The 82nd Airborne … I have chills. Where I grew up in Eastern North Carolina was just 2 hours away from where they were stationed in Fort Bragg in Fayetteville. I still feel overcome by a hushed reverence and a welling of pride in my chest when anyone brings them up, even though I never served in the military nor shared in their accomplishments. In Rocky Mount, the Army paratrooper division was close enough that it made many of us, including me, feel that hometown pride whenever the name was invoked. Geography had something to do with that (perhaps nothing more than shared Eastern NC vinegar-based chopped barbecue), but the history of the division was beyond special. It was originally made up of soldiers from 48 states and was accorded a couple of nicknames, one being the “All-American Division”.1 So perhaps that’s one reason they are so easy to love. They come from All America.
The other nickname came from none other than General George S. Patton who dubbed them “America’s Guard of Honor”. Because wherever the battle was the toughest is exactly where you would find them. 12,000 Airborne troops were dropped into Normandy on D-Day and fought for 33 straight days claiming crucial bridges and clearing roadways for the main Allied forces. After they were rushed into the fight without much food or ammunition or winter clothing, they held their ground against the Germans in the Battle of the Bulge and began pushing the Nazis back. Patton handed out 4 Medals of Honor to members of the 82nd afterwards. In more modern-day action, the 82nd held Hamid Karzai airport in Afghanistan and allowed over 124,000 refugees to evacuate the country as the surrounding crowd pushed inwards in those now infamous videos from 2021. The list of their accomplishments is very long, and they are called on for the most critical missions. They are real life superheroes. America’s real Bat Signal has not a bat silhouetted, but the number, 82.
Honor … pride … reverence … The 82nd were as much of an Eastern NC legend as one Michael Jordan. Each soldier a “born winner. A Jordan 23,”2 – another legendary number.
So, when I read that 2,000 paratroopers from the 82nd had been ordered to the Middle East it quickly fostered a big change in perspective for me on Operation Epic Fury.3 We’ve gone from airstrikes and knocking out military installations and infrastructure and posturing about blowing up some power stations to some real serious business. Those paratroopers from the 82nd will join Navy Seals, Rangers and Marines likely near the Strait of Hormuz to number close to 7,000. The target may be Kharg Island, a 5-mile island with a deep-water port that allows Iran to traffic 90% of its oil exports. CNN reported that the Iranians are arming up defenders to fortify the world’s most important island, well, maybe 2nd most to Taiwan. As I think of the 82nd moving into action, in my head I hear “O Fortuna” de Carmina Burana and picture Arthur and his knights in sun-dazzled silver armor charging through the falling petals of the blossoming trees as the land awakened in the movie “Excalibur” – the best scene of any movie, of all time.4
As interesting as the military developments are, even more important to you, is the escalating price of oil, which impacts company expenses worldwide, which impacts stock prices everywhere, which of course, impacts your retirement money. The Organisation for Economic Co-operation and Development (OECD), a group of 38 democracies with its headquarters in Paris, says that the Middle East crisis will pump inflation higher in the States – all the way to 4.2%.5 There’s some healthy skepticism required as the prognostication comes from a Parisian group that spells organization with an “s”. But … we just reviewed the CME FedWatch Tool that quite suddenly has a 35+% probability of interest rates being at least a quarter-point higher around October’s Federal Reserve meeting.6
The markets have come off as rather naïve in the last week, seeming to buy into whatever Trump is saying at the moment without the realization that the Commander-in-Chief can’t just give his battle plans to the media nor appear too ready to negotiate with the enemy. Upon reports of potential peace talks over the weekend, the market zoomed higher earlier this week as Trump seems to have the price of oil locked into his X feed. (By the way there is algorithmic trading done now on headlines and social media posts, so this is not such a bombastic statement). WTI Crude which had risen to $101.45 on March 23rd fell all the way to a low of $86.19, before beginning to rise again to today’s level of $93.21 amongst reports of troops and the tenor of Trump’s warnings to Iran negotiators to “get serious”7 after the U.S. 15-point plan was pretty much Dead-on-Arrival.
