Equities moved higher last week despite momentum stocks reaching elevated valuations and concerns over a hawkish Fed. Energy-related stocks and oil prices rose on renewed tensions between the U.S. and Iran. The two countries exchanged attacks over the weekend causing 
oil futures to spike more than 3%, which could lead to higher energy prices in the short-term. However, despite reports that the Strait of Hormuz is "closed," ships continued to pass through the narrow alley throughout the week - albeit at a much lower pace than last month's numbers.1 Another concern among investors is the perceived stance of the Federal Reserve. A "hawkish" Fed considering hiking rates would be considered a threat to the current economic expansion. Regardless, since 1965, there have been 12 distinct Fed rate-hiking cycles. At least nine of them coincided with bear markets (20%+ declines) and at least 8 led to recessions.2 The good news is that the latest 
inflation "Nowcast" for both June and July, according to the Cleveland Fed, express inflation dropping from +4.2% to +3.9% in June and +3.7% in July.3 If that's the case, there's little else to suggest a need for rate hikes. The labor market is stable, but not hot. GDP is stable, but also not hot. Rate hikes, at least at this point, could pose greater risk to the economy than a temporary spike in inflation. Labor markets continue to show resiliency and do not show any widespread multiplying of job losses. Initial Claims for the week came in at 215,000, which is much lower than previous pre-recession spikes of more than 300,000 claims.4 Similarly, Continued claims were lower 
than expected this week at 1.8 million versus prior spikes of 2.5 million or more.5 Currently, more than 66% of S&P 500 stocks are trading above their respective 200-day moving averages, indicating improved breadth in the market.6 The Mag 7 and AI-related stocks have come under pressure due to a shift in how AI is perceived moving forward. The conflict in the Middle East is of more immediate concern than labor markets, inflation, or the Fed. Until economic fundamentals deteriorate, investors should maintain a risk-adjusted approach to investing.
Strait of Hormuz daily maritime risk and transit monitor – July 13
https://x.com/nicktimiraos/status/2072386756469473686?s=12&t=rL12aWyiinzSgh3poyqO0w
Continued Claims (Insured Unemployment) (CCSA) | FRED | St. Louis Fed
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