Dollar strength pushes Yen to 40-year low despite intervention warnings
Essentially, Friday will be a big day, since that is the last day of the five-day halt of hostilities in Iran. Traders are unlikely to hold positions over the weekend, due to the uncertainty about whether or not a ceasefire will emerge and the Strait of Hormuz will reopen. Since the U.S. shut down Iran’s deep-water port on Kharg Island, which accounts for about 90% of its crude oil exports, I suspect that is the primary leverage the U.S. has on Iran, since that is where the Iranian Republican Guard Corps (IRGC) gets much of its revenue. It will also be interesting if U.S. Marines take control of Iran’s deep-water port on Kharg Island. In other words, the fog of war persists, but ironically, global economic issues are becoming the primary reason to implement a ceasefire.
I think it is safe to say that President Trump wants lower crude oil prices and that the Trump Administration will be pushing to reopen the Strait of Hormuz. It is also imperative that fertilizer shipments through the Strait of Hormuz resume, since food prices are expected to remain high if fertilizer cannot boost crop yields during the planting season.
The U.S. is the economic growth engine of the world, and international investors are expected to continue to gravitate to the U.S. due to stronger GDP growth as well as an improving U.S. dollar. President Trump delayed his trip to China due to the crisis with the Strait of Hormuz, but ironically, even China needs the U.S. to reopen the Strait of Hormuz since it gets 80% of its crude oil from the Middle East. Ironically, California is now increasingly importing gasoline from South Korea, so $8 per gallon gasoline is possible for California during peak summer demand due to its dependence on imported gasoline.
In the meantime, the best defense remains a strong offense of fundamentally superior stocks that are reporting stunning sales, earnings, surprises and positive guidance. Stocks like Micron Technology (MU) and Nvidia (NVDA) remain the market leaders.
Even my weakest stock, namely Super Micro Computer (SMCI) has 171% forecasted sales growth and now trades at less than 10 times this year’s forecasted earnings, so I think it may be acquired in the upcoming months. This is a good time to remind all investors that good stocks bounce.