The Fed is on hold. Iran is not. Oil regains highs, despite Trump's efforts. Markets test a critical support level. Read no further, unless you want the gory details.

 

My first downside target has been met. The S&P 500 Index has fallen to the 200-Day Moving Average (DMA). That is the level that has historically separated the bulls from the bears. Below it, we have problems. Above it, the sky's the limit. That's simple enough, I guess, but the question on your mind right now is what happens next?

 

That 200 DMA, while important, is not an exact science. More often than not, the market overshoots that line in the sand just to freak out the most investors. I am thinking that overall, we should pull back further, maybe closer to 10 percent over time rather than the 15 percent some bears are predicting.

 

As for when this conflict in the Middle East will end, I don't know. You could ask the president, since he has said that he will "have a feeling" when enough is enough and the war is over. When that occurs, the markets will rally. The bounce should be breathtaking, and if you are not invested, you will miss it. There won't be an opportunity to chase.

 

There is one caveat to that advice. If you are lucky enough to know someone in the inner circle or have paid (donated) enough to the right people, then you will be given advanced notice. Giving friends, relatives, and donors advance notice has become a standard practice within government over the last year.

 

I am not the only one with a foggy crystal ball. The Federal Reserve Bank has no idea what is in store for the economy or the financial markets either. They met this week but decided to do nothing but wring their hands. Chairman Jerome Powell (the Fed's lame-duck who isn't) said they would be watching and waiting for the next six weeks (the next FOMC meeting) until they see how this Middle Eastern conflict plays out. He intimated that the longer the war lasts, the more difficult the Fed's job becomes.

 

Higher-for-longer energy prices mean inflation strengthens as growth slows. The Fed has raised its inflation forecast for the year, but FOMC members still expect the economy to grow. Unemployment appears balanced. Since the immigration crackdown, job openings and job seekers are nearly zero, creating an unusual equilibrium.

 

On the inflation front, the Producer Price Index for February rose over twice as fast as expected, climbing 0.7 percent from January's 0.6 percent. This increase more than doubled most economists' forecasts, though not mine. About 30 percent of the gain was from higher diesel fuel prices. Read my column on diesel fuel this week. I expected this increase and anticipate that the next inflation numbers will be even higher.

 

The era of markets anticipating future rate cuts has ended, replaced by, at best, no change, and at worst, rate hikes if inflation accelerates. That shifts the narrative and market dynamics.

 

Precious metals and metals overall are a case in point. The sector has responded to the fear of higher interest rates by dropping precipitously. The hot money has bailed out and moved into speculating on energy and the U.S. dollar. I see further downside in all metals and a period of consolidation as interest rates decimate the asset class.

 

A series of measures — including using Strategic Petroleum Reserves, lifting Russian oil sanctions, and removing U.S. regulatory restrictions (The Jones Act) — to boost global liquidity appear to have slowed energy price gains.

 

Given that I am not a war correspondent, nor do I pretend to be, unlike so many talking heads in the financial media, all I can say about the conflict in the Middle East is that it has spread. Significant strikes on gas fields and oil refineries are investors' worst nightmares. That kind of escalation is a significant threat to global growth.

 

At the same time, the narrative has changed. The administration's assurances that we will kick Iran's butt, oil prices will fall, and on to the next victory are beginning to fall flat. Missile and drone strikes have taken precedence over words and presidential posts, with every new explosion sending oil prices higher and stocks lower.

 

Some traders are keying off the price of West Texas Intermediate oil (WTI) to signal which way stocks will go. Above WTI $97.37 a barrel, stocks fall further, while below WTI $92.62 markets rally. That is a wide range.  In between, equity markets are in a chop fest. The VIX (volatility index) indicates the same thing. It is at 25 right now. Below 19, the VIX signals all clear, but above 30, look out below! In between, we have the same chop fest as the oil price indicates. I warned readers to expect volatility, and we have it in spades. It will get worse before it gets better.

 

In keeping with the administration's return to its own brand of 16th-century mercantilism, could the next colony they seek be Cuba? It appears to be a strong bet, but for what purpose?

 

Given the actions and words of our government officials, the next country, or in this case, island nation, it seeks to conquer lies 90 miles from Key West. Cuba sits at the intersection between the Gulf of Mexico and the Atlantic Ocean. Historically, the U.S. considered it a natural barrier controlling vital sea lanes and a dominant landmass that protected or threatened the southern U.S. coast.

 

It may be that its long-term strategic military and economic value remains viable, but the country's economy is in a mess. The Economist, in a recent article, indicated that the Cuban economy was on the verge of collapse. Aside from rum, cigars, and a little tourism, Cuba suffers from decades of economic mismanagement, a lack of structural reforms, and mass migration.

