With everything going on in the world right now—the conflict in Iran, oil prices surging, stocks selling off—it can be hard to know what to actually focus on. So this week, rather than zooming in on just one data point, I want to share a chart that I think does a really nice job of cutting through the noise.
What you’re looking at is four different market indicators, all shown side by side from last summer through today. The vertical line marks February 27th—the Friday before the conflict in Iran began. You can see that right around that date, all four of these indicators started moving in the same direction: oil prices shot up, the dollar strengthened, high yield credit spreads widened, and the VIX—Wall Street’s fear gauge—spiked higher. That’s a lot of headwinds hitting at the same time.
Here’s why this matters for your portfolio. Each of these four things, on its own, can weigh on stocks. Higher oil prices squeeze consumers and businesses. A stronger dollar hurts earnings for U.S. companies that sell overseas. Wider credit spreads mean it’s getting more expensive for companies to borrow money. And an elevated VIX just reflects the fact that investors are nervous and demanding more protection. When all four are moving against you at once, the market tends to struggle—which is pretty much what we’ve seen over the last several weeks.
The good news—and there is good news here—is that this also works in reverse. If these four indicators start rolling over together, history suggests we could see a meaningful rally in stocks. And as of the end of last week, there were early signs that some of them may be starting to turn. Oil is near highs, sure, but the dollar has plateaued, credit spreads are coming back down, and the VIX is coming off its highs.
The bottom line? Nobody can say for certain that the worst is behind us. But this is the dashboard I’d be watching right now. If these four things continue to calm down together, that’s a pretty good sign that the market is finding its footing.
This is intended for informational purposes only and should not be used as the primary basis for an investment decision. Consult an advisor for your personal situation.
Indices mentioned are unmanaged, do not incur fees, and cannot be invested into directly.
Past performance does not guarantee future results.