Tensions with Iran took center stage this week as Iranian missile strikes targeted two U.S. military bases in Iraq on Tuesday. The missile strikes by Iran came in response to the U.S. airstrike in Baghdad last week that killed Iran’s top military commander, General Qasem Soleimani. The Dow Jones was down over 400 points in pre-market trading on Wednesday, but soon recovered as investors digested the news. Energy prices saw heightened levels of volatility this week as market participants weighed the likelihood of a disruption to supply as approximately 16% of the world’s oil moves through the Strait of Hormuz, which is largely controlled by Iran. All told, the conflict with Iran has weighed on market sentiment, but no real threat of war appears to be priced into the markets at this time. On the labor front, private sector employment in the ADP report rose by 202,000 in December, well above expectations. Investors will be looking to Wednesday’s more widely followed jobs report for signs of continued strength in what has been an extremely resilient U.S. labor market. Following the yield curve inversion in August of last year, interest rates are now in a more sustainable range with the 2-year and 10-year treasury trading at 1.55% and 1.82% respectively mid-week.
Source: Morningstar Direct, WSJ Market Data, GSAM, Bloomberg
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