Wall Street closes at a record for the first time since end of January
Goldman Sachs (GS) just kicked off this earnings announcement season with its strongest result in the past five years. Most of the earnings announcements this week will be financial stocks, and by and large, they should report good results. Next week, fundamentally superior stocks will begin to announce their second-quarter results, and expectations are very high due to positive analyst earnings revisions.
Of course, the big news is the failure of the negotiations with Iran in Isambard, Pakistan. This has triggered a U.S. Naval blockage of all Iranian ports. The Strait of Hormuz is now under the control of the U.S. Navy, and since Iran does not remember where it might have placed mines, the U.S. Navy will use its Manta Ray drones and other technology to verify if Iran did actually place some mines in the Strait of Hormuz before allowing commercial ship passage.
Naturally, the customers for Iranian crude oil, like India and China, are expected to put pressure on the U.S. In the meantime, the U.S. is continuing to cut off the revenue to the Iranian Republican Guard Corps (IRGC) to get them back to the negotiation table and/or cause an Iranian regime change. So essentially, right now, the U.S. is implementing an economic chokehold on Iran. The good news is that the 2-week ceasefire is holding for now.
This is a good time to remind all investors that the U.S. remains largely unaffected by the goods that are transmitted through the Strait of Hormuz. Although food and energy inflation have surged, which will show up in the March Producer Price Index (PPI) that will be announced on Tuesday, U.S. economic growth is expected to accelerate in the second and third quarters and approach 5% annual GDP growth.
Overall, the next few weeks should be stunning as fundamentally superior stocks announce better-than-expected results. The tension with the U.S. and Iran will persist, but since Iran’s military has been disabled, the presence of the U.S. Navy in the Strait of Hormuz will eventually allow ship traffic to resume, once the area is swept for mines. So, investors should be seeing that normalcy will be returning to the world economy in the upcoming months.
