TRUMP HAS 13 DAYS UNTIL THE US MIDTERMS.
IRAN KNOWS IT.
And I think something VERY important is happening in financial markets right now.
US inflation: 3.7%.
Brent oil: $110 a barrel.
US 10-year Treasury yields: around 5.1%.
And this morning, US Secretary of State Marco Rubio says reaching a peace deal with Iran is EXTREMELY DIFFICULT.
Iran is refusing to reopen the Strait of Hormuz without Washington accepting its conditions.
Think about the timing of all this.
On 3 November, Americans head to the polls.
Trump needs lower energy prices. He needs inflation coming under control. And he certainly doesn't need another surge in petrol prices just before an election.
Iran knows this.
In fact, Reuters has reported that Iranian officials see prolonging negotiations as a way of increasing political pressure on Washington.
Now look at this from a market perspective.
Every rumour of a peace deal sends oil lower.
Every denial, threat or escalation sends it back up.
But here's what I think traders really need to understand.
THIS IS BIGGER THAN OIL.
If energy prices remain elevated, inflation expectations could rise again.
That makes the Federal Reserve's job considerably harder.
Higher inflation expectations could push Treasury yields back up, support the dollar and put renewed pressure on equities.
Particularly highly valued technology stocks.
But there's another possibility.
We've already seen Treasury yields fall despite HOT inflation.
Why?
Because investors are also worried about growth, borrowing costs and what prolonged higher interest rates could do to the economy.
That's what makes this environment so fascinating.
We're potentially dealing with TWO competing forces.
INFLATION FEARS pushing yields higher.
ECONOMIC FEARS pulling yields lower.
And geopolitical developments could determine which one dominates.
I've spent 6 years watching markets, and one thing I've learnt is that the biggest moves often happen when the market suddenly changes what it's most worried about.
My concern now is what happens AFTER the midterms.
IRAN KNOWS IT.
And I think something VERY important is happening in financial markets right now.
US inflation: 3.7%.
Brent oil: $110 a barrel.
US 10-year Treasury yields: around 5.1%.
And this morning, US Secretary of State Marco Rubio says reaching a peace deal with Iran is EXTREMELY DIFFICULT.
Iran is refusing to reopen the Strait of Hormuz without Washington accepting its conditions.
Think about the timing of all this.
On 3 November, Americans head to the polls.
Trump needs lower energy prices. He needs inflation coming under control. And he certainly doesn't need another surge in petrol prices just before an election.
Iran knows this.
In fact, Reuters has reported that Iranian officials see prolonging negotiations as a way of increasing political pressure on Washington.
Now look at this from a market perspective.
Every rumour of a peace deal sends oil lower.
Every denial, threat or escalation sends it back up.
But here's what I think traders really need to understand.
THIS IS BIGGER THAN OIL.
If energy prices remain elevated, inflation expectations could rise again.
That makes the Federal Reserve's job considerably harder.
Higher inflation expectations could push Treasury yields back up, support the dollar and put renewed pressure on equities.
Particularly highly valued technology stocks.
But there's another possibility.
We've already seen Treasury yields fall despite HOT inflation.
Why?
Because investors are also worried about growth, borrowing costs and what prolonged higher interest rates could do to the economy.
That's what makes this environment so fascinating.
We're potentially dealing with TWO competing forces.
INFLATION FEARS pushing yields higher.
ECONOMIC FEARS pulling yields lower.
And geopolitical developments could determine which one dominates.
I've spent 6 years watching markets, and one thing I've learnt is that the biggest moves often happen when the market suddenly changes what it's most worried about.
My concern now is what happens AFTER the midterms.