On My Radar: The Strait of Hormuz
March 20, 2026
By Steve Blumenthal
“A short closure is an oil shock. A long one becomes an inflation and growth shock.”
It’s early morning, coffee in hand, and another Friday has quickly arrived. The world is off-kilter and moving faster than it should. There’s a lot to sort through.
Markets are trying to make sense of rising geopolitical tensions, oil pushing higher, and a Fed that, for now, remains on pause. Underneath it all, a question keeps surfacing: Is this just another cycle… or something more structural?
As Ray Dalio often reminds us, “the times ahead will be radically different from those we’ve experienced in our lifetimes.” Eyes wide open. The evidence is clear.
That doesn’t mean panic; it means perspective.
If America succeeds in restoring commercially viable traffic through Hormuz, the most dangerous economic phase of the conflict may be shortened. If it does not, then the world will move from a short-term oil panic into a more persistent phase of higher energy prices, tighter fuel markets, renewed inflation, and slower growth.
This is one of the few true macro “tripwires” in the world. Systemically important, immediately felt, and historically recessionary.
Pressure is building: Energy costs are rising, supply chains are being affected, and global tensions are impacting sentiment. Complicating the job of the Fed. Odds now favor a rate increase before a rate decrease. I retweeted this earlier today:
Source: X, @charliebilello
If the Strait of Hormuz remains closed for another 3–4 weeks, we move from concern to consequence fast.
Roughly a fifth of the world’s energy supply flows through that narrow passage. Oil, LNG, and key inputs like fertilizers and industrial commodities all pass through. When that artery clogs, the global economy feels it.
This is one of the few true macro tripwires; pull it, and recession risk rises quickly.
Markets don’t do well in recessions.
Speaking of tripwires, the 10-year Treasury yield closed near the day's high of 4.39%. The 30-year yield is pressing toward 5%. Meanwhile, U.S. debt has now pushed past $39 trillion and is climbing quickly.
Take that second sip of coffee and settle in. I track ten recession indicators each week. For now, none are signaling trouble. I’ll let you know the moment that changes. In the meantime, you’ll find a few charts this week that are worth your attention.
On My Radar:
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The Strait of Hormuz
The Strait of Hormuz is one of those places most people never think about (until it matters). It’s a narrow waterway, but roughly 20% of the world’s oil supply flows through it. In many ways, it’s the central artery of the global energy system. If it closes — even temporarily — the impact is felt almost immediately and far beyond the Middle East.
The first move is oil. Prices spike quickly as tankers halt, insurance costs surge, and supply tightens. But it doesn’t stop at the pump. Higher energy costs ripple through transportation, manufacturing, and food. Inflation, which had been easing, begins to reaccelerate. And just like that, the narrative shifts.
The second phase is more subtle, and even more important. Higher costs slow economic activity. Consumers pull back, corporate margins compress, and growth starts to weaken. If the disruption lasts long enough, the risk is not just inflation, it is stagflation: higher prices combined with slower growth. Historically, that’s been one of the more difficult environments for both policymakers (Central Banks and Treasury) and markets.
And then there’s the bigger picture: a prolonged closure would force a global response, both economic and military.
We are seeing nations activate strategic reserves, adjust supply chains , and move energy security to center stage. The deeper the impasse grows, the more markets will need to navigate not just an oil shock but a broader shift in geopolitical stability.
Bottom line: a short disruption is an oil story. A longer one becomes an inflation-and-growth story. And, if it persists, it could evolve into something much more structural.
Head up, this is one of those moments worth watching closely. For investors, if markets break down, get ready for a buy-when-everyone-else-is-selling moment. One can feel the collective pressure on overvalued asset prices growing.
A Few Notable Charts
At the end of the day, price is truth.
You can debate the economy, argue valuations, forecast earnings, and build elegant models, but price reflects the collective judgment of millions of participants, each acting on their own information, biases, and expectations. It is the final vote. Not perfect, not always rational, but real.
Great technicians have always understood this.
Paul Tudor Jones put it simply: “Price is the final arbiter of truth.” He built one of the greatest trading careers of all time not by predicting what should happen, but by reacting to what is happening. When the price moves, something has changed. The job is not to argue with it but to listen. Source: Paul Tudor Jones (widely cited trading principle)
Jesse Livermore, one of the original market legends, said it even more directly: “Markets are never wrong, opinions often are.” It’s a humbling reminder. The market doesn’t care about our narratives. It discounts the future in real time, often before the story becomes obvious. Source: Reminiscences of a Stock Operator (1923)
And Ned Davis, founder of Ned Davis Research, framed it with discipline: “The weight of the evidence is in the price.” Trends, momentum, and breadth are not abstract concepts. They are all derived from price behavior. They tell us whether money is flowing in or out, whether risk appetite is expanding or contracting. Source: Ned Davis, Ned Davis Research
Here’s the key insight:
Price leads. Fundamentals follow.
