Stocks are lower this morning as the Iran situation drags on. Bonds and MBS are down small. The Iranian announcement on Friday that the Strait of Hormuz was open was rescinded and hostilities continue. The US seized an Iranian ship over the weekend and continued peace talks in Pakistan appear to be up in the air.
One thing to keep in mind is that time is on the US’s side here. Iran’s currency is worthless and it needs to export oil to survive. China relies heavily on Iranian oil and has to be getting sick of the situation. The US can endure high energy prices longer than the Iranians can endure the status quo of having their ports blockaded. Not only that, but there were all sorts of wells drilled 20 years ago when oil was $140 a barrel that become economic to operate if oil stays elevated. That increased supply will push prices down. As they say in the commodity markets: “the cure for high prices is high prices.”
The week ahead will be relatively data-light with retail sales and consumer sentiment. We are in the quiet period ahead of next week’s FOMC meeting, so we won’t have any Fed speakers. Earnings season continues, with numbers expected from AGNC Investment, Tesla, and PennyMac. The homebuilders will also report with D.R. Horton, Pulte, NVR, Tri-Pointe, and Meritage. The builders will be interesting to get a read on the Spring Selling Season.
Fed Governor Christopher Waller says that the Iran War is keeping the Fed on hold. He is worried about both sides of the dual mandate, with persistent inflation and a “slow growth” labor market. “High inflation and a weak labor market would be very complicated for a policymaker,” the central banker said for a speech in Alabama. “If I face this situation, I’ll have to balance the risks to the two sides of the Fed’s dual mandate to determine the appropriate path of policy, and that may mean maintaining the policy rate at the current target range if the risks to inflation outweigh those to the labor market.”
“My sense is that employers are walking a tightrope between their earlier challenges in finding qualified workers and where they think the economy is going, leaving them vulnerable to some economic shock that could tip them over and lead to significant job reductions,” he said.
“Beyond the length of these disruptions, with this economic shock coming on the heels of the boost to prices from import tariffs, I believe there is the possibility that this series of price shocks may lead to a more lasting increase in inflation, as we saw with the series of shocks during the pandemic,” he said.
The Atlanta Fed GDP Now model sees Q1 GDP at 1.3%. The estimate has been working its way lower.
Single-family rents increased 1.1% in February according to Cotality. This is about 1/3 of the pre-pandemic level.“While it looks like rent increases have slowed significantly more for lower-income renters, when you look back at the last five years, rent growth is similar across all price tiers, highlighting how broadly gains were distributed earlier in the cycle. Higher-end rentals continue to show comparatively more stability, with prices rising 2.0% year-over-year despite ongoing deceleration,” said Molly Boesel, senior principal economist at Cotality. “Geographic differences remain substantial, but deceleration is becoming less widespread, with fewer metros seeing annual declines and slowdowns than last month. Los Angeles posted its first annual decline since the 2025 wildfires, signaling rents are beginning to trend back toward pre‑wildfire levels.”
This really makes the push to get institutional investors out of single family properties look like a solution in search of a problem. Which is why you don’t see them grumbling about it too much. They are looking at the potential returns and seeing better alternatives in other asset classes.
