Good morning. (Today's Smart Brevity: 1,105 words, ~ 4 minutes.)
The attack on a Saudi Arabian oil field Saturday is still sending reverberations through markets, and it could have long-term implications for much more than the price of crude.
What's happening: Just about every market was moved by the attack and fears or hopes of how it could reprice assets.
Looking ahead: Gas prices could rise meaningfully if tensions persist in the Gulf between longtime rivals Saudi Arabia and Iran, which the White House blamed for the bombing.
Yes, but: Oil prices are still a far cry from their levels even a year ago and are not even threatening $100 a barrel, where they held for much of 2011 to 2014.
The big picture: Much of what happens next will depend on President Trump and his response to the attack. On Monday, he tweeted that the U.S. was "locked and loaded" and prepared for any conflict, but later asserted that he was "somebody that would like not to have war."
The impact of tariffs has been difficult to quantify because U.S. retailers that pay them can choose whether or not to pass the costs on to customers.
The big picture: "When it comes to the prices inside NPR's tariff-inspired shopping cart, the average price change since August 2018 was a 3% increase," write NPR's Alina Selyukh and Charlotte Norsworthy. "That's almost double the current rate of inflation."
Yes, but: Prices haven't moved uniformly in one direction.
Why it matters: "Many makers and sellers have so far chosen to absorb most of the tariffs, spread them across dozens of items, or pressure suppliers to bear more of the burden. Big U.S. retailers — such as Walmart, Target and others — get the final say on the price tags, and for them, jolting shoppers with price hikes is the last resort," they write.
My thought bubble: The fact that average prices of the NPR basket have risen by about double the rate of inflation suggests the tariffs are playing a role in increased prices even at a retail behemoth like Walmart.
A new survey of more than 275,000 gig applications in the U.S. over the last 12 months shows there's a bit of a mismatch between the side hustles gig workers are seeking and the ones that pay the most.
Monday's Empire State manufacturing index was little noticed, but BMO Capital Markets U.S. rates strategist Ian Lyngen says in a note that the continuing trend of rising inventories and falling new orders, as also seen in last month's ISM manufacturing data, is "troubling."
"The rise of unwanted inventories has historically been a precursor to a recession and warrants a nod in the current environment."
"[Capital expenditures] predictions are back in the single digits for the first time since Aug '16; completing the round-trip since the Presidential election. We're reminded that a spike in energy prices has also been a harbinger of economic slowdowns."
While not yet sounding an alarm, top strategists at BlackRock are starting to worry about the possibility of U.S. stagflation — high inflation combined with high unemployment and stagnant demand.
What they're saying: Mike Pyle, chief investment strategist for the BlackRock Investment Institute, sees inflation as set to pick up "thanks to more tariffs and faster wage growth in the face of a tight labor market," he says in a note to clients.
Be smart: Despite a recent armistice between the U.S. and China on the trade war, BII strategists believe the tensions are underpinned by "structural" issues, reducing the likelihood of a meaningful deal and keeping the trade war brewing for some time.
The bottom line: "Trade tensions pose the risk of slowing growth and rising inflation — a potential threat to stock and bond markets alike."
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