlook
Goldman Sachs last week cited the ongoing war in Iran as it lowered its fourth-quarter U.S. economic growth forecast, now expecting GDP to rise 2.2% year-over-year, down from its earlier estimate of 2.5%. The firm warned that the surge in crude oil prices, driven by disruptions to flows through the Strait of Hormuz, has become the main channel of economic risk for the U.S.
Goldman also sees a 25% risk of a recession over the next 12 months.
Analysts at ING Think stated in a note on Monday that energy markets are having to continuously price in a more prolonged disruption to oil and gas flows through the Strait of Hormuz, with little sign of de-escalation or a resumption in oil and LNG flows through the chokepoint.
“Escorting commercial vessels through the Strait of Hormuz would leave naval ships vulnerable to attack, and so the US may hold off from such action until it feels that Iran’s ability to launch attacks on vessels has been eroded,” the firm noted.
Crude oil prices continue to hover above the $100 per barrel mark, despite cooling down on Monday. U.S. West Texas Intermediate (WTI) crude futures maturing in May are down 3%, hovering at $94.18 per barrel. Brent crude futures expiring in May declined 1% to hover around $101.89 a barrel.
The United States Oil Fund ETF (USO) fell 2%, while the ProShares Ultra Bloomberg Crude Oil ETF (UCO) was down about 1% at the time of writing.
Meanwhile, U.S. equities gained in Monday’s opening trade. At the time of writing, the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, was up 1.12%; the Invesco QQQ Trust ETF (QQQ) rose 1.19%; and the SPDR Dow Jones Industrial Average ETF Trust (DIA) gained 1.04%. Retail sentiment on Stocktwits regarding the S&P 500 ETF was in the ‘extremely bearish’ territory.
Also See: HCWB Stock Soars Pre-Market On Positive Research Results For CAR-T Cell Therapy
For updates and corrections, email newsroom[at]stocktwits[dot]com.