Hi YXI friends,

Oil prices rose again this morning, as the US is likely to turn down Iran’s request to lift the blockade on the Strait of Hormuz as a condition to reopen the Strait of Hormuz. None of the more complex topics for negotiations is on the table right now, and the US isn’t even sure that the person proposing terms from Iran has sufficient authority.

As the stalemate continues, the bigger question is whether the equity market is correctly “pricing everything and forward-looking”. There is every chance that equities are underestimating the impact of the transmission of high oil prices on global growth, although there are arguments that the US, as a wartime economy, could do even better than before.

We have FOMC this week and more Mag-7 earnings. Right now, the market feels like the calm before the storm. What I am watching is the potential deterioration in credit as a leading indicator of a turning in investor risk appetite, and, more importantly, how stocks perform in the next pullback.

Housekeeping: I am still working on evaluating the current models and building some new ones. The aim is to cross-validate findings across different methodologies and to enhance our market understanding systematically.

DISCLAIMER: This newsletter is intended for educational purposes only. Any information or analysis in this note does not constitute an offer to sell or a solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice, nor should it be relied upon to make investment decisions. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice.

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