 

Inflation is at 15 percent, the peso is tumbling, tropical diseases are surging, and in cities like Havana, the municipal waste system has ground to a halt. Blackouts are increasingly common. Hospitals are canceling surgeries, and public transportation is scarce. It wasn't always that way.

 

Originally a Spanish colony, Cuba in the 1800s fell under the Monroe Doctrine after Spain formally renounced its claim to Cuba in the Treaty of Paris in 1898, and was largely occupied by the U.S. By then, massive amounts of American capital had already been invested in the country. Beyond a thriving sugar trade, American interests controlled significant percentages of the island's railroads, public utilities, mining, and tobacco. The country essentially became a U.S. protectorate in 1903.

 

The Communist takeover of Cuba and the nationalization of American property in 1959 soured U.S./Cuban relations to the present day. Although there have been several false starts and attempts at reconciliation through the decades, the U.S. doctrine of isolation and embargo has continued to the present day. That policy has brought the Cuban economy to its knees today.

 

Trump's decision to choke off Venezuela's oil to Cuba, which can only meet 40 percent of its own energy demands, was a body blow. The oil crisis hammered the regime's already doomed economic model. In a rare admission of crisis, President Miguel Diaz-Canel scrambled to implement an urgent economic overhaul. The Castro brothers must have spun in their graves as Diaz-Canel called for loosening the state grip, courting foreign investors, and shrinking government control.

 

As the mood in this communist nation soured, the state's iron grip on the economy had already begun to loosen. In 2021, the government allowed the creation of hundreds of small businesses in the private sector with fewer than 100 employees. As such, there are now 11,000 small and medium-sized independent businesses on the island. Just recently, another series of reforms allowed private ownership of a wide range of industries, from food production to construction and beyond.

 

In the case of Cuba, I believe Trump would rather have a deal that would make the island economically dependent on the U.S. Unlike the war in Iran or the late-night raid in Venezuela, I am not looking for an abrupt change nor the sudden overthrow of all state control. Times have changed. Most so-called capitalist economies have evolved into a new model of state capitalism, whether we are talking about China or the U.S.I believe the approach will be different. It would be more of a bailout or bankruptcy reorganization than a regime change.

 

President Trump has used the term "friendly takeover" more than once in talking about Cuba. His Secretary of State Marco Rubio, a longtime Cuba hawk, along with a Florida-based Cuban business community, has been reaching out to the private sector. I have noticed that rather than threaten regime change in the name of democracy or an end to communism, the administration is focusing on commercial, economic, and financial engagement.

 

From the president's point of view, the need for humanitarian assistance is high, and what better way to deliver it than through the private sector? Exactly how a friendly takeover would be accomplished is a question for the market. The island was certainly part of the discussions Trump had with Latin American leaders at a March 7 summit at the Doral Golf Club.

 

For a successful takeover, Cuba's private sector will need the skills and capital of American business, particularly the banking sector. It appears the present government would be amenable to such an approach. It also helps that they know if a carrot doesn't work, Donald Trump is more than ready to use a Big Stick.

 

The introduction of prediction markets such as Polymarket and Kalshi are exploding in popularity. At the same time crypto currency trading seems to be falling off a cliff. Are the two connected?

 

"Crypto is so yesterday," said one Gen Z trader, in response to my question. Younger investors are turning their attention to platforms where users can trade contracts on the outcome of future events. Today, one can bet on everything from the outcome of the mid-term elections to when the next Fed interest rate cut will occur. Not only can you bet on political or cultural events but increasingly on sports and real-world events.

 

I suspect that economic conditions  may be behind Gen Z's shifting preferences. The average salary for a Gen Z is under $40,000. Speculating in Bitcoin has become an expensive proposition with the price around $63,000 per coin. It has traded as high as $124,000. That is a far cry from the days of $15,000 or less.

 

That doesn't mean the younger generations are completely abandoning cryptocurrencies but are instead changing the way they speculate. In addition, the narrative has changed. The number of HODLs ("hold on for dear life") have declined as dreams of  a $1 million Bitcoin seem less feasible. Prediction markets offer a simpler, cheaper and more scalable alternative.

 

You can still bet on the future price of crypto, along with individual stocks, bonds, gold, or whatever. "Why buy Bitcoin when you can buy a cheap contract that offers you the same chance to profit?" argues another Gen Z trader. The simplicity of the prediction market structure is also appealing. There are no research reports, promises of gains or losses based on scenarios or schedules. The price you pay reflects a bet on a simple yes or no, to happen or not to happen. It appeals to a generation increasingly skeptical of project promises.

