Before we proceed, a disclaimer. I am not a stock market expert. My views on the market are entirely second-hand—a distillation of what the business press is saying at any given moment. I believed last October that a stock market crash was imminent. That was obviously wrong (as my broker has lately been reminding me). But the signposts haven’t exactly got better since then. Warren Buffett has an indicator for stock overvaluation: market capitalization divided by gross domestic product. Buffett says that when his indicator nears 200 percent, which is to say when stock prices are twice as great as the economy, investors are “playing with fire.” The Buffett indicator was 218 percent when I wrote last fall. It’s 213 percent now.
Some Wall Street commentators, including everybody in the Trump administration, are saying that the surge in oil prices and consequent financial disruption are only temporary. “The backdrop is very strong fundamentals,” said David Dietze, chief investment strategist of Dietze Wealth Management Group, last week, citing corporate earnings up 16 percent last year. But that was a.) last year and b.) driven by an AI bubble. Last year’s more relevant fundamental, as I’ve noted previously, is that growth in gross domestic product slowed to 0.7 percent during the last quarter of 2026. This year’s most attention-getting fundamental is that the economy lost 92,000 jobs in February.
Trump seems to want very much to end the Iran war. But what he’s discovering—and what any non-sycophant could have told him, if he’d had any on the White House payroll—is that wars are very difficult to end, especially against a pathologically violent regime like Iran’s. Trump wants to declare victory and go home, but that won’t open the Strait of Hormuz. As the stalemate continues, the likelihood increases that Trump will commit to the ground invasion he felt sure he could avoid. Even if troops were able quickly to overthrow Ayatollah Khamenei fils and the Islamic Revolutionary Guard, it likely wouldn’t happen quickly enough to rescue the global economy. And how would we prevent the theocracy’s reinstatement after we withdrew, as occurred in Afghanistan? In Venezuela we didn’t even try to change the Chavismo regime we purported to oppose.
What would be the effect of sustained high oil prices? It’s interesting to observe the shifting perspective of the oil market analyst Daniel Yergin, author of the Pulitzer Prize–winning 1991 book The Prize: The Epic Quest for Oil, Money, and Power. Six days into the war, Yergin wrote in the Financial Times: “This crisis is unfolding in a world in which the global oil and gas system is more resilient and diversified than it has been for decades.” Twenty-three days later, Yergin said Sunday on Fox News: “If it’s a couple more weeks, this crisis is manageable; if it goes longer, it really is a big hit to the global economy, including here in the United States.” Marko Papic, chief strategist at the investment research firm BCA Research, told CNBC Saturday that through April 19 the world will have lost 5 percent of global supply, but after that the loss will be more like 10 percent as the United States strategic petroleum reserve empties out and the Russian and Iranian tankers we exempted (preposterously) from sanctions unload their oil.
All this suggests that, except perhaps for oil stocks, the bear market is practically here already. Even if Trump chickens out, he won’t be able to do it fast enough. TACO is dead. It got eaten by a bear.
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