Quick Morning Note

I can't help but sympathize with Peter Boockvar's bottom line this morning:

"Strictly from a market and economic perspective, the war either ends or continues and the Strait of Hormuz either fully reopens safely or does not. There is no in between at this point it seems."

I'll add that from a powers-that-be's political success perspective, it's the same bottom line. 

This morning's S&P Global Flash PMI report -- capturing the onset of the war -- is telling, and concerning.

Both services and manufacturing PMIs remain in expansion, but just barely -- the composite touched an 11-month low, with the Iran war explicitly cited as the driver.

This makes the Fed's job all the messier... Cutting rates into a supply-shock-driven inflation surge is in all likelihood a non-starter... At least the Fed's history says it's definitely a non-starter... In fact, fed funds futures are beginning to price in hikes going forward... Now, that said, allow me to push back on conventional reasoning by sharing my response to the point made by a very sharp macro-thinking-podcast-guest over the weekend who stated emphatically that the Fed never cuts into an energy supply shock... Frankly, again, that's historically correct -- and it's probably correct even now -- nevertheless:

"Central banks are SIMPLY their respective members -- guided by their own personal priors, proclivities, political incentives, yada yada. “Never” in markets and in policy, especially these days, lacks thoughtful perspective/acknowledgement of the times we’re in. Not saying that a cut is imminent, but never say never!!"

In the meantime, US stocks, as I type, are essentially flat on the morning session... As is our core allocation, with our energy and materials-related exposures catching a nice bid, offsetting a drag from our holdings in European equities and US software stocks.

Stay tuned, there's lots left to play out...