Morning Note

As I type (~8am pt), and as anticipated by weekend events, US equities are taking a notable hit this morning… Dow down 800pts, S&P down 1.25%, Nasdaq down 1.5%.

The news being the president upping the new global tariff scheme to 15%, vs the 10% (which was greeted with a rally) announced Friday after the Supreme Court ruled against the existing scheme.

Our core allocation is only down fractionally, at the moment, due to gold, staples, healthcare, oil, and our non-US equity exposures.

Financials and consumer discretionary – two areas we just (albeit lightly) added to – are getting hammered, down 3.3% and 3% respectively.

While, per the above, diversification is huge right here, our near-term thesis remains bullish for to-this-point-unloved cyclicals and financials based on what will be a big year on the fiscal spending front – alongside record tax refunds to consumers… In addition, we’re anticipating lower overall tariffs going forward (despite the weekend decision), particularly as mid-terms approach.

Here’s from Bespoke this morning:

“All major polled issues were underwater for the President; tariffs have 64% disapproval (30 points underwater).”

The other potential market flashpoint right here is Iran… With large military deployments in place I expect things will come to a head, or a near-term resolution, in days or weeks.

The setup isn’t horrible for US equities during the first half of the year, assuming geopolitical tensions – on-balance – ease… I.e., a protracted Middle East conflict would not be risk-on bullish.