It’s not just the price of oil that is a tell in this high-stakes poker game. The biggest hint to predict Trump’s behavior on the war and other issues may be the level of the 10-year Treasury Bond. We all know that the National Debt is approaching $39 trillion with no signs of slowing. A total of $10 trillion of government debt will mature over the next year which is a ¼ of all debt outstanding. The US can’t afford for the 10-year Treasury to rise due to debt payments and that’s why in their auctions they’ve been issuing short-term bills mostly. The last auction didn’t go well according to Guy Adami of CNBC on his “mrkt call” podcast. So, when the 10-year reached 4.43% we suddenly saw the prospect of peace talks8. After tariffs were announced on Liberation Day last year, the 10-year Treasury began to climb reaching 4.5% before Trump began announcing deals and discounts to various countries9. The administration appears focused on that 10-year Treasury not getting over 4.5%, so that’s something we’ll be monitoring.
Private credit is a topic to cover that would need the length of 3 Market Mindsets to properly explain. Let’s sum up by saying that the further we get from the last credit crisis (2008), the more risk humans tend to take to get a higher yield for their clients. So private equity firms have been taking more risk, specifically in the software space which as we know has imploded somewhat with AI threatening to take their value proposition away. There is much stress in the space and you’ve probably seen the headlines about more and more private credit funds that are “gating” or restricting withdrawals. Larry Fink just warned of a global recession. Lloyd Blankfein has raised concerns. Jamie Dimon has warned that when you see a cockroach, there’s never just one. Banks have been loaning to private equity firms which juices the latter’s returns and so the banks are levered to them (thus their concern, see). To complicate matters, in perhaps the worst move possible in this moment, US regulators will be easing capital requirements on banks.10
In response to this our WTA Investment Committee recently in our Monthly Cashflow Fixed Income strategy got out of all high-yield bond ETFs and went 100% investment grade to lessen the likelihood of bad outcomes. The move lowered the yield (and therefore the income somewhat), but protecting our clients’ capital as much as we can in this environment is our primary motivating factor. Today, we’ve taken another step which is to even out our allocations to bond ETFs that do better with rising interest rates to ones that do better with falling interest rates to a more neutral stance, as the direction of interest rates can go either way at this point. (We’re confident in these changes, and investment-grade fixed income has a history of lower price volatility than high-yield debt, but past performance is no guarantee of future results! If you want to hear more details or talk about how fixed income fits into your overall strategy, please give our office a call. ~The Compliance Department)
We’re gathering intel as we see our beloved 82nd, Seals, Rangers, Marines and other soldiers head to the heat of the action. We’re reading between the headlines and news copy and doing what we can as portfolio managers to mitigate any financial impacts a continuation of hostilities in the CENTCOM region may have. If you feel like gaming this out with us, please give us a call. And let’s all say a prayer for our troops abroad. Remember … if you listen to us, we’ll change your financial world …
Sincerely,
Scott Wright
Portfolio Manager
The Wealth Training Academy
(Marketing Disclaimer: Past performance is never a guarantee of future results. We offer a lot of services. Our planning, tax, and insurance strategies are designed to improve financial outcomes when implemented as recommended. We’re confident in these strategies, but results will vary based on individual circumstances. Investment results cannot be guaranteed. Unless otherwise indicated, no third party individuals mentioned in this article are clients of our firm, nor have they been compensated for appearing. This article is for educational purposes only – we do not recommend anyone buy or sell any security discussed here. Instead, we recommend readers call our office for personal advice about your circumstances! ~The Compliance Department.)
Sources:
1A Proud Legacy – 82nd Airborne Division Museum
2DJ Snake, Rick Ross & Rich Brian – Run It Lyrics | Genius Lyrics
32,000 U.S. Troops From 82nd Airborne Division to Be Sent to Middle East – The New York Times
5US inflation will surge to 4.2% on energy shock, warns OECD
7Trump: Iranian negotiators ‘better get serious soon, before it is too late’
810-year Treasury yield falls after Trump halts strikes against Iran
9Trump’s tariffs pushed the U.S. uncomfortably close to a financial crisis – The Washington Post
10Easing bank regulation a negative for investors | Investment Executive
