This ain't over

A Reuters Open Interest newsletter

This ain't over

By Jamie McGeever, Markets Columnist 

Wall Street brought an otherwise positive day for global stocks to a downbeat end on Tuesday, as rebounding oil prices, spiking bond yields and soft business activity data compounded concerns that the war in the Middle East is far from over.

In my column today I look at how the war, energy crisis, and market turmoil have sent investors scurrying for safe havens. The only trouble is, the one-size-fits-all safe haven asset no longer exists.

I'd love to hear from you, so please reach out to me with comments at jamie.mcgeever@thomsonreuters.com. You can also follow me at @ReutersJamie and @reutersjamie.bsky.social. 

Data refreshes every time you open this email. For more U.S. market news, click here. Please send any feedback to morningbid@thomsonreuters.com.

* PMI pointers

Closely-watched purchasing managers index data for March released on Tuesday show that U.S. private sector output fell to its lowest in 11 months, overall activity in the euro zone fell to a 10-month low, and activity in Britain expanded at its slowest pace in six months.

Unsurprisingly, war in the Middle East, a global energy shock, and soaring oil and gas prices are putting global growth under strain. The longer this goes on, the more activity is squeezed, which could widen labor market cracks and spook policymakers. Maybe rate hike pricing has swung too far?

* Private chancer

Another wave of worry about the health of private credit markets is cresting. In the last 24 hours, Apollo's $25 billion private credit fund Apollo Debt Solutions and Ares Management's $22.7 billion Ares Strategic Income Fund have said they are capping redemptions at 5%. 

Shares in both firms underperformed on Tuesday. Shares in these and other big names in the sector are down 25-35% this year, as concern over asset value deepens. Do cracks in private credit pose structural risks to markets more broadly? The more firms stop investors from accessing their money, the more that debate will rage.

* A U.S. equity ... upgrade?

Barclays equity strategists put out an interesting note on Tuesday. Despite the war, energy shock, AI disruption, and private credit risks, they are raising their S&P 500 forecast for this year: EPS to $321 from $305, and price target to 7650 from 7400. That implies ~15% upside from today's close.  

They admit the risks skew toward more bear downside than bull upside, but insist the U.S. offers stronger nominal growth than other economies, led by a tech juggernaut that shows few signs of stopping. "We are incrementally bullish on US equities, though the road likely stays bumpy until we turn a corner." 

The Iran war and the global energy shock it has unleashed may have killed off the idea of a one-size-fits-all safe-haven asset.

This is not necessarily a new concept, given how poorly U.S. Treasuries fared after Russia invaded Ukraine four years ago. But the extraordinary slump in gold since the U.S.-Israeli strike on Iran on February 28 has exposed it to the light.

Treasuries, the dollar, Swiss franc and especially gold are among the assets investors tend to flock to in periods of heightened economic, geopolitical, or financial uncertainty. They are the assets most likely to serve as a store of value in a crisis.

But it's not turned out like that. At all.

Find ROI on the Reuters website, and join the debate on LinkedIn and X.