Iran and the US Economy: Signal or Noise?
Today’s Interest Rate: 6.44%
(👇 .03% from this time last week, 30-yr mortgage)
This week, we’re talkin’ the state of the market, and US Economic growth outlook. It’s looking very positive with ISM manufacturing gaining steam. We could be living amidst the next manufacturing renaissance. But I still have some skeptical thoughts.
Let’s get into it.
The Weekly 3 in News:
Apartment rents increased in March (the start of the leasing season), but less than normal. Demand remained solid despite the economic headwinds, but still playing catch-up to the supply overhang from 2023-25 (the biggest supply wave since 1970s, as I have written about at length) (Parsons).
The latest job numbers are positive. Private sector added an average of 26k jobs per week for the 4 weeks ending Mar 21, the 4th consecutive increase in the 4-wk moving average, ~104k/month (ADP,EJ).
Nashville is the #2 state for income growth. Up 41.% since 2010! (Census).
Fun fact: WWII lasted 5 years.
But the market bottomed just 5 months into the conflict.
And historically, the market usually bottoms within the first 10% duration of a war, but sentiment may continue up, down, and all around for much longer.
So while there may be bad vibes in the headlines now, the sharp investor is moving on.
Where’s the Bull Market?
As a real estate investor, I’m always quite interested in what sector(s) of the economy are driving the train. And which are lagging.
Right now, the state of play is quite interesting.
Labor market is looking weak.
Employment is still contracting.
Hiring is weak.
Inflation is a concern, driven by gas/fuel prices.
Delivery times are lengthening.
But!…..
Firing is low.
Unemployment is still low at 4.3%
Unemployment rate for prime-age workers (25-54) improved the last few months.
Average hourly earnings have been rising at a reasonably strong rate.
The technology durable goods super cycle may be starting.
Employment for March was nearly triple expectations.
Large hyperscaler companies are spending trillions on CapEx.
So, What the Heck Does This Tell Us?
There’s always a bull market somewhere.
And it looks like it’s starting with good old-fashioned building.
Specifically, manufacturing, and all that feeds it.
Yes, I’m talking manufacturing again this week. But don’t worry, I’ll be brief.
I think this is a chronically underreported / analysed / publicised point.
Manufacturing is Un-Coiling
The latest ISM Manufacturing PMI came in at 52.7 for March 2026, up modestly from 52.4 in February and once again above expectations. This marks the third straight month of expansion—the longest such streak since 2022—and the strongest reading since August of that year.
Production accelerated sharply to 55.1, while new orders held at 53.5. Supplier deliveries slowed further (58.9), a classic signal of rising demand straining capacity.
Factory activity is finally gaining some traction after a long period of contraction.
Digging Deeper
On the surface at least, these numbers look encouraging. After years of contraction, factory activity is finally expanding.
The real test is whether this holds and broadens.
Good News: Industrial output, freight / trucking, and capital spending are absolutely going nuclear at the same time, 3 lines of concurrent effort suggesting it just might.
Industrial Production Climbing
The Federal Reserve’s index of industrial production posted modest gains through February, with manufacturing output contributing solidly. Year-over-year growth remains positive, and momentum?…
The trend is your friend.
This is confirmation that the positive ISM production number is not isolated.
Global manufacturing is heating up too.
In fact, global demand for manufactured goods is so hot that delivery times are becoming delayed. PMI for supplier delivery times fell to a 10-month low of 49.0 in September 2025. Supply bottlenecks are resurfacing, particularly affecting developed markets, with US delivery times hitting a four-month low of 46.0 (AMRO).
While this will inflate costs in the short term, as supply catches up, it is bullish and part of the natural expansion cycle.
Silver lining: container tariffs are declining. That era seems to be past us.
New Tech Boom?
And folks are ordering new technology like mad. One example: The Personal Computer will soon be a Personal AI Assistant. Everybody will want a new computer. Businesses will need them. This cycle is just starting.
My Skeptical Take:
Yes, we are still wading through the soggy repercussions of a conflict with Iran, with inflation fears abound in the news.
For us real estate investors, the implications of an accelerating production economy are obvious.
Growth=jobs up=wages up=more (and nicer) housing needed.
New and expanded factories require modern warehouses, distribution centers, and supporting logistics infrastructure—particularly in the Southeast, Midwest, and Texas. Texas is really killing it right now in manufacturing capacity. Heavy industrial demand is the leading edge of broader industrial-property absorption. The data now align for what could be the early stages of a genuine manufacturing expansion.
That said, caution is still required….
The ISM production costs also vaulted to 78.3—its highest level since June 2022—signaling sharp cost pressures across steel, aluminum, and energy. And the Iran conflict will mean gas/diesel/input chemical prices linger for a handful of months longer.
Employment had a strong quarter yes, but on a yearly basis is in contraction. One strong quarter does not erase these risks.
Still, the combination of three straight months of PMI expansion, accelerating production, record-level factory construction spending, and wild freight trucking and rail volumes is making a great case.
The labor market is right at the Fed’s employment mandate. It has been for some time. Inflation is a concern with fuel prices elevated, and which will remain so for the next handful of months. This means the Fed is unlikely to cut rates in the next few months. But please ignore any talk of raising rates. That is NOT on the table, and is pure headline babble.
The Fed’s Fund Rate Interest Rate will be unchanged for 6+ months, but overall interest rates will fall.
Mortgage interest rates specifically will soon resume their decline, which was interrupted by the conflict-driven inflation scare.
And thus.
In my humble opinion, we are witnessing the start of a US manufacturing renaissance.
This is something you will tell your kids about. It will be evolutionary and historic.
I will be watching April-June’s ISM, construction, industrial production figures, and freight trends closely.
These next 3+ months will be very telling.
Data may never lie, but it does require interpretation.
The Iran conflict is noise.
Production and manugacturing and construciton are signal.
Keep your antenna tuned to what matters.
Until next time. Stay Curious. Stay Skeptical.
Herzliche GrĂĽĂźe,
-The Skeptical Investor
