Concerns over AI and private credit put downward pressure on equities last week. As if that were not enough, early Saturday morning a joint 
U.S./Israel strike on Iran took place that has markets teeming with anxiety. I hate to be the one to say, "We've been here before," but we indeed have been here before. Different geopolitical shocks have affected the price of oil many times since 1920. Each time is a little different - some shocks are short-term in nature, while others are longer lasting. When the Iran Crisis occurred in 1979, upward pressure on oil prices lasted for multiple years. However, in 1990, when Iraq invaded Kuwait, oil prices increased more than 30% in just two months, but by January of 1991, 
when the official ground campaign started, oil prices had already come back down to their original price before the conflict began. Trading equities, bonds, or commodities based on geopolitical shocks is difficult as each situation is different. There are some unique elements to this particular event. Several key leaders of Iran were killed in Saturday's bombings. Iran seems to have responded with bombings on other Middle Eastern neighbors and threatening to shut down the Strait of Hormuz. The Strait sees approximately 20% of the world's oil and natural gas tankers go through the choke point annually. Meanwhile, two oil tankers have already been struck by Iranian troops in just the last 48 hours. In addition, ship insurers are cancelling 
"war risk" policies and are likely raising premiums by up to 50%. This will prevent ships from travelling through the region regardless of Iranian tensions. There are some overtures by the White House that an "off ramp" may be possible should Iran agree to certain conditions - most notably, regime change. Regardless, the average recovery for equities following a geopolitical shock is 30 days to get back to even. What's more, markets are higher 3 mths, 6 mths, and 9 mths after geopolitical shocks at least 61% of the time. In respite from the geopolitical environment, equity markets finished the month on par with seasonality for the month of February. 
The S&P 500 Index was down -0.76% for the month of February which falls in-line with the average return for February. Equities are also falling in-line with the typical mid-term election year. The S&P 500 has closed within 2.5% of its 50-day moving average for 63 consecutive sessions - it's longest streak since 2018. This means buyers and sellers are evenly matched - indecision. If we look under the hood, Mag 7 stocks are down for the year, while the other 493 names in the S&P 500 are up. While Mag 7 drove returns in 2025, that group is down more than 5% so far this year, while some of its competitors in other asset classes - Mid-caps, Small Caps, & International equity - are up more than 9% so far this year. Despite concerns, economic fundamentals remain strong. Both Jobless Claims and Continuing Claims were lower this week and remain at low levels compared to other pre-recessionary periods. Consumer spending, as measured by the Redbook Sales, continue to show a resilient consumer overall. The St. Louis Fed's Financial Stress Index remains below zero and shows a financial system not exhibiting the typical signs of an impending recession. Manufacturing is showing signs of recovery, as manufacturing production has improved over the last 16 months and has reached a new 3-year high. In addition, the regional Fed manufacturing indices, with the exception of Richmond, are all on the mend have improved since hitting lows last year. The best course of action right now is to limit concentrations and remain diversified.
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