 

However, the prediction market uses cryptocurrency infrastructure to underpin its platform. Custody, settlement and payment processes run on block chain technology. With the support of stablecoins. Bitcoin contracts are still one of the most active speculative markets.  

 

Another encouraging development is that prediction market platforms are regulated by the Commodity Futures Reading Commission. As such all prices are set by buyers and sellers and not by "the house." In many ways, prediction market contracts are like trading futures contracts. You are essentially buying or selling a financial derivative when you invest in prediction contracts.

 

In 2025, this prediction markets saw trading volume expand to more than $27.9 billion. Open interest, which is the total value locked in contracts broke $1 billion. These contracts are both liquid and easy to trade. One can pay for them in both crypto currencies and regular currencies.

 

Supporters argue that these platforms represent a new frontier for fintech. Their platforms innovation has combined the blending of capital markets, crypto, prediction-economics and sports betting into one. The rapid growth in this new avenue of investment, speculation, or just plain gambling depending upon your view, has attracted outside investment. Several institutional players believe this new technology has enormous potential. The retail brokerage firm Robin Hood, as well as Coinbase Global, are entering the market. No surprise there, but some of the largest exchanges and financial institutions in the world are also embracing these betting platforms.

 

In October 2025, The New York Stock Exchange parent company, Intercontinental Exchange (ICE), purchased a $2 billion stake in prediction leader Polymarket. The S&P Down Jones Indices also announced a partnership with another fintech company, Dinari, to create a crypto-focused index. DraftKings and Flutter Entertainment, two sports betting operators, entered the prediction markets in December 2025. Flutter joined hands with the CME Group, to launch FanDuel Predicts in five U.S. states and plans to go nationwide this year.

 

Supporters argue that these platforms use innovation financial technology tools that allow traders to better discover efficient pricing of event risk. Yet prediction markets today are sitting astride several industry fault lines. Including sports on their platforms, for example, are encroaching on already established regulatory domains.

 

Many states are in an uproar as a result, predicting that these new markets make it easier for coaches, players, or referees to bet on matches they may be able to influence. The wave of recent betting scandals in 2025 makes regulator's fears that much more immediate. Rather than new investment alternatives, many regulators see them as an easy avenue toward further corruption.

 

This week two congress representatives Blake Moore, R-Utah, and Salud Carbajal, D-Calif., jumped into the fray by introducing legislation that would prohibit the listing of contracts for sale related to terrorism, assassination, war, gaming (sports or athletic competitions ), or illegal activity. Betting on certain outcomes in the U.S./Iran conflict may have sparked this bipartisan effort to reign in the prediction markets when it comes to what they deem to be threats to public safety and national security risks.

 

In my opinion, trying to stem the flow of this new prediction market arena in the age of AI is futile. Over the next 10 years, the sector is projected to reach a market size of $95 billion, with a growth rate of 47 percent.  Even an old codger like me, is already monitoring the betting on any number of events from war in Iran to the earnings on Nvidia. I suggest you do the same.

 

Iran is on everyone's radar screen. Markets are tumbling. Oil is skyrocketing, and explosions echo throughout our evening news shows. You may be nervous but remember that we have been here before.

 

And while war is a monstrous thing, its impact on your stock market investments is negligible. Last summer, I remember reading a J.P. Morgan research report that listed 36 geopolitical events between 1940 and 2022 that we could call crises. What they found was that in the first three months after an event, markets do underperform.

 

However, if you look at returns six and 12 months later, it was as if the risk event had never happened. You might know this, but in the heat of battle, many investors let emotions override their objectivity. Don't do it.

 

This conflict, although less than a week old, is playing out just like so many others. There has been a sharp sell-off in stocks and a flight to quality into the U.S. dollar. Energy prices, both for oil and gas, have also spiked, as they did on several prior occasions, most notably in 1973 and at the onset of Russia's invasion of Ukraine in 2022.

 

This time around, however, gold and even U.S. Treasury bonds, which are usually a "go-to" in times of geopolitical strife, have not responded as expected. It is unusual since gold has historically been one of the best-performing hedges against war risk. It may be that gold has already had a spectacular run both in 2025 and thus far in 2026. That may mean traders are hesitant to chase the price higher.

 

This war could curtail both energy shipments and production. Investors fear that rising energy prices may spark a resurgence in inflation. This is one reason the yield on longer-dated U.S. Treasury bonds spiked rather than fell. Higher yields and a stronger dollar — both antithetical to gold and other commodities — could also explain gold's poor performance.

