Markets Weekly March 21, 2026

Markets Weekly - March 21st Announcement

Launch of Central Banking 101 Second Edition

• The host announces the launch of the second edition of "Central Banking 101," updating data and content since its first release in early 2021.

• The new edition includes discussions on significant events like the transition from LIBOR to SOFR, Treasury buybacks, and how to interpret Treasury refunding announcements.

• The physical dimensions of the book are larger, and it appears more professionally produced compared to the first edition.

• To celebrate this launch, a special discount is offered: the book will be available for $10 instead of its usual price of $20 for a limited time.

• An email announcement regarding this promotion will be sent to newsletter subscribers.

Market Movements Driven by Geopolitical Events

Impact of Middle Eastern Conflicts on Financial Markets

• Recent market movements have been significantly influenced by ongoing conflicts in the Middle East, leading to major shifts in central bank expectations globally.

• In both the US and UK, there has been an extraordinary rise in two-year yields; UK yields increased by approximately 100 basis points due to anticipated rate hikes from the Bank of England.

• Despite high oil prices influencing market sentiment, the Federal Reserve's stance has shifted from expecting rate cuts to considering potential rate hikes within this year.

Central Bank Responses to Energy Shocks

• Traditionally, central banks respond cautiously to energy shocks based on historical precedents from past geopolitical events; they often choose not to react immediately due to lagging effects of monetary policy.

• The Fed operates under a dual mandate focusing on full employment and price stability, which complicates their response compared to other central banks that prioritize inflation control.

Insights from FOMC Discussions

Governor Waller's Perspective

• Governor Waller has gained recognition as a leading dove within the FOMC; his recent decisions have surprised many observers given his previous dissent regarding labor market weaknesses.

• He suggests that projected stagnation in labor force growth may lead us not to expect significant job growth moving forward despite recent job losses being concerning.

Long-term Implications of Oil Price Changes

• Waller emphasizes that temporary spikes in oil prices can be overlooked; however, sustained increases could eventually impact core inflation rates necessitating a policy response.

Monetary Policy and Market Reactions

Fed's Stance on Interest Rates

• The Federal Reserve is not currently projecting any rate cuts, despite a potential weakening labor market that could prompt future considerations for cuts.

• A shift in the Fed's dovish stance has led to markets pricing in a more hawkish policy path, indicating a significant change in central bank policy.

Market Performance Overview

• The S&P 500 experienced poor performance, breaking below the 100-day moving average and dipping under 6,500 points.

• Gold prices have also declined unexpectedly due to a strengthening dollar and rising interest rates, losing key momentum signals like the 50-day moving average.

Global Financial Landscape

• There was widespread selling across financial assets last week, with bonds, equities, and gold all experiencing declines.

• Oil prices remain elevated at around $110 per barrel amidst ongoing geopolitical tensions.

Geopolitical Tensions Impacting Markets

Current Situation in the Middle East

• Accurate news regarding the war is scarce; propaganda complicates understanding of military capabilities and actions.

• President Trump's recent social media post suggested he might consider winding down military involvement, which positively affected market trading after hours.

Escalation of Conflict

• Despite talks of de-escalation from Trump, recent missile attacks on energy production facilities indicate an escalation rather than resolution.

• An Iranian missile attack on Qatari gas fields may lead to a structural decline in global gas production capacity.

Implications for Energy Prices

• The closure of strategic waterways like the Strait of Hormuz suggests persistently high oil prices and reduced economic growth prospects.

• Iran's retaliatory strikes against Israeli actions highlight ongoing tensions that could further impact energy markets.

Future Prospects Amidst Ongoing Conflict

Military Strategy Considerations

• Reports indicate potential deployment of Marines near Iran as part of strategic military options concerning oil infrastructure.

Negotiation Leverage Dynamics

• Taking control over key locations like Kar Island may be viewed by Trump as a means to gain leverage for negotiations regarding conflict resolution.

Regional Perspectives on Conflict Resolution

• Israeli leadership appears less inclined towards de-escalation; Prime Minister Netanyahu emphasizes continued military objectives related to Iran’s nuclear capabilities.

Understanding Iran's Strategic Position in Global Trade

Iran's Negotiations and Control Over the Strait of Hormuz

• The speaker suggests that it is not yet time for Iran to withdraw from its strategic position, highlighting ongoing negotiations between Iran and Japan regarding passage through the Strait of Hormuz.

• Reports indicate that some countries may be paying tolls to Iran for passage through the strait, potentially allowing Iran to maintain control while generating revenue.

• If successful, this scenario could lead to lower oil and gas prices globally, benefiting economies and alleviating potential starvation threats in poorer nations.

Economic Implications of Iranian Control

• Despite potential benefits for global trade, oil and gas prices may remain structurally higher due to the toll imposed by Iran, which would also increase its income amidst heavy sanctions.

• The U.S. Treasury Secretary recently lifted sanctions on Iranian oil at sea, enabling sales that have been restricted for a long time; this could allow Iran to profit from the ongoing conflict.

Risks of Continued Conflict

• The speaker emphasizes uncertainty surrounding the war's outcome but notes that prolonged conflict risks exacerbating global recession as energy production declines.

• A metaphorical comparison is made between the current economic situation and radiation sickness, suggesting that while things may seem fine initially, they are deteriorating rapidly.