Why War Isn’t Spooking Wall Street—Yet

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Goalfleaders insist on crippling Iran's regime

before ending the war.

Plus, as fighting drags on,

we'll look at why Wall Street isn't freaking out,

at least not yet.

So we see the shortage of this conflict will be

so small as the impact should be on the economy

and the consumer, but as of now,

we're actually having a stack of stationary risk

that is growing by the day without equipped escalation.

And bad news for the struggling U.S. Postal Service

as Amazon plans to take its business elsewhere.

It's Wednesday, March 18th.

I'm Luke Vargas for the Wall Street Journal,

and here is the am edition of What's News,

the top headlines and business stories

moving your world today.

Goalfeficials say they want the U.S.

to keep up the fight against Iran

in order to render it incapable of future attacks.

A major pivot from a region that once courted Tehran.

Speaking to the journal,

Emirati and Katari officials described Iran

as the belligerent party,

citing its attacks on infrastructure

and civilian targets,

while another senior golf officials

said the only acceptable outcome of the war

would be in Iran so infebold

that it could never imperil its neighbors again.

Iranian leaders in recent days have said

they'd only accept a ceasefire with the U.S. in Israel

if the country received reparations

and ironclad guarantees against future attacks.

Meanwhile, Iran struck central Israel

with missiles overnight,

causing heavy damage and killing two people,

raising the death toll in Israel

since the start of the war to at least 14.

And authorities in Iraq report

that the U.S. embassy in Baghdad suffered a fresh attack

without providing more details.

The compound was hit by a missile over the weekend

and targeted by rockets and drones Monday and Tuesday.

Well, with the war dragging on,

the effective closure of the Strait of Hormuz

sending energy prices soaring and inflation warnings

now cropping up around the world,

why are U.S. equity markets

off just a few percentage points

since before the fighting started?

A manual comb is the head of European equity strategy

at Barclays, and he joins me now to discuss why that is

and whether that trend will continue.

A manual Wall Street's reaction as far

has been much less negative compared

to past conflicts in the Middle East

in spite of concerns that this all could become

a protracted situation.

Why is that?

Hey, look, I think the market is pretty comfortable

with the view that President Trump

cannot afford to have a long lasting shock

and stark fashionary heat to the U.S. economy, right?

And I think there is still a lot of trauma

from investors having sold equities

after Liberation a year ago, which was a big mistake.

So I think investors are hopeful

of a Swiss resolution to this conflict.

On the view that Trump will ultimately do

whatever is good for the U.S. economy.

And that includes triggering a swift policy response

pushing in particular the IEA to release all of this oil.

I think this is part of the toolbox,

but I guess what we can conclude

from Trump communication in the last couple of days

is that the all price as church is spent threshold.

So that was already seen a year a week ago

when Trump was starting to talk about this escalation

after all price went above $120.

Obviously, it's not just about him tweeting

about the end of the conflict.

We need to see the other parties,

whether it's Israel or Iran,

willing to support this escalation effort.

So I think this is where we have a bit of question, Mark,

about whether the market is too complacent

about the outcome of this conflict

and whether you could get the situation to worsen

before it gets better.

So I think what we said is that typically

for a 30% move up in oil,

what about 10% to 15% drop in equity market

and so far the global equity market is not only 4%.

So it's not the typical risk of we had

in previous old super shocks.

Yeah, and we've spoken on the show in recent days

about some of the factors that have insulated

the US economy in particular from this crisis,

more so than the rest of the world.

It really helps, for instance, to be a net energy exporter.

What else?

Look, I think the US markets,

whether it's US equity market or the US dollar

have behaviors as safe haven again, right?

And think about this in the context of the past six months

was the only gaming town was South America

and rotation towards international market.

What we saw in the last couple of weeks

is the safety of the US market prevailing again.

And yes, I think the most hit market

are those which are the most energy sensitive.

