Market Matters 193 – Earnings Strength Meets Hormuz Uncertainty

Summary

• Markets stayed firm even though the backdrop became more difficult. The S&P 500 made new highs, helped by strong US earnings and continued leadership from large technology companies, while most other regions were quieter as investors worried about weaker growth, higher energy prices and policy uncertainty.
• The Strait of Hormuz is still the main issue to watch. Disruption to shipping has continued even after the ceasefire, which means energy markets remain exposed and a geopolitical premium is likely to stay in oil prices. The note makes clear that this is a serious economic risk, not just another short-lived geopolitical headline.
• Higher oil prices are making life harder for central banks. Rising energy prices push inflation up first, then start to weaken consumer spending and growth. That creates a difficult backdrop for policymakers, because inflation risks rise at the same time as economic momentum may start to slow.
• The US is in a stronger position than most regions, but it is not fully protected. Economic growth and business investment are still holding up well, especially where AI spending is involved, but the pressure on lower-income consumers is beginning to build as fuel costs rise and earlier support fades.
• Earnings are still doing most of the work in supporting markets. Strong results from major technology and cloud businesses helped keep confidence intact, although investors are becoming more selective about which AI stories they trust. The overall message remains constructive but more measured: stay invested, but remain selective given higher oil prices, central bank uncertainty and less room for valuation disappointment.