Here Come The Cockroaches: Stagflation City Ahead!

This is our weekly market update where we start in the US, cross to Europe and Asia and end in Australia, covering commodities and crypto along the way. Financial and tech stocks were hit hard by a handful of persistent investor worries on Friday, with U.S. stocks suffering their largest monthly percentage declines in a year weighed down by persistent concerns about high valuations and the disruptive force of AI, while the potential for oil supply disruptions due to tensions between the U.S. and Iran lifted crude prices. Market sentiment has weakened as investors worried about the broader impact of artificial intelligence on technology companies, even after AI chipmaker Nvidia posted better-than-expected results. Shares in Nvidia, the world’s most valuable company, were down 4.16%, extending losses from the prior session. Michael Burry warned Nvidia’s balance sheet is flashing dot-com era red flags. The “Big Short” investor says “This is not business as usual. This is risk.” And a hotter-than-expected Producer Price Index reading fortified expectations that the U.S. Federal Reserve is unlikely to cut its key interest rate in the near term. In October 2025, JPMorgan Chase CEO Jamie Dimon used a "cockroaches" analogy to warn of hidden, mounting risks in the private credit and banking sectors, suggesting that initial signs of bad loans indicate a larger, concealed problem. He stated "when you see one cockroach, there's probably more" following defaults at companies like Tricolor Holdings. A lingering concern about the hundreds of billions of dollars earmarked for artificial intelligence – and private equity’s ability to help fund it – and whether AI itself is poised to destroy the profitability of an ever widening array of businesses caused Financial stocks to be hammered this week with the KBW Bank Index 4.9 per cent lower. Markets were betting on a flare up in Iran as well as reacting to the latest signs of emerging stagflation in the US. Seeking safe havens, Gold, the US Dollar and US Treasuries were all in vogue. And yes, now we know kinetic action is underway as Isreal and the US launched strikes on Iran on Saturday, with the predictable retaliation and confusion about the military objectives and legality of the strikes. Oil has gone up and will likely go higher on the news. But it is still worth remembering that we are touching all time markets highs. MSCI’s All Country World Index fell 0.24% on Friday but was up 0.36% for the week and nearly 0.63% in February. Europe’s STOXX 600 added 0.11% on Friday, while the All Asia ex Japan was up 0.56% for the week and up 44% over the past year. The Australian share market has recorded its biggest monthly rise in 10 months with the S&P/ASX 200 up 0.3 per cent, to 9198.6 – a record close. The index rose 3.7 per cent in February, marking a third consecutive monthly gain and its strongest rise since May. But Wall Street ended lower, with the benchmark S&P 500 dropping 0.43%, the Dow Jones Industrial Average falling 1.05% and the Nasdaq Composite off by 0.92%. New credit issues give a reminder that credit cycles have not been eliminated. Goldman Sachs and Citigroup were among the biggest losers in the final session of the month in New York after the collapse of UK mortgage firm Market Financial Solutions revived private credit market anxieties. Meantime the Iran conflict will spook markets ahead, and continue the crazy ride, as those cockroaches come out to play!