Fluid, Frustrating, Yet We Remain Fundamentally Constructive

Per the below, general conditions continue to deteriorate at the margin... Nevertheless, we remain constructive on markets, particularly if the geopolitical setup continues to improve.

I mentioned yesterday that we weren't taking the latest positive tone/headlines for granted, and that "this is an extremely fluid situation, subject to change on a dime."  Which, per the following, has been frustratingly borne out since yesterday's note:

Important Morning Note

Markets are celebrating Iran's announcement that the Strait of Hormuz is now fully open during the ceasefire... While the US, however, has stated that its blockade will continue as negotiations move forward.

We came into the year positioned for geopolitical tensions (tariffs included) abating -- and fiscal oomph appearing -- as the mid-term election approaches... In the meantime, the Iranian conflict of course has called the geopolitical element of our thesis notably into question, which in turns threatens the fiscal element... It's been estimated that, for example, higher gasoline prices will effectively absorb the record tax refunds that are now beginning to flow into consumer pockets.

Morning Note

Per the below, the S&P 500 recaptured 7000 yesterday, however the breadth was, let's say, uninspiring... I.e., roughly 60% of its constituents were actually red on the day -- and while the index presently sports an all time high, over 40% of its members are still down on the year, with half of those by more than 10%.

So, while we're not complaining -- we're finding bargains here and there as a result of the messy action thus far -- and while we remain constructive if geopolitical waters begin to calm very soon, this is no time just yet to be letting the pigeons loose.

Here's your PWAI morning rundown:

Morning Note

In my weekend note I cautioned that if nothing changed around Iran sentiment market pain would be felt come yesterday morning. 

Well, at the open, stocks were indeed lower (though not nearly what futures were pointing to the night before), however, by the close, the major averages were nicely in the green.

While, per the below, there's no peace deal to trumpet at this point -- it's clear that for the moment both sides are in the mood for one.

Weekend Note

For those of you who track markets, and your portfolios, daily, if nothing changes between now and tomorrow's open, look for the equity market to give back a notable chunk of last week's gains (save for equities tied to the energy space).

As I type (9:36am PDT Sunday 4/12), oil is spiking higher/stocks lower in synthetic markets... Gold -- priced in crypto (which allows us to track it during weekends) -- is trading down notably.

Morning Note

We addressed stagflation (weak economy/rising inflation) risk in a video or two last year as conditions developed -- which was nevertheless not our base case heading into 2026... Although we had been flagging the inflation/interest rate risk that we felt could accelerate in the back half of the year... All the while our view of economic conditions remained constructive, largely due to fiscal oomph coming from record tax refunds and the OBBBA (One Big Beautiful Bill Act).

Now, however, per the PWAI narrative below, stagflation is suddenly a front-and-center, albeit potentially transitory, concern:

Quick Morning Note

In yesterday's note I asked you to recall our past commentary around sentiment and positioning; the message being how one-sided sentiment and positioning gets fiercely unwound when events or conditions throw cold water onto the market crowd... That happened yesterday.

Today, on the other hand, reality says "not so fast."  As markets digest yesterday's gains and grapple with the latest Middle East headlines.

Here's this morning's (at 8:02am PDT) succinct summary generated by our proprietary analytical engine (PWAI):