By the time the data confirms a trend, the price has often already moved. Paying attention to price, trend, direction, and momentum is so critical. It keeps us aligned with the market rather than fighting it.
As you know by now, I’m a big Ned Davis Research fan. A few of my must-watch charts signaled this week. They are not investment strategies. Think of them like a risk gauge, signaling that we are in the high-risk zone. Not a recommendation to buy or sell any security.
Let me briefly go through each one.
High-yield Bonds and Small-Cap Stocks
High-yield bonds and small-cap stocks tend to travel together, and for good reason. They are risk assets that tend to be a canary in the coal mine for markets (early warning).
Approximately 50.64% of the time (data 1995 to present), the signal in the first chart is “risk-on.” When liquidity is abundant and confidence is rising, investors reach for yield and growth. Junk bonds rally. Small caps outperform.
When conditions tighten, these are two higher-risk asset classes that feel it quickly.
Think of high yield as a close cousin to small caps. Different wrappers, same underlying driver: risk appetite and need for access to capital.
When small-cap trends are positive and breadth is expanding, high-yield prices tend to move higher as well. When those trends roll over, junk bonds often follow.
Bottom line: I watch this chart to understand the market’s appetite for risk. The current signal is “risk off.”
Source: NDR
Don’t Fight The Tape or The Fed
The next chart was designed to test the old adage, “don’t fight the trend or the Fed.” In this case, the tape (or price trend) is measured by NDR’s Big Mo composite indicator, and the Fed is measured by price action in Treasuries.
Bottom line: Watch out for -2.
Signals range from +2 to -2.
A -2 signal triggered this week. Such signals are infrequent. The problem is the bad stuff in stocks tends to happen when Don’t Fight The Tape Or The Fed is scoring -2.
Take a look at the data box in the lower section of the chart.
Source: NDR
There are many ways to approach and manage risk. Reach out to me if you need some help.
Views are subject to change. Not a recommendation to buy or sell any security. Please note that the information provided is not recommended for buying or selling any security and is provided for discussion purposes only. Current viewpoints are subject to change. Please note that the information provided is not recommended for buying or selling any security and is provided for discussion purposes only. See important CMG disclosures below.
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Not a recommendation to buy or sell any security. Please note that the information provided is not recommended for buying or selling any security and is provided for discussion purposes only. Current viewpoints are subject to change. Please note that the information provided is not recommended for buying or selling any security and is provided for discussion purposes only.
Trade Signals: March 20, 2026 Update
Trade Signals Sections:
Market Commentary
The Indicators Dashboard - Stocks, Investor Sentiment, Bonds, Commodities, Currencies, and Gold
Valuations and Subsequent 10-year Returns
Supporting Charts with Explanations
Why Trend Following Matters
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Please note that the information provided is not recommended for buying or selling any security and is provided for discussion purposes only. Current viewpoints are subject to change. Please note that the information provided is not recommended for buying or selling any security and is provided for discussion purposes only.
Personal Note: Spring is Here
Spring officially arrives tomorrow, March 21, 2026. I see the low 70s in the weekend forecast. I always dread the day we put the patio furniture away… and love the day we bring it back out. This feels like one of those weekends.
For most of the past week, I’ve been flat on my back with an upper back injury. A golf injury of all things. I saw the physical therapist this morning and was surprised to hear him say, “You’ll be good to play by the weekend.” Susan, who’s been taking great care of me, is urging a bit more caution.
Here’s what I learned: there’s a small bone that’s part of the rib, connecting in two places - where the rib meets the spine and where it attaches to the vertebra. These joints sit right under and alongside the shoulder blade. A strong rotational move, like a golf swing, can irritate or slightly misalign that joint.
The body responds by tightening the surrounding muscles to protect it. Tightening is an understatement. It was a full-on spasm.
The therapist sat me up, positioned me just right, and then - crack. Back into place. Immediate relief. Feeling much better and ready for spring.
Enjoy your weekend. Hug your loved ones—and keep pressing forward.
Warm regards,
Steve
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Stephen B. Blumenthal
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CMG Capital Management Group, Inc.
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Stephen Blumenthal founded CMG Capital Management Group in 1992 and serves today as its Executive Chairman and CIO. Steve authors a free weekly e-letter entitled, “On My Radar.” Steve shares his views on macroeconomic research, valuations, portfolio construction, asset allocation and risk management. Author of Forbes Book: On My Radar, Navigating Stock Market Cycles.
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