So we've seen Asian equities, Europe equities coming down

quite a lot more than the US equity market,

which is again less directly impacted

by this kind of stack-facenery fields.

And even if you look at the right market,

we had a pretty hawkish reprising in Europe and race

because now the market is looking for the ECB to high-grade

as a consequence of this inflationary shock

while seeing the market instead looking

for one cut from the Fed this year.

So the market is really seeing that this stack-facenary shock

would be much more acute in Europe than it would be for the US.

The consumer outlook worsening in your view.

I would say today compared to two weeks ago,

yes, the consumer outlook is worsening

because we have lower growth and higher inflation

as the consequence of this oil shock.

And again, if you get gasoline prices going through the roof

in the US and some other sentiment surveys

are starting to be hit, right?

So this is a short term, this conflict will be

the smaller the impact should be on the economy

and the consumer.

But as of now, we're actually having a stack-facenery

risk that is growing by the day

without a quick destination.

And man, I want to talk about central banks.

The Fed is making a rate announcement today.

Could central banks here inadvertently dial up

stagflation fears if it looks like their focus

is returning back to fighting inflation

instead of supporting growth?

Yeah, absolutely as things are,

the key will be how central banks around the world

respond to this development.

And you know, we have a busy week with the Fed,

we have the ECB, the Bank of England as well,

meeting on Thursday ends the Bank of Japan as well.

So all the main central banks around the world

are going to have to tell us what they make of this oil shock

and whether there's something to shift away

from what has been a pretty dovish communication so far.

And whether they start to embrace what the market seems

to be facing, which is basically a higher rate

in the case of Europe or less right cut

in the case of the US.

Emmanuel Coe is the head of European equity strategy

at Barclays.

Emmanuel, thank you so much for being with us on What's News.

Thank you.

Well, as we mentioned there, the Fed's latest interest rate

decision is due this afternoon in announcement

that journal chief economics correspondent Nick Timoros says

comes as officials are contending yet again

with a familiar foe inflation.

It has a feeling of deja vu for the Fed.

First it was the aftershocks of the pandemic.

Then it was Russia's war in Ukraine.

Last year you had sweeping tear of policy changes

and now it's the war in the Middle East.

What the war does is that it freezes up your ability

to make big judgments.

So if you thought the bigger problem

before all of this was still in the labor market,

you may look at the possible destruction of demand

that comes from higher oil prices and say, well,

now the labor market is going to be in an even more

fragile position and we should focus on that.

If on the other hand, before this conflict,

you were worried that inflation wasn't getting better.

You also can look at that and say, geez,

inflation was not getting better.

It was actually getting a little bit worse

and now we're going to have a new round

of potential supply problems.

Well, the war is likely to reinforce the consensus

around holding rates steady.

Nick says there's less clarity

about where policy makers should head after that.

Policy makers around the table this week face a question

that would have seemed unlikely a few months ago

when they were cutting interest rates.

And that question is no longer,

when will they next cut interest rates?

But rather, can they credibly suggest

that the next move in interest rates

is still more likely to be a move down than a move up?

And there were some officials even before this

who wanted to get rid of that guidance that suggested

that the next move was more likely to be a cut.

They wanted to go to a more neutral bias

and so that debate I think will continue.

Today's rate announcement is due at 2 p.m. Eastern

followed by a press conference by Chair Jerome Powell.

Coming up, the U.S. Postal Service

risks losing business from its largest customer, Amazon

and Illinois governor, J.B. Pritzker,

dodges political embarrassment in a Senate primary,

those stories, and more after the break.

Voices are powerful things.

At Vanguard, investors are also owners

and their voices are heard.

And now with investor choice,

they have an even greater voice when investing.

It's just another reason millions of investors

have turned to Vanguard for 50 years,

50 million investors, 50 million voices, Vanguard.

Vanguard is owned by its funds,

but are owned by Vanguard's fund shareholder clients

to learn more visit Vanguard.com.

