A Note From Publisher Stephen Prior: The markets and our Monument Traders Alliance offices will be closed Monday, May 25, for Memorial Day. So, we won’t be publishing our Trade of the Day letter.
We hope you enjoy the long weekend, and you can expect to receive your next issue on Tuesday, May 26.
Jet fuel has nearly doubled in price since the Iran war started.
The conflict in the Middle East triggered the largest oil supply disruption in recorded history. The Strait of Hormuz, which carries roughly 20% of global oil supply, saw tanker traffic collapse from 130 ships per day in February to just 6 in March.
Global oil supply fell by 10 million barrels per day in March alone.
My job is to look past the pain.
The most useful investing maxim I know comes from hockey: skate to where the puck is going, not where it’s been.
The sectors that will generate the most profit in a few months look absolutely terrible right now. That’s the window of opportunity I see.
Chris Johnson talked about it yesterday… the S&P 500 is near all-time highs, but a handful of AI names are doing all the work.
Airlines, industrials, consumer discretionary, homebuilders, and financials are falling further behind. When the market is this narrow, the sectors getting ignored are the ones worth watching.
The ceasefire Pakistan brokered on April 8 has held in fits and starts. Iran’s foreign minister says a deal is just inches away. But a durable resolution hasn’t happened yet, which means the positioning window is still open.
When the Gulf War ended in 1991, the S&P 500 gained roughly 26% in the year that followed.
Oil prices fell sharply the moment the supply threat lifted, and the sectors that had absorbed the most punishment posted the strongest rebounds. That’s the playbook I’m working from.
Jet fuel surged from roughly $85 a barrel to nearly $200 in Europe and up 70% in the United States, and Reuters estimates the industry absorbed nearly $15 billion in war-related costs.
The three largest U.S. carriers face nearly $5 billion in additional quarterly fuel expenses at current prices, and one carrier, Spirit Airlines, has already ceased operations.
Delta (DAL), United (UAL), and Booking Holdings (BKNG) are on my radar. When oil falls, the fuel cost reversal is dramatic, and the stock recovery follows.
The pain extends beyond aviation.
High oil prices are inflationary, and inflation is a direct tax on consumer spending.
When energy costs consume a larger share of household budgets, companies in retail, restaurants, entertainment, and autos contract.
A drop in oil is a drop in inflation, a rise in consumer confidence, and a release valve on the interest-rate pressure that has kept the Fed from moving. Amazon (AMZN), Tesla (TSLA), and LVMH sit in that recovery path.
It disrupted everything that moves through it. Global merchandise trade growth is now forecast to slow from 4.7% in 2025 to as low as 1.5% in 2026 as rerouted shipping lanes and broken supply chains ripple through the industrial economy.
A resolution normalizes those routes and puts companies like FedEx (FDX), Caterpillar (CAT), and UPS back in business at pre-war margins.
War-driven inflation pushed bond yields higher and kept the Fed from cutting rates.
Higher rates mean higher mortgage costs, which keep the housing market on the sidelines waiting for relief. If peace cools inflation and gives the Fed room to move, the homebuilders and lenders move fast.
Lennar (LEN) and JPMorgan (JPM) are the names in that camp.
AI has been the only game in town, but a peace deal broadens the whole market.
The parts of technology sitting outside the top AI names have room to run into semiconductors, software, and growth names that have been left behind. Broadcom (AVGO), Intel (INTC), and AMD are already moving.
The rest of the sector has some catching up to do.
A lot of the market looks terrible right now. Which is why I’m looking at these specific sectors before we get a resolution.
I’m already building positions in several of these sectors inside the War Room.
Be sure to tune in next week to see where I think the puck is going next.
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FUN FACT FRIDAY
This week, NVIDIA raised its quarterly dividend from 0.01 dollars to 0.25 dollars per share. This is a 25 times increase. Jensen Huang owns roughly 812 million to 871 million shares of NVIDIA.
This change boosts his personal annual dividend income from around $35 million to nearly $870 million. It is one of the largest self-funded pay increases a CEO has ever given himself through a dividend hike.