Market Commentary
“The first casualty of war is the truth. ”
As much as I would love to skip any discussion about Iran, and despite my best efforts to avoid it, there doesn't seem to be any way around it. That said, there is no shortage of newly minted Middle East conflict/crude oil "experts," writing articles and social media posts that you are welcome to read (not that I would recommend it), so I won't pretend to have any unique insight. I, after all, am not a political analyst nor do I have any specialized training in the global crude oil trade.
As of this writing, the latest from President Trump is that the war campaign is "very complete, pretty much," whatever that means. The seemingly flippant comment made yesterday afternoon was enough to send crude oil prices down 15%. At the time, crude had already fallen 20% from its overnight peak of over $119. The administration had been trying to "talk down" oil prices since at least Friday, when Treasury Secretary Scott Bessent suggested that the U.S. might "unsanction" Russian crude oil. Yesterday, Trump had an hour-long conversation with Russian President Putin, as headlines came across the wire that he (Trump) was weighing further easing those sanctions.
For now, it seems like Russia, which (I have heard it said) is a "gas station with a flag," is the primary short-term beneficiary of this war.
I can't help but notice that some of the recent comments about the war nearing its end seem to be in direct conflict. For example, yesterday, these headlines all came through within a couple of hours, in no particular order:
*TRUMP SAYS US IS VERY FAR AHEAD OF 4-5 WEEK TIME FRAME
*TRUMP SAYS IRAN WAR WILL END 'SOON' BUT NOT THIS WEEK
*TRUMP SAYS SOMEONE IN MIND TO REPLACE MOJTABA KHAMENEI
*TRUMP: ENOUGH IS WHEN IRAN WON'T DEVELOP NUCLEAR WEAPONS
*TRUMP: NOBODY KNOWS WHO WILL BE THE HEAD OF IRAN
*TRUMP MULLS TAKING OVER STRAIT OF HORMUZ
I find it very difficult to believe all of those things can be true at the same time.
This was originally planned for a 4-5 week time frame, and we are 8 or 9 days in?
The campaign will continue into at least next week.
Having someone in mind to replace the current leader, who just took over, implies that the current leader will leave willingly or must be eliminated.
When exactly do we think that Iran will stop pursuing a nuclear weapon?
Implies that the current known leader will not be the leader for long.
"Very complete" vs. thinking about taking over the Strait of Hormuz are very different things!
Considering the full quote, "I think the war is very complete, pretty much. They have no navy, no communications, they've got no air force," as reported by CBS News, I can't help but think about Afghanistan and Iraq, and the "Mission Accomplished" fiasco, which effectively declared the war in Iraq over. We all remember how that turned out. It was 7 years and thousands of deaths later before we pulled out of Iraq. And we were in Afghanistan for nearly two more decades before leaving that job decidedly unaccomplished.
The leaders of Iran, meanwhile, have indicated no intent to unconditionally surrender and allow the U.S. President to select a new leader for the country. Shocker!
I have already spent far more time on this than I care to. What I would want to know if I were you is that I am paying attention, but I am incredibly skeptical of every headline I see, especially when it comes to politicians and war. And I don't make decisions to allocate your hard-earned capital based on them. I also promise that I am not "monitoring the situation," and you probably shouldn't be either!
Index Performance Recap & Technical Analysis
Surprise, surprise—gold was the top performer again in February, up 7.9% for the month. Meanwhile, the so-called Magnificent 7 (Mag 7) was down 7.2%, and the Top 10 was down 4.7%. With nearly 33% of the S&P 500 in the Mag 7 and nearly 39% in the Top 10, the market-cap-weighted S&P 500 index finished the month down 0.9% while the equal-weighted S&P 500 index was up 3.4%.
At the end of February, the S&P 500 was basically flat for the year, while the equal-weight S&P 500 was up 6.8%. Once again, this is because the biggest stocks with the largest weighting, as a group, have struggled this year. I am not yet ready to call an end to the leadership of the largest stocks, but I am watching closely, and we have lightened up our exposure to them a little bit by taking profits on some of the Top 10 names.
So far this month, the equal-weight S&P 500 has fallen considerably more than the market-cap-weighted S&P 500.
With nearly 39% of each new dollar passively, and mindlessly, flowing into the 10 largest stocks as folks make their 401(k) contributions, there is reason to believe the Top 10 can reclaim its leadership position. Additionally, within the group, several of these stocks have become fairly-, or even under-valued, with their stock prices languishing as their earnings rise. For example, NVIDIA now trades at only 21 times expected earnings over the next 12 months (Fwd P/E = 21) vs. an average of 35 times over the past 10 years.
In a recent LinkedIn post, I wrote:
❓ For the next three years, do you think NVIDIA can:
1️⃣ Grow revenue at 30% a year (over the past three years they've averaged 100%)
2️⃣ Maintain a 50% profit margin (down modestly from today’s ~52%+)
3️⃣ See its P/E multiple decline from 39 to 30 (a 23% decline)
If those three things happen, this model points to a stock price of about $292.80 three years from now.
Why three years? That is an eternity for most investors these days!
Discount that back at a 10% required return, then apply a 10% margin of safety, and you get a "buy up to” price of roughly $198 today. It closed at $180.
In other words, even assuming slower growth, lower margins, and multiple compression, NVDA can still justify an attractive entry point—if you’re disciplined about what you pay.
This is how I think about risk and return for clients: start with realistic (not heroic) assumptions, build in a required return, and then demand a margin of safety before putting capital at risk.
I should point out that this is just one valuation method based on projected earnings per share; others yield different intrinsic value estimates.
