Hi YXI friends,
Trump's naval blockade of Iranian ports, Strait of Hormuz minesweeping operations, and failed diplomatic talks dominate the commodity prices and geopolitical risk to start this week.
Latest Headlines:
US to impose blockade from 10 a.m. ET Monday of all maritime traffic entering and exiting Iranian ports
Iran rejects US restrictions on shipping and threatens ports in the Persian Gulf
Iran-US talks broke down over US’s “shifting goalposts,” Iran Foreign Minister Abbas Araghchi says
Ceasefire remains broadly in place, except for Lebanon where Israel-Hezbollah strikes continue
At the time of writing, oil prices are up 9% from Friday, the 10-Year yield is up 2bp, and VIX is back to 21. But US equities futures are showing resilience, with the S&P and Nasdaq only down 0.6%.
I see this discrepancy in market reactions as a divergence among asset classes amid uncertainty, with equity holders showing the highest optimism that Trump will “TACO” out of the conflict soon. Since the end of March, equities seem to have broken away from their relationships with oil and yields, moving much more bullishly than before.
Is this a new market regime? It may be too early to tell. Right now, I am certainly open-minded to all the possibilities - it would be foolish not to.
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