All investing is subject to risk

Vanguard Market Incorporation Distributor figure

as of January, 2025.

Illinois's lieutenant governor, Juliana Stratton,

has won the state's Democratic Senate primary,

putting her in pole position to replace

retiring Senator Dick Durbin, who's held a seat since 1997.

Tonight, we showed what's possible

when you listen to the people and give the people

what they want.

You got it.

General National Political Reporter, John McCormick,

says the win is a boost to the economy

and John McCormick says the win is a boost

for Stratton's boss, Governor JD Pritzker,

as he eyes a potential White House run in 2028.

The primary race tested Pritzker's political cloud

in a state where he has leveraged his wealth

to dominate the Democratic Party.

Stratton's victory comes as he's working

to raise his national profile with the party's base nationally,

helping elect Stratton could prove useful to Pritzker,

should he run for the party's nomination

after a likely securing a third gubernatorial term

for himself in November's election.

The victory by Stratton could also help

soothe some of the bad feelings about Pritzker

among members of the Congressional Black Caucus,

which had backed another candidate in the race

and was critical of the governor's financial involvement

backing Stratton.

If elected Stratton would become only the sixth Black woman

to serve in the US Senate.

Voice of America could soon be back on the air.

A federal judge yesterday

ordered that the Trump administration

restart the government run outlet

after effectively shutting it down last year,

putting hundreds of employees back to work.

The ruling comes after the same judge last week,

ruled that Trump's pick to lead the US agency

for global media, Carrie Lake,

lacked the authority to slim down V.O.A.'s operations.

We are exclusively reporting that Amazon plans

to slash the number of packages it sends

through the U.S. Postal Service by at least two thirds

as early as this fall.

That's after Postmaster General David Steiner

solicited bids from Amazon and others

for its last mile delivery service for the first time.

But with Amazon's existing contract ending in October

and the results of the bidding not released

until the second quarter,

we report that Amazon grew concerned

it would have little time to adjust operations

if its bid wasn't accepted.

And Amazon spokesman said that the e-commerce retailer

initially wanted to increase volumes

with the Postal Service,

where it's long been the largest customer

and was surprised by the new bidding process.

The USPS delivered more than a billion Amazon packages

last year and the pullback comes

as its finances are in dire straits.

Here was Steiner testifying yesterday on Capitol Hill.

At our current rate, we'll be out of cash

in less than 12 months.

So in about a year from now,

the Postal Service would be unable to deliver the mail.

If we continue the status quo,

Steiner is asking Congress to raise the Postal Service's

debt limit and lift regulations on its ability

to raise prices for stamps and other services.

And finally, celebrations in Caracas.

Venezuela, last night, beat out the heavily favored US

in the World Baseball Classic in Miami,

sparking celebrations in cities with large Venezuelan

populations from Santiago to Madrid.

Following the win, Venezuela's interim president,

Delcy Rodriguez, declared today a national holiday,

while Donald Trump took to truth social

to suggest making the oil rich nation the 51st state.

And that's it for what's news for this Wednesday morning.

Today's show was produced by Hadi Moyer,

our supervising producer, his Daniel Bach,

and I'm Luke Vargas for the Wall Street Journal.

We will be back tonight with a new show.

And until then, thanks for listening.

And I'm Luke Vargas for the Wall Street Journal.

I'm Luke Vargas for the Wall Street Journal.

And I'm Luke Vargas for the Wall Street Journal.

And I'm Luke Vargas for the Wall Street Journal.

Voices are powerful things.

At Vanguard, investors are also owners,

and their voices are heard.

And now with investor choice,

they have an even greater voice when investing.

It's just another reason millions of investors

have turned Vanguard for 50 years.

50 million investors, 50 million voices.

Vanguard.

Vanguard is owned by its funds,

but are owned by Vanguard's fund shareholder clients

to learn more, visit vanguard.com.

All investing is subject to risk,

Vanguard Market Incorporation Distributor,

figure as of January 2025.