Alarm Bells
Posted on Sunday, June 15th, 2025
Every year, I set a reminder in my calendar to change the smoke detector batteries on Mother’s Day. Why Mother’s Day? Honestly, I’m not sure—it just seemed like an easy date to remember. Well, this year, I completely forgot. And of course, I paid the price.
At 1 a.m. on Tuesday, that dreaded, ominous beep echoed through the house. You can picture me, half-asleep, stumbling around in the dark, trying to figure out which detector was making the noise. The beeping only happened every two or three minutes, so I spent a good deal of time wandering from room to room. Eventually, Diane joined the search. Together, we finally tracked down the culprit and disabled it, then headed back to bed.
But at 5:30 a.m., another alarm started beeping—this time in the basement. I was on my own for this one.
Alarm bells were ringing in the markets this week following the attacks in the Middle East. As serious as these events are, the oil market’s reaction was surprisingly muted—ranking only as a top-20 event in terms of impact. It seems the market has grown somewhat indifferent to headlines about Middle Eastern unrest. After all, “unrest in the Middle East” has been a recurring theme for over two millennia.
Still, there’s a risk that markets underestimate the potential for the conflict to escalate. The possibility of Iran closing the Strait of Hormuz isn’t far-fetched, and such a move could send oil prices sharply higher. In fact, if Iran wanted to retaliate against the U.S., what better way than to try to spark inflation by disrupting oil flows? It’s a scenario worth watching, even if the market seems unfazed for now.
The current weakness in the US dollar is providing a boost to emerging markets. Many of these markets are rich in commodities, which are expected to see rising demand as AI technologies require significant raw materials. From a valuation standpoint, emerging market equities are trading at some of their most attractive levels relative to US stocks in recent history. These factors make a compelling case for increasing exposure to emerging market stocks.
On a further note, regarding last week’s comments about bonds. We do hold some mid-duration government bonds in the portfolio. That holding (IEF) is up 1.94% year to date. The S&P 500 is up 1.85%. It’s not the level of government spending that concerns us. It is the speed at which interest rates rise. If they rise too quickly, investors cannot reposition quickly enough. Last week’s note – For stocks, it looks as though the recent all-time highs are now resistance, with the 200 DMA being support. June is one of the weaker months, but July is much better. I would expect some type of slowing of stocks’ ascent here, especially when we come out of the options expiration on June 20th.
We continue to be convinced that money is going to go home. Meaning that we see strength in Europe, China, and in emerging markets. A weak dollar will help those markets (and gold). Europe and Emerging Markets have underperformed for 18 years. The 18-year bear market in Emerging Markets, China, and Europe may be ending. We look to continue to take off some US exposure and add to Europe and China on selloffs.
Economic history is a never-ending series of episodes based on falsehoods and lies, not truths. It represents the path to big money. The object is to recognize the trend whose premise is false, ride that trend, and step off before it is discredited.” – George Soros
I think we aspire less to foresee the future and more to be a great contingency planner… you can respond very fast to what’s happening because you thought through all the possibilities, – Lloyd Blankfein
A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty. – Winston Churchill
To learn more about us and Blackthorn Asset Management LLC visit our website at www.BlackthornAsset.com .
Disclosure: This blog is informational and is not a recommendation to buy or sell anything. If you are thinking about investing consider the risk. Everyone’s financial situation is different. Consult your financial advisor.