Stock markets have experienced a significant decline due to escalating geopolitical tensions, simultaneously witnessing a surge in oil prices, which have reached their highest levels since January. To provide further insights into the trading day’s developments, we turn to Yahoo Finance’s Jared Blickry. Jared, it seems we had a mixed week overall.
Yes, indeed. While the previous day showed promise, we saw a downturn this morning, which was somewhat anticipated. Let me illustrate this with a chart. It’s important to note that this isn’t catastrophic; we remain close to all-time highs in the major indices. The VIX index is above 20, suggesting some market volatility. Notably, energy stocks have performed well today, a trend that has been consistent throughout the week. Crude oil prices have seen an uptick, which might have hinted at this morning’s market movements. Overall, energy has emerged as the standout sector this week, while defensive sectors like healthcare, utilities, and real estate have also shown resilience. In contrast, financials, particularly regional banks, have faced significant losses today, alongside a downturn in industrials, which had previously been the top-performing sector of the year.
Let’s take a moment to review the performance of various indices for the week. The Nasdaq experienced a slight decline of two-thirds of a percent over the past five days, dipping into negative territory by the close yesterday. Both the S&P 500 and Dow Jones also ended in the red, with the Russell 2000 following suit. I mentioned the VIX earlier, which has risen above 20. Although this is notable, it’s not alarming, especially considering its history; it previously spiked to 60. Currently, we are just shy of those lows. Interestingly, we noticed a rise in the VIX yesterday, even while stocks were up, which could serve as a cautionary signal.
Indeed. Earlier today, a guest highlighted that investors are increasingly seeking to diversify their portfolios beyond just dollar-denominated assets. What’s the current status of the dollar?
The dollar index, known as the Dixie, is an older trade-weighted index that hasn’t been adjusted in four decades, making it heavily influenced by the euro. Currently, the index is up a mere 0.3% year-to-date, and today’s small uptick is barely noticeable, considering it remains at three-year lows. Interestingly, bond yields have also increased, which means bonds are losing value. If there’s a movement towards the dollar, it raises the question: what assets are being purchased? Stocks are down, and bonds are also losing value. Are investors turning to U.S. dollar-denominated futures in commodities like gold or oil?
Indeed, oil could be a factor here since purchasing WTI crude oil requires dollars. Let’s examine crude oil futures, which have recently experienced a significant increase. Year-to-date, crude oil prices are just slightly positive. Over the past two days, we’ve observed a price surge of around 14%. Historically, such price spikes can be temporary, reminiscent of the sharp increases following the Russian invasion of Ukraine. Prices around $73 per barrel are manageable, but if they were to rise significantly, say to $100 or $130, that would be a more pressing issue. Currently, we’re not approaching those levels.
The energy producers stand to benefit from these price increases, which is reflected in their gains.
Absolutely. Now, let’s shift our focus to the dynamics between gold and Bitcoin, which you’ve been monitoring closely.
Yes, that’s right. Today, there was noticeable buying in gold, which I’ll emphasize by saying that gold is presently outperforming Bitcoin. This observation stems from Bitcoin’s lack of upward momentum in response to recent market news, with gold rising while Bitcoin saw a decline. As we look at the futures data, gold is up by 1.5% today. Although it hasn’t reached record highs, it has been fluctuating without bearish trends. It seems plausible that gold futures could soon hit another record, but the question remains as to how far they could exceed that peak. In contrast, Bitcoin has dropped by two-thirds of a percent, dipping below the $105,000 mark. Its year-to-date performance shows it has been relatively stagnant, particularly in light of the recent divergence from gold, indicating that Bitcoin is not yet established as a safe-haven asset equivalent to physical gold.
Thus, it appears Bitcoin is not necessarily considered a defensive investment.
Correct; it might be viewed more as a hedge against inflation or a risk-on asset. But it’s not functioning in the same capacity as gold. Enjoy your weekend, Jared.
