We have so many struggles going on right now that it’s hard to believe the market can stay up at this level for much longer. It’s a visceral moment where the losses mount quickly if you are on the wrong side of the trade. We all know that it’s time to embrace the bear, right? But we always recall that when we declare we cannot take it anymore and sell — whether it be in the days after “Liberation Day” or the days leading up to last week’s Iran war truce — we’re immediately proven wrong. The result: The selling that can go from a trickle to a flood stays at a trickle longer than we think, aided, of course, by a brain-dead bond market that doesn’t seem to care about the fundamentals, even as that’s all it is supposed to care about. The benign bond market, though, masks some cogent themes. They need to be looked in to. So, let’s do this. Let’s examine the three most salient battlegrounds in play right now: Iran, software and earnings, not because they are emblematic of the market, but because there is nothing emblematic about this market at all. Instead it is just tugs-of-war that are surprisingly disparate and surprisingly separate from each other. Iran war First, we know the Iran war basically caused oil to double from where it started the year — that is, before last week’s big decline on the two-week ceasefire news . Nevertheless, if history was our guide , the S & P 500 should be down some 20% from its highs right now. Not only is history being disobeyed, but since the market rally began in all of it pessimistic glory two weeks ago, we are capable of punching to new highs with another strong week. The S & P 500 ended Friday 2.3% below its Jan. 27 all-time closing high. At its lows of the year on March 30, the index was off 9% from the highs. Why is that? First, we use less oil than we used to for a variety of industries, including the refining of gasoline. Interestingly, it is not our continental self-sufficiency that has helped keep down the price of oil or gasoline; both are set by the world’s market forces. In the past, oil shocks have primarily hurt us at the pump. But today’s vehicles are more fuel efficient. Perhaps more important, despite all of the griping, it simply isn’t that high versus inflation. We’ve been here before and it didn’t cause a downturn, so the market is concluding it won’t do so again. Additionally, natural gas is the largest single source of power generation in the U.S. We’re blessed that we produce a ton of it, and that its domestic price is less connected to global market forces than what we see with oil. Since the Iran war began on Feb. 28, U.S. natural gas futures are actually down over 7%. The chart of Europe’s benchmark natural gas contract looks much different . While the U.S. is exporting a lot of natural gas via LNG terminals, we still have plenty of domestic supply. It’s obvious that our country’s efforts to become more fuel efficient and energy independent have worked. So why does the price matter…
Read More: Jim Cramer opines on Iran war, software stock rout and earnings season
