More Bumps Ahead?

Fed Chair Jerome Powell has often said that the road toward lowering inflation down to the Fed's 2.0% target is likely to be bumpy. Nevertheless, there has been no turbulence in the stock market's smooth ascent to new record highs since October 27, 2023, which marked the end of a 10.3% correction in the bull market that started October 12, 2022 (chart).

Nevertheless, we should expect some turbulence for the stock market ahead similar to today's pullback. Leading the way down today was Tesla on lower-than-expected deliveries. Shares of health insurers fell after the Biden administration didn’t boost payments for private Medicare plans as much as the insurance industry and investors had hoped. After the close, Intel 's shares fell when the company reported a big loss in its foundry business.

On a more macro level, the price of a barrel of Brent crude oil rose to $88.92 (chart). Our crude technical analysis of the crude oil price shows a clear breakout above a downtrend line that started in early March 2022. In addition, there is a channel formation in the price chart that might take the price up to $100 between July and September of this year.

Since Hamas attacked Israel on October 7, 2023, our number-one concern has been that the war between these two mortal enemies could turn into a regional war with a direct confrontation between Israel and Iran that could disrupt the global supply of oil. On April 1, Reuters reported: “Suspected Israeli warplanes bombed Iran's embassy in Syria on Monday in a strike that Iran said killed seven of its military advisers, including three senior commanders, marking a major escalation in Israel's war with its regional adversaries.