Despite this month’s selloff in equities, most major indexes are still showing support around their long-term moving averages, consistent with the historical reality that most geopolitical shocks tend to be shallow and short-lived. Given that individual investor sentiment has already reached overly bearish levels and could be due for a reversal, we are not yet moving our Technical Dial out of its Positive position. 

Initial surveys of consumers are showing that future spending is already likely to be impacted by higher gas prices and overall uncertainty caused by the war in Iran, which threatens to halt previous signs of a pickup in activity. With companies continuing to limit employee headcounts and the Fed losing wiggle room to cut rates if inflation resurfaces, our Economic Dial stays in a Negative position. 

We’ve long viewed this stock market as priced for perfection, and geopolitical uncertainty as well as renewed competition from higher yielding bonds could lead to a continued downward repricing in equities. As such, our Valuation Dial remains Negative.