Macroeconomic Risk

A US-Israel military strike on Iran has kept the Strait of Hormuz closed for nine weeks, driving US gasoline to $4 per gallon and sending equity markets to yearly lows. The Federal Reserve is holding rates steady, caught between fighting inflation and avoiding recession. Leading economists warn the energy shock could rival the 1970s oil crises in severity.

The top 10% of U.S. earners now account for nearly 50% of all consumer spending, while the bottom 80% (households earning under $175,000) are barely keeping pace with inflation. With 22 states plus Washington D.C. already in recession, economists warn that any pullback by high-income spenders could trigger systemic economic contraction and banking sector stress.