 

Higher energy prices are among the main determinants of inflation, as energy permeates almost every aspect of the economy. The longer and steeper the price of oil and gas climbs, the higher the inflation rate. Herein lies the risk of the present conflict between Iran and the U.S.

 

Normally, as I said, wars in the past have had little to no impact on equity market returns on a one-year horizon; there have been exceptions. The 1973 oil crisis did have a lasting impact on returns. The reason had everything to do with a prolonged oil supply shortfall. That resulted in a two-fold hit to the U.S. economy as growth slowed and inflation rose, producing a period of stagflation.

 

This time around, we have a completely different scenario when discussing the energy markets. Back in 1973, America relied heavily on Middle Eastern oil, while U.S. production was already as high as it could be given the technology available at the time.

 

Today, the U.S. is among the world's leading energy producers, and the worldwide supply of oil and gas is plentiful. Bringing more of these resources online while the conflict continues may temporarily disrupt global markets, but few expect the energy shortfall to linger for many years. Remember 2022, the Russia/Ukraine war also spiked oil prices, but they quickly fell as additional oil supply came online.

 

We are in an era where trade wars, real wars, and repeated supply shocks challenge the world's economies and will continue for at least the next decade. Older generations must relinquish control so new leaders can guide us.

 

Unlike in prior decades, these new threats cannot be managed by an interest rate cut, a little more fiscal spending, or a protest march. Shocks to the system, whether through conflict, political and/or climate change, artificial intelligence, or pandemics, will require new leadership and policies. It is an age where economic and political relationships have been upended, and that, my dear reader, will continue.

 

 

The winter storms of ice and snow that buried much of the U.S. in January and February were large enough to impact the economy. It will be months before the final tallies are in, but many economists expect the price tag to be over $100 billion.

 

That seems like a lot of money. I guess if you take into account the indirect and longer-term costs, like business supply chain disruptions and even medical costs, then maybe. Sure, there was some disruption. On those minus-degree days, we only took the dog out for a few minutes to do its business. And yes, we may have curtailed our trips to the grocery store a little, or to a restaurant, but how does that add up to that much money?

 

I mean, I could understand if we were discussing a series of hurricanes or tornadoes, which have now become commonplace under climate change. The high cost of damage from such disasters is usually attributed to infrastructure. But how can a spate of reduced shopping hurt the economy that much?

 

Well, airline cancellations come to mind. When you cancel as many as 11,400 flights, there is significant lost revenue for both airlines and their passengers. Then there are power outages, which also impact businesses, sometimes for a few days. Trucks also find it more difficult, if not impossible, to make deliveries at least on the actual days of snowfall.

 

One area that could see some significant losses is in vehicle sales. The January 2026 vehicle report seems to bear this out. Last week, the Bureau of Economic Analysis indicated that sales really took a nosedive, hitting a three-year low. That does make sense, since not only would buyers need to drive to the showroom in snowstorms, but they would also want to test-drive a new car before buying it.

 

Most consumers may not realize it, but natural gas prices also surged. The week ending January 30th saw the largest inventory drawdown since the Energy Information Administration began record-keeping in 2010. Wholesale prices rose 81 percent. Since then, the EIA has raised this year's price forecasts by 25 percent.

 

Housing construction also took a hit. As one small example, the guys building a spare room in our condo could not cut the lumber needed outside, so they had to ferry the wood back and forth from their shop. Imagine putting on a new roof or laying cement in 2 feet of snow! Some analysts are now predicting a 3 percent decline in residential investment growth in the first quarter.

 

The early February bomb cyclone that hit the lower East Coast, combined with the ongoing deep freeze that has covered parts of central and south Florida, could cause as much as $15 billion in total damage and economic loss. The citrus groves and other crops were damaged extensively.

 

If I step back and look at the overall impact on most Americans, it seems clear that our heating costs are going up this year. The average family spent almost $1,000 to heat their home last year. We should expect that cost to rise 9 percent. If you use electricity to heat, tack on another 3 percent to that. Fixing water damage from burst pipes can cost as much as $30,000, and many insurance companies won’t pay unless you can prove that your thermostat was set on at least 65 degrees.

 

And then there are the "panic buyers." Even here in New England, grocery stores and supermarkets are often packed in the days before a winter storm. Of course, prices are higher because retailers know they can markup groceries and supplies the most.

 

The good news depends on the weather. Just this week, Boston, New York and other parts of the Northeast saw record snowfall levels.  If storms and icebox temperatures persist, it will take longer for the economy to recover. If not, and we get a break, most economists expect any lost output could be made up quickly in this first quarter of the year.