The Wrap: Energy Prices Surge, Stocks Ooze Up, Gold Edges Sideways
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In this week’s edition of “The Wrap,” we feature our view of the top events in Washington and on Wall Street over the past week. And please do watch “The Wrap with Chris Whalen” on The Julia LaRoche Show every Saturday on YouTube to catch our discussion of what’s hot and what’s not in the world of finance and investing.
April 24, 2026 | The situation in the Middle East is largely unchanged, with the US maintaining a unilateral ceasefire “indefinitely” and Iran still attempting to interdict merchant vessels transiting the Strait of Hormuz.
The inflationary pressures from the Israeli-US war against Iran continue to build with each day that the standoff continues. Nineteen of the world’s 20 largest airlines, for example, have cut scheduled flights for May 2026, driven by surging fuel costs.
“Navy Secretary Is Out, Pentagon Says,” was the headline in The New York Times Wednesday. John Phelan left the Pentagon and the Trump administration after months of infighting with senior Pentagon leaders, says the Times.
One can only wonder about the acrimony between the Trump Administration and the traditional US Navy staff. Intervening in Venezuela was one thing, but the war with Iran is the precursor to endless naval conflict in the Persian Gulf.
One casualty of the war with Iran is bankrupt Spirit Airlines. A mediocre operation in a brutal industry, Spirit has not reported a profit since 2019, but apparently will receive a $500 million bailout from the US Treasury.
President Trump previewed the rescue Tuesday in an interview on CNBC, saying that “maybe the federal government should help” the company. He also stated that he would “love somebody to buy Spirit.”
Senator Ted Cruz (R-TX), chairman of the Senate Commerce Committee, labeled it an "absolutely TERRIBLE idea" on X and argued the government "doesn't know a damn thing about running a failed budget airline."
Pulte Boosts Vantage Score
In a Soviet style building on 7th Street SW in Washington, D.C., HUD Secretary Scott Turner and FHFA Director William J. Pulte announced that the Federal Housing Administration and Fannie Mae and Freddie Mac are implementing their first live pilot for new credit score models for mortgages in decades. This is all great, but fact is that Vantage 4.0 is mostly used in larger jumbo, non-agency loans, which is not about helping affordability is it?
Secretary Turner announced that the FHA will permit the use of VantageScore 4.0 and FICO 10T as eligible credit scoring models for mortgage underwriting. “This historic move is intended to lower costs for the American people after years of rising prices under the status quo credit score system,” says the FHA press release. The only trouble is that virtually no one in the industry uses Vantage Score and none of the major vendors including InterContinental Exchange's (ICE) Encompass platform support it.
As our continuous poll among executives in the mortgage industry indicates, few lenders currently use either of the new scores, which include utility and rent payments as part of the calculation for credit utilization. If lenders use Vantage Score at all it is mostly in third party acquisition channels like correspondent / co-issue. Same with the FICO 10T hybrid, which likewise has no significant use data.
The more severe FICO 5 has 35 years of data through several recessions, which is why it is and will remain the de facto baseline for default probabilities. No amount of lobbying spend by Experian et al or political puffery can eliminate the FICO 5 advantage in terms of historical loss data, with private obligors, banks and insurers, to name the largest subsets.
But the banks and rating agencies that matter to non-agency loans and securitizations are using Vantage for non-QM loans, a development we find fascinating but hardly surprising. Maybe a more flexible credit score model is really optimal for high-end, high-income but atypical loans. But FICO 5 remains the incumbent model for buying loans in the conventional and government market.
Kevin Warsh Hearing Circus
On Capitol Hill, Kevin Warsh appeared before the Senate Banking Committee this week to consider his nomination as Fed Chairman. Warsh reiterated that Fed “monetary policy independence is essential.” But he got some rough questions from Democrats, especially ranking member Elizabeth Warren (D-MA) She asked whether he will be a “sock puppet” manipulated by President Trump. Warren called Warsh “uniquely ill-suited for the job as Fed chair,” but frankly Warren is uniquely unqualified to be a member of the Senate.
US bank earnings continued this week, with banks reporting record repurchases of common stock. Financials specialist Keefe, Bruyette & Woods reports that G-SIFI and super-regional banks saw heavy primary issuance last week in the debt markets, with Bank of America (BAC), BNY Mellon (BK), Goldman Sachs (GS), JPMorgan, M&T Bank (MTB), and Morgan Stanley (MS) issuing nearly $40bn across 19 debt tranches, including two subordinated deals. Strong investor demand resulted in solid new issue performance metrics, headlined by spreads that were roughly in line with pre-war levels
As the week draws to an end, stocks are back near record highs and a familiar force seems to be in play: automated retirement contributions, otherwise known as passive investing, notes Edward Harrison at Bloomberg. “These steady inflows can act as an accelerant in rallies, stabilizing markets after selloffs — but they can also amplify declines when momentum turns negative.”
In the past five trading days, the S&P 500 is basically unchanged, gold is down about 2% and silver futures are down 5%, reflecting the market dynamics in Chicago and London more than the physical markets in Asia. Gold prices are reportedly dropping due to a combination of dollar strength, surging energy-led inflation fears, and a market shift in expectations for interest rates to remain higher.
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