The S&P 500 and NASDAQ 100 have been moving sideways since October. In fact, since their October highs, both are down slightly.
In the chart above, you'll see that the S&P 500 has broken down from its consolidation pattern shown by the purple lines. It also now trades below its 50-day moving average (DMA), which has flattened and is starting to decline. The 200DMA, on the other hand, is still trending higher. Remember, the 50DMA is the intermediate-term trend, and the 200DMA is the long-term trend. The 200DMA is the next level of support, and the November lows at 652.53.
Next, we'll look at the NASDAQ 100:
The NASDAQ 100 looks similar, with the 200DMA still rising and the November lows proving support just below. However, the NASDAQ has fallen harder recently and the 50DMA has been falling for over a month. It has also made a few lower highs, indicating a short-term down trend. The 50DMA has also acted as resistance.
I don't think there is much to do here. Both major indexes are consolidating, moving sideways within a range after a big move off the April 2025 "Liberation Day" lows. This is normal and, arguably, healthy for building a base for the next move higher. Of course, this could also mark the beginning of a phase transition, and the markets could certainly head lower from here. There are plenty of fundamental and economic reasons why lower prices could be the path of least resistance.
Stagflation
If you haven't already, don't be surprised if you start hearing the dreaded term, "Stagflation."
Stagflation is an economic condition in which high inflation, weak or stagnant economic growth, and elevated unemployment occur simultaneously.
More simply, prices keep rising, but the economy is barely growing (or shrinking), and jobs are hard to find, making it especially difficult for households to make ends meet.
We'll see what happens with the latest inflation data when it gets reported tomorrow morning. In January, I wrote that the most reliable projections I had access to indicated that inflation would slow in the first half of the year. Those projections have shifted to a modest acceleration given the recent spike in crude oil prices. Tomorrow's inflation data will only cover the month of February, though, so the rise in oil over the past few days won't show up. Additionally, since the last day of February, 2025, oil was down 4% at the end of last month.
Meanwhile, the 4th-quarter GDP disappointed, coming in at only 1.4%, vs. expectations of 3%. This was just the first estimate, which will be revised again on March 13th before being finalized on April 9th. A lot can change between now and then, but the initial estimate suggests slowing economic growth.
Finally, economists were expecting a modest gain of about 50,000 jobs created in February, but when the payroll data was released, we found out that the economy actually lost 92,000 jobs and the unemployment rate rose to 4.4%.
Prices rising: ✓
Economic growth slowing: ✓
Unemployment rising: ✓
The longer the war with Iran carries on, the worse each of these three metrics is likely to get.
SaaS-pocalypse Update
I have begun to uncover what I think are some of the babies getting thrown out with the bathwater in the Software-as-a-Service (SaaS) market, but we have not taken any new positions yet. I expect to soon, but there is more work to do, and more dust to settle. Beyond that, if the market begins to roll over into a correction or bear market, better prices will be available. So far, none of the stocks I am evaluating has developed a new short-term uptrend.
Crypto
Bitcoin has fallen about 50% from its October highs and is struggling to find a bottom.
It seems to me that Bitcoin is caught up in the same concerns that have driven software stocks lower. After all, what is Bitcoin if not software? This is an oversimplification, but the Bitcoin operating system relies on extremely complex mathematical problems that must be solved by trial and error. AI makes many complex math problems much simpler. And if quantum computing ever becomes a reality, the complex cryptographic keys that keep Bitcoin wallets safe and secure could end up looking like using an Amazon box as a bulletproof vest. Bitcoin would likely go to zero immediately.
I think the concerns are valid, but overblown for now.
In the chart above, you can see a few different levels marked by horizontal lines, the lowest of which is the red line at $49,050. Given where it is trading now, I would not be entirely surprised to see a drop to that red line. Bitcoin has risen about 16% from its recent low around $60,000 and could be in the early stages of a new uptrend, but the blue line at $73,709 represents resistance. It failed there last week. You can also see that the last time an uptrend was developing (shown by the rising orange line(s)), it failed.
I still think Bitcoin is more likely to find its way back above $100,000 than to fall to zero. Keep in mind that a 50% drawdown for Bitcoin is pretty normal. It has dropped 80% more than a couple of times in its history, yet the long-term results are undeniable.
Bitcoin performs best when the Fed is injecting liquidity into the economy. In December, the Fed announced that it would begin injecting $40 billion per month by purchasing U.S. Treasury Bills. Should that continue, or even accelerate, that should help put wind in the sails for Bitcoin.
In short, this is a market that demands humility, skepticism, and discipline rather than hot takes and headline chasing. The fog of war, the growing risk of stagflation, and the usual boom‑bust dynamics in leadership stocks, SaaS, and Bitcoin all argue for sticking to our process: focus on realistic assumptions, valuation, trends, and risk management instead of trying to trade every geopolitical sound bite.
That is what I'm doing—ignoring the noise, acknowledging both downside risk and upside opportunity, and waiting patiently for prices and probabilities to line up before putting more capital to work, or taking some chips off the table.
I hope you found this commentary both useful and enjoyable. Please tell me what you think - good, bad, or otherwise.
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Until next time, I thank God for each of you, and I thank each of you for reading this commentary. For those who observe it, I pray that you are enjoying a spirit-filled Lenten season as we prepare for the celebration of the resurrection of our Lord.
Clients, I encourage you to click here to access your personalized performance portal and see how your portfolio performed compared to the market's last month.
Shane Fleury, CFA
Chief Investment Officer
Elevate Capital Advisors
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