09 Mar 9th March 2026

Markets Year to Date

Understandably we have seen some selling since the war with Iran broke out 9 days ago. But not panic selling yet. So there is nothing to be really concerned about at this stage.

Stock investors only need to really worry about one thing, and that is Recession. Outside of a recession any selling that might occur is not protracted and stocks quickly recover.

A recession is a different beast though and it can take several years for stock prices to recover.

The problem now is Oil. But I will come back to that point later

First I want to recap some significant numbers from last week.

The Fed has two goals. To control inflation and maintain employment

US inflation is running at +2.6%, well under control, which is why markets were thinking the Fed would lower interest rates this year.

But employment numbers on Friday were negative. That has now happened 3 times in the last 5 months and shows the employment market is weakening.

Normally this would prompt the Fed to reduce rates. Rates go down and businesses hire more people which fixes the employment problem. But because of the war in Iran, oil is shooting up, which will lead to higher inflation if it sticks around this level. That higher inflation will stop the Fed from reducing rates.

It is a difficult spot for the Fed and I think they will just leave rates where they are for now and see how long the oil disruption lasts.

The Oil price is very important. It is one of my rules of thumb for predicting a recession.

If the Oil price doubles, very often, what follows is recession. $120 is the key level to get my attention

I have been watching Oil futures today and they got to a hig of $119.48 but have fallen back to $102 as I write.

An intra-day spike means little, but if Oil spends some time above $120 then a recession is likely.High oil prices lead to inflation which prompts Central banks to increase interest rates to slow the economy and those high rates often kill economic growth.

Watch this space carefully. The next few days will be telling. $120 is the level it needs to stay under.

The funny thing about this is the similarities to the double inflation spike of 1980-81

You probably know the history of Iran.

Following World War I, the British maintained control of Iranian Oil through the Anglo-Persian Oil Company (This would later become BP Ltd the massive British Oil company of today)

Mohammad Mossadeq was prime minister via his National Front Party and he decided to nationalise the Oil industry, effectively wrestling control away from the Anglo-Persian Oil company. This upset the British so MI-6 and the CIA undertook operation Ajax in 1953 which toppled Mossadeq from power. They basically thwarted the democratic process in Iran and presumably with the war to day they will try and bring it back.

Whilst Mossadeq was Prime Minster, Mohammad Pahlvi was Shah.

in 1963, the Shah announced his White Revolution, a program that included land reform, the nationalisation of forests, the sale of state-owned enterprises to the private sector, a profit-sharing plan for industrial workers, and the formation of a Literacy Corps to eradicate illiteracy in rural areas. The White Revolution also granted Iranian women the right to vote, increased women’s minimum legal marriage age to 18, and improved women’s legal rights in divorce and child custody matters. These reforms were opposed by some of Iran’s clergy, in particular Ayatollah Khomeini. Khomeini led the June 5, 1963 uprising, opposing the Shah and the White Revolution. This failed and Khomeini fled to Iraq.

The Oil boom of the 1970s led to a large influx of dollars to Iran. The unequal distribution of wealth led to social unrest and in 1979 we had the Iranian Revolution where the western-backed, authoritarian monarchy of Pahlavi fled, replaced by the Islamic Republic and Khomeini returned.

This revolution disrupted Oil supply and Oil quickly spiked, leading to recession around the world. Paul Volker was brought in to Fed Chair and he aggressively increased interest rates to tame inflation. This worked but he changed course too early in 1980 and that led to a second spike in inflation. He was forced to raise rates again to control this.

Back to the present. Following Covid, we saw inflation rise. The Fed raised rates and by 2024 the Fed could see inflation was under control and began to cut again. Many commentators remarked how Powell might have gone to early and he could have a Volker moment on his hands and we see a second spike in inflation.

Today I find that comparison amusing. If Oil stays up here then we will see inflation and the Fed will be forced to raise rates. It is amusing because last time it was Iran that caused the first spike and the Fed that caused the second.

This time the Fed caused the first spike with free-money following Covid and we could see Iran cause the second spike.

Conjecture at this point and if the Oil price retreats quickly there is no concern. But if it stays here……things could get ugly.

For now, I personally bought some futures contracts today (it is just an easy way to get long stocks) on the dip because the VIX hit my first buy point at 27.

In the past, when the VIX hits 27, stocks have been higher one week later 55% of the time and one month later they are higher 66% of the time.

A VIX of 35 is my second buy point. Those stats are even better so if this selling continues and the VIX continues to rise (it was 29 on Friday) I will buy more.

A couple of weeks ago Alex pointed out it was a good time to buy software companies. Last week we saw a noticeable rotation out of hardware and into software.

Microsoft was up 4.1% but NVidia flat at +0.4%. Salesforce was up +3.8% while Micron was down -10.2%

There is still value in software if you are looking for something to buy.

Warning

Stock values can go down as well as up. It is possible to lose 100% of your investment in a stock. Any advice given by Capital 19 is general advice only and does not take your personal circumstances into account and might not be suitable for you.