Hi YXI friends,

We saw an ugly set of Nonfarm Payrolls on Friday, with a loss of 92k jobs and the tick up in unemployment to 4.4%, raising the question of “Stagflation”. This is the undesirable scenario in which the Fed cannot aggressively cut rates to save the labour market due to rising inflation concerns (thanks to oil).

I have no idea how the US-Iran war will end, but the administration certainly does not wish for sustained high oil prices and a steep market crash. So the best interest remains to keep the war swift and avoid a ground invasion.

That means oil prices could reverse rapidly on a whim, too. While the market is buying hedges (e.g., puts in the S&P or Vol-products), it tries not to panic-sell spot prices. We have seen many of the weekend/Asia-hour moves reversed.

At the same time, the S&P valuation is getting, dare I say, “attractive” on a growth-adjusted basis, while crypto names stay pretty firm during the market turmoil.

Overall, I am very cautious about the near-term risks (as I have been throughout the past week), meaning I wouldn’t punt around or bottom fish, but I also refrain from joining the "it’s all over, panic-sell now” camp.

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