As both an advisor and an investor, I believe history is one of our greatest investing tools. While history never guarantees future results, it often provides valuable clues about what may come next. In a previous Regent Peak Pulse, I discussed the historical relationship between oil prices and conflicts in the Middle East.
For context, oil was trading around $64 before the conflict involving Iran. During the height of the conflict, prices briefly climbed above $100. As I record this in late June, oil has settled back to approximately $70. Why does this matter? Historically, conflicts in the Middle East create temporary spikes in oil prices, often leading to short-term inflation. Once those conflicts begin to subside, we frequently see inflation cool just as quickly.
Earlier this year, headline inflation, as measured by the Consumer Price Index, was 2.4% year over year, down from 2.7% just two months earlier. More recently, with higher oil prices, the Fed's preferred inflation measure -- Core PCE -- rose to 3.4% in May. It's important to remember that Core PCE is a backward-looking indicator. [1]
If oil prices remain around $70 or lower, don't be surprised if inflation falls back below 3% in the coming months. And if history repeats itself, there's a strong probability the markets will respond positively.
Now let's shift to another recent headline.
You'd have to be living under a rock to have missed SpaceX's IPO on June 19th. We could also see other major companies, including OpenAI and Anthropic, go public later this year. That's exciting for several reasons, especially after one of the slowest IPO markets in the past five years.
However, many investors don't realize this: history shows that most IPOs underperform the broader market. Since 1990, 52% of newly public companies have trailed the S&P 500 by a median of 0.3% during their first month. Three months later, 60% had underperformed by a median of 5%. The trend continues. After one year -- and even two years -- nearly 70% of IPOs had lagged the S&P 500, with median underperformance growing to approximately 20% and 35%, respectively. [2]
Now, I'm certainly not suggesting every IPO is a poor investment. Many have become exceptional long-term performers. My point is simply this: be selective. Have a strategy before you invest. Know when you'll take profits, and just as importantly, know when you'll cut your losses if an investment doesn't perform as expected.
Finally, on a patriotic note... As we celebrate Independence Day, it's worth remembering that this year marks America's 250th birthday. I was only six years old during the Bicentennial in 1976 and vaguely remember some of the celebrations. This time around, I plan to fully appreciate this historic milestone and celebrate what makes our country so special. Wherever you're spending the holiday, I hope you have a safe, relaxing, and enjoyable Fourth of July. Thank you for watching, and I look forward to seeing you again next month.