Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Friday, June 13, 2025. Happy Friday the 13th to those who celebrate.
State of Play
Israel carried out a series of attacks on and in Iran yesterday, adding a big dose of fear to the market set-up. As we eye or board of indicators for signs of direction at 06tk ET, this is being seen in commodity markets, first and foremost:
Oil is spiking upward. WTI crude is up 8.5% to trade close to $74/barrel. Copper is down 2%. Gold and silver are higher but not as much as you might expect (<1.5%);
Stock index futures are lower, but off of the lows. Nasdaq down 1.1%, S&P 500 is down 0.9%;
Cryptos are down too, but not terribly either. Bitcoin is down <2% to trade around $105,000;
Bonds are unchanged through all this. The 10-year yields 4.37%.
Today’s Known Events
Michigan Consumer Sentiment is out at 1000. That will be ignored. It’s all Middle East, all the time.
The market reaction ex-oil actually seems a bit muted. A drop of 1% and change for Nasdaq and S&P do not exactly speak to rampant fear. The selling could accelerate once the market opens of course, but so far this is really not that bad.
Markets hate uncertainty more than they hate bad news, but we’ve seen this movie before. There were some exchanges of hostilities last April. The market shrugged those off quickly. The question, then and now, is whether this spills into a broader Middle East conflict? Trump for his part is urging the sides to make a deal. Iran is calling this a declaration of war. Israel has said the operation is ongoing, whatever that means. Sabre-rattling or something more sinister?
The Bottom Line
The key question of course is what to do with one’s portfolio. How to protect against the possibility of a broader conflict? There are three options that immediately come to mind:
Oil. One could argue there is more upside here. JPMorgan analysts are making that point at least, saying crude could rally to $120/barrel. That’s another 50% or so of upside.
The problem with this argument is it assumes demand will remain constant. If there is a broader conflict there will likely be economic retrenchment, which (one would think) will crimp demand.
Gold. This is the traditional, proven, risk-off play. The muted move we’ve seen in gold overnight is perhaps an opportunity.
Problem with that is that gold is already trading at historic highs. Gold has no real tangible use. It has no yield. Is that really an investment you want to make right now?
Bonds, specifically Treasuries. There too the reaction has been muted. But bonds are still pretty cheap, at least compared to the last two decades. Treasuries are of course a bet on lower interest rates. If there is economic retrenchment one figures interest rate cuts would be coming. The problem with that argument is that sustained higher oil prices will in turn move inflation higher
Housekeeping
Obviously this is not investment advice (duh). Do your own research, make your own decisions.
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