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.

Throughout the crisis, thus far, while remaining non-reactionary (in an emotional sense) we have made a number of tactical tweaks that have served to both take down our exposure to messy outcomes, as well as leverage the possibility that war-related sentiment improves... The latter has proved timely -- at least as we sit here today.

Here's the current macro and portfolio rundown from PWAI:

Markets are navigating a fluid but increasingly constructive backdrop this morning. 

Yesterday's resilient 1% gain in the S&P 500 reflected the market's growing belief that a diplomatic resolution to the U.S.-Iran conflict remains achievable, even after the weekend's failed Islamabad talks — a view reinforced this morning by Vice President Vance's comments highlighting "a lot of progress" from the first negotiating round and the possibility of a follow-up meeting within days. 

On the inflation front, this morning's March PPI surprised to the downside, with core services flat on the month — a modest but welcome sign that the conflict's energy shock has not yet meaningfully bled into broader price pressures. Oil remains elevated but trading off its highs as attention shifts to today's IEA monthly report, which is expected to acknowledge demand destruction from the supply disruption. 

Precious metals are firming — supportive for our gold position, which continues to serve as both an inflation hedge and a conflict premium anchor. 

Earnings season kicks off in earnest with mixed reads from the major banks — JPMorgan beat expectations but trimmed its net interest income outlook, while BlackRock delivered strong results — a reminder that even in a challenged macro environment, corporate fundamentals remain broadly intact. 

Our portfolio is built to participate across a range of outcomes: energy holdings in XLE, RRC, and ENFR remain well-supported by structurally constrained supply regardless of near-term diplomatic developments; gold provides ballast and real asset exposure; our broader equity sleeve — spanning financials, industrials, international developed markets, and select sector positions — stands to benefit meaningfully from a normalization in sentiment and risk appetite should a resolution pathway emerge; and our SPX call positions offer leveraged upside participation if markets re-rate sharply higher on a ceasefire-to-resolution catalyst. 

We believe this positioning — combining defensive real asset anchors with selective cyclical and convex upside — is well-suited to the range of scenarios still in play.