The above button links to Coinbase. Yahoo Finance is not a broker-dealer or investment adviser and does not offer securities or cryptocurrencies for sale or facilitate trading. Coinbase pays us for certain activity generated through this link. Prices displayed are informational.

There’s been a month of stellar earnings — the fewest earnings misses in 25 years, apart from the pandemic recovery — and where basically nothing has happened in the Strait of Hormuz, with little kinetic action but also few ships traversing the key waterway.

Citi’s team of quantitative analysts has studied the market and says it’s beginning to smell like stagflation.

‘I always did the graveyard shift’: I worked for 54 years. Why on earth would I wait to claim Social Security at 70?

Micron’s stock soars as new report throws cold water on the bear case: ‘This time is different.’

Get ready to work for 60 years — as living to 100 becomes the new norm

The last time semiconductor stocks rose this far this quickly, the dot-com bubble burst

“We make the case that the current analog return patterns do rhyme with the early signs of a pricing of stagflation. Specifically, we find the simultaneous underperformance in both equities and bonds often precede the official trigger of the stagflation regimes, while commodities take some time before being a useful stagflation hedge,” say the strategists, led by Vinh Vo, a London-based analyst for Citi’s quant global macro team.

The strategists studied four previous stagflation clusters: the mid-’70s “Great Inflation” episode, a subsequent shorter phase in the early 1980s, briefly in the global financial crisis and the post-2020 period. The key lesson, they say, is that markets will identify stagflation before economic indicators do.

What happens during stagflation? Bonds tend to absorb more of the initial shock either from the earlier sequencing of an inflationary boom or a tightening of financial conditions, but they also tend to stabilize comparatively sooner, the Citi strategists say. The stock-market deterioration is more gradual but also lags deeper into the tightening phase. Gold does not trade in line with its reputation as a stagflation hedge but instead — as has happened recently — can trade in line with other risky assets.

In the early days of stagflation, stocks and bonds can act more as an early warning sign than a contemporary indicator that stagflationary conditions are here.

So where are we right now? Based on a 22-day rolling correlation of market returns, the strategists say the market is moving from a more benign recovery/normal regime early in the year “toward a regime that looks much more like inflation boom and tighter financial conditions, i.e. the typical regime we see prior to stagflation.”

Energy XLE has repriced the most, while bonds and equities have also moved in the expected direction of stagflation without fully pricing it in.

In a stagflation regime, energy stocks will perform the best, by sector, while financials XLF and industrials XLI struggle, the Citi team says. By factor, meanwhile, trend and momentum do well, as does quality, the strategists add.

U.S. stock futures ES00 NQ00 lurched lower after Iran said, in a disputed report, that it had hit a U.S. warship with missiles, though the subsequent U.S. denial took markets off lows. Crude-oil futures CL00 still rose, however.

Key asset performance

Last

5d

1m

YTD

1y

S&P 500

7230.12

0.91%

9.84%

5.62%

27.14%

Nasdaq Composite

25,114.44

1.12%

14.79%

8.06%

39.70%

10-year Treasury

4.379

3.40

3.50

20.70

3.00

Gold

4559.5

-2.94%

-2.49%

5.25%

36.37%

Oil

105.06

8.67%

-6.70%

83.00%

83.58%

Data: MarketWatch. Treasury yields change expressed in basis points

U.S. Central Command announced it would help restore freedom of navigation for commercial shipping through the Strait of Hormuz. Iran threatened to attack any U.S. ship that entered the waterway.

Berkshire Hathaway BRK.B reported first-quarter growth in operating earnings of 18% and ended the quarter with $397 billion in cash.

GameStop GME made an audacious cash-and-stock offer to buy eBay EBAY for $56 billion. EBay said it would review the proposal.

Norwegian Cruise Line NCLH stock slumped after a profit warning, citing the war as well as revenue underperformance.

Why almost everyone loses, except a few sharks, on prediction markets.

How America’s retail army came to rule the stock market.

70% of farmers can’t afford to grow all their crops.

Deutsche Bank analysts call the old adage “sell in May and go away” a myth, though their own calculations aren’t quite as dismissive of the approach. A team of strategists led by Maximilian Uleer focused mostly on European equities but also crunched the numbers for the S&P 500. Since 1973, an investor who invested in U.S. Treasury securities during the summer months returned 12% per year, versus a buy-and-hold return of 10.4%. However, bailing out of stocks in the summer only outperformed in 22 out of 53 years. Last year would’ve been particularly disappointing — those seasonal investors would’ve missed a 14% run in stocks from May to September, a period when Treasurys returned 3%.

Here were the most active stock-market ticker symbols on MarketWatch as of 5 a.m. Eastern.

Ticker

Security Name

GME

GameStop

NVDA

NVIDIA

TSLA

Tesla

AMZN

Amazon.com

TSM

Taiwan Semiconductor Manufacturing Co.

AMD

Advanced Micro Devices

EBAY

eBay

AAPL

Apple

MU

Micron Technology

MSFT

Microsoft

Ohioans are increasingly reporting Bigfoot sightings.

A zoo frantically looked for an escaped zebra but discovered the animal on the loose was actually a repainted donkey.

MarketWatch picks: 9 financial advisers on how they are personally preparing for retirement

‘Like 10 Manhattan Projects going off all at once’: AI is rewiring the entire global economy, says this BlackRock exec

Why this bullish stock-market timer flipped to bearish

PayPal’s stock falls after earnings. Here’s what’s spooking Wall Street.