Wall Street Breakfast: Time To Hedge?

Survey Monday

Geopolitical tensions were already flagged as some of the biggest investing risks going into 2024. How are you hedging your portfolio?

· Check out the oil, gold and crypto rally (already happening)
· Invest in the defense sector (the flight-to-arms trade)
· Moving more money to the sidelines (cash is king)
· Using options strategies (offsetting risks and exposure)
· No need for hedging (ride it out with a buy and hold)

Take the survey here and don’t forget to share your thoughts in the WSB comments section.

Time to hedge?

The market reaction to Iran’s unprecedented strike on Israel has been contained so far, as the region’s path to an all-out war seems to be contained (so far). More than 170 drones, as well as 150 cruise and ballistic missiles, were launched on Saturday by the Islamic Republic, though 99% of the aerial threats were shot down by Israel and its allied coalition partners. “We will exact the price from Iran in the fashion and timing that is right for us,” Jerusalem declared following the attacks, while Tehran said that such an event would be met with a “decisive and much stronger response.”

Flashback: Since the Gaza war erupted on Oct. 7, 2023, Israel has been fighting Iranian proxies on multiple fronts, including Yemen’s Houthis who have disrupted shipping in the Red Sea, as well as Iranian-backed forces in Lebanon, Iraq and Syria. Iran attributed its strike on Israel as retaliation for an alleged Israeli airstrike on April 1 that killed several senior IRGC commanders in Syria, which leveled the consular building adjacent to Iran’s embassy in Damascus. Over the weekend, Iran also seized an Israeli-linked cargo ship in the Strait of Hormuz, which is a key route for the oil trade.

Israelis spent Saturday night in safe rooms and bomb shelters, while the Home Front Command instituted limitations on public gatherings and other restrictions through Sunday. Those have so far been lifted, suggesting that immediate retaliation in the form of a direct strike on Iran won’t be the clearest path of deterrence. President Biden has also vowed to continue helping Israel defend itself, but the U.S. won’t take part in a counter-offensive in a bid to prevent an all-out regional war in the Middle East. A coalition will likely be established instead to isolate Iran diplomatically, with the aim of putting the war back in the shadows.

Take the win? Some thought that the moves would shake up equities, oil, gold or shipping stocks, but it appears that investors are taking the off-ramp. In fact, many of those asset classes and sectors made an unexpected U-turn as the active situation was digested, instead of the risk-on rally or selloff that might have been anticipated. More pressing to Israel is also the threat of Iran-backed Hezbollah in Lebanon, which has prevented around 100,000 of its citizens from returning home, as well as winning the war against Hamas in Gaza. Take the WSB survey.

iPhone slump

Android popularity is growing, with Samsung (OTCPK:SSNLF) reclaiming the crown as the top smartphone maker from Apple (AAPL) amid a slump in iPhone shipments. That’s according to the International Data Corporation, which also showed that Chinese brands are gaining ground, with Xiaomi (OTCPK:XIACF) taking the third global spot. Recall that iPhone sales in China have already taken a hit as Huawei regains its foothold in the market. Briefly entering correction territory, Apple shares have fallen 8.3% YTD, with its market cap shrinking from nearly $3T to $2.73T. (7 comments)

Gimme an extension

Tax Day is officially here, which can have big consequences for individual investors who sold assets held in taxable accounts. Check out Seeking Alpha’s historical Q&A to some of investors’ most common tax questions, including how stock sales and dividends are taxed, how and which cryptos are taxed, and a brief explanation of the “wash-sale rule.” The latter prevents investors from gaming the system by selling a stock at a loss for a deduction and then buying back the same stock the next day. (67 comments)

Layoffs and FSD

Tesla (TSLA) is slashing the monthly subscription price of its Full Self-Driving package to $99 per month from the prior monthly rate of $199 in what appears to be a shift in strategy from the EV giant. The automaker recently required that all customers take an FSD demo drive and offered existing Tesla owners one free month of the driver assistance system. Tesla deployed the AI-powered FSD v12, but the upgrade is still far from full autonomy, with the package now being called “FSD (Supervised).” The company has been under pressure recently and just confirmed it would lay off 10% of its global workforce. (379 comments)

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