What's Still Working, What's Still Not, And Why (video)

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Morning Note

Despite the Dow 30 being essentially flat on the session thus far (7:50am PDT), this morning's tape is predominantly red... US tech and industrials are getting hit particularly hard, down 2.7% and 1.6% respectively, while gold and the the commodity complex (save for energy) are getting hammered as well so far this morning.... On the plus side, energy, consumer staples and healthcare are catching a bid.

As noted in yesterday's and the weekend's commentaries, this week is big -- and potentially market moving -- on a number of fronts.

As for this morning's action, the following synopsis* does a good job breaking it down:

Morning Note

Per this morning's rundown below, there's a lot to cover this week... Of course the primary focus at the moment is the Middle East.

It was reported yesterday that Iran has submitted a proposal that would include an ending of Hormuz blockades, but a delaying in negotiations around their potential nuclear capacity... The oil market (up 2%) reads it skeptically this morning, while stocks are essentially flat, as the US has yet to issue an official response... One might argue -- despite oil's reaction -- that no immediate refusal means there's serious consideration being given.

BCA's view is that Europe, for example, can withstand only a few more weeks of Hormuz closure, while the US can sustain a few more months... They're clearly referring to the economic ramifications (per our weekend note, the economy -- while anything but robust -- is hanging in there for the moment)... The political ramifications of persistently higher energy prices may be a different calculation altogether.

Here's your morning rundown*:

Resilience, Incentives and Current General Conditions

Per the rundown below, general conditions continue to hold up better than one might expect given the present geopolitical state of affairs.

I listened to the President comment this week on how he had figured that the stock market would be down 20-25% once the war got started -- he then touted its counterintuitive ascent to all time highs (which I contextualized for you yesterday)... That (his minus 20-25% prediction) is actually understandable, as, when I think about market reactions to the policy shifts and/or threats (be they from the Administration or from the Federal Reserve) throughout his first term and this one to date, that's about the level of decline where the presumed cause got reversed, or notably diluted, and thus allowed markets to bottom and ultimately recover, in impressive fashion.

Therefore we have to ask ourselves, is the market holding up due to strong fundamentals and earnings outlooks, or is it all about the belief that the powers-that-be are not remotely inclined to experience any deep or lasting financial market pain? Or a bit of both?

Morning Note

Lots of ink being spilled (that's old school talk) of late in celebration over the S&P 500 hitting a new all time high... Well, alas, if we peek a bit below the headlines, we discover a somewhat less-celebratory reality.

One of the first places -- alongside determining if the recent ascent has been earnings-driven or multiple-(meaning the price in the price/earnings multiple)-driven, and interpreting the signal -- I go is to the underlying breadth readings... Which, at current, are nothing to celebrate.

Today is a prime example... As I type the S&P 500 is up 0.42% while 326 (60+%) of its members are actually in the red on the session... The Nasdaq is up over 1% while 54% of its members are trading lower.

Bigger picture, while, again, the S&P 500 sports a new record, literally 462 (92.4%) are actually trading somewhere below (notably below in many cases) their 52-week highs.

My point being, this is not the kind of action that has us feeling confident that the worst for now is over.

Now, all that said, I do maintain that, in the near-term, an end to the Iran conflict would very likely bring animal spirits -- and market breadth along with them -- roaring back to the market.

Speaking of animal spirits, this morning's release of the widely followed University of Michigan US Consumer Sentiment Survey showed its lowest print on record!  

Here's your morning rundown on the latest Middle East developments, etc.*

Morning Note

As I seem to repeat almost daily, economic and political reality virtually demand that the present dynamics around world oil supply find resolution in the not too distant future.

The key word there being "world."  

While, as it is often expressed by US officials, the US is significantly energy independent -- well, actually, what officials tend to say is that we are "entirely energy independent" -- in reality, believe it or not, we are not a net-exporter of crude oil, we actually import more than we export -- to the tune of 2.2 million barrels a day last year in fact... Put correctly, the US is indeed a net exporter of energy products (nat gas, refined products, etc. combined), but, under present circumstances, the crude oil distinction is worth acknowledging.

Where "world oil supply" is key is that, make no mistake -- while, again, we are anything but immune -- the rest of the world's net-importers (while they may not be facing the immediate political risk the US Admin presently is) have to be fearing the pinch even more so... I.e., we expect to see other nations step in, and step up, their participation in the negotiation process -- a la South Korea this morning:

Morning Note

While, ultimately, we need to be thinking about, and be guided by, the longer-term global macro setup, along the way we have to take the near-term into account as well -- and, if only at the margin, adjust accordingly… Particularly when near-term dynamics could ultimately morph into something consequential for the long-term global macro setup.

We’ve maintained from the get-go that the economic, and, thus, the political ramifications of a protracted Iran war are too dangerous for the powers that be to accept… Which doesn’t mean of course that it can’t happen, it just means that the political incentives and constraints make it a resoundingly undesirable affair.

Hence, among others (see below), this telling headline from this morning:

“Despite high levels of mistrust on both sides, mediators and people familiar with the talks say the two sides have been engaging in ideas that could point to compromise around core issues like Iran's nuclear program - MS Now Reporter.”

Here's your morning rundown*:

Morning Note

After opening in the green, US major equity averages have turned marginally south as I type (8am PDT), with all but 2 sectors trading lower -- materials, industrials, healthcare and utilities notably so.

The headline risk of course remains Iran, with them not yet confirming a willingness to resume negotiations in Pakistan tomorrow... Fed Chair nominee Warsh is also getting the attendant Capital Hill grilling this morning, which -- to the extent he suggests he'd be tough on inflation -- I suspect could add to today's volatility as well... Gold, which is trading mostly as an interest-rate-sensitive asset of late, is getting hammered this morning.

Per the below, despite feeling it a bit this morning (given the sector, regional and precious metal pain thus far), our overall allocation is durably positioned for times like these.

Here's your morning rundown*:

Morning Note

Our main current conditions message over the weekend was the following:

“…should geopolitical conditions improve -- political incentives virtually demand that they do -- heading into the back half of the year, it makes sense -- heavy volatility (and inflation risk) notwithstanding -- to remain on-balance constructive on the economy, and on risk assets for the time being.”

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):

Important Morning Note: "Reprieve, Not Resolution"

Despite this morning's impressive rally, the ceasefire agreement itself is anything but a risk-on greenlight for markets -- other than for the obvious initial flow/position-driven spike higher (recall our past missives on sentiment, options dealer positioning, etc).

Here's our PWAI overview of the latest developments and our core allocation response this morning:

Quick Morning Note

Suffice to say that if markets hate uncertainty, while the year-to-date action in equities has indeed been negative, it could be a whole lot worse... Which of course is a distinct probability should present geopolitical conditions become a protracted affair.

Here's the succinct take on current events and our core allocation this morning generated by PWAI, our proprietary analytical engine:

Deteriorating General Conditions

This week's scoring of our recently-revised -- increased our featured data points to 68 from 43 -- PWA Index shows a marked deterioration in overall general conditions.

Here's the succinct assessment produced by our proprietary analytical engine:

"Timing is everything" -- And -- What If the bulls (on the economy) have it right?

I sympathize with the following from MRB Research's latest analysis:

"The outlook for capital markets is close to being binary, with the most likely scenario an easing of Middle East tensions in the near term and a rebound in asset prices. However, with the potential imminent landing of U.S. military on Iranian territory, there is a non-trivial risk of a severe escalation in the regional war that would almost certainly trigger widespread selling pressure. 

We are convinced that the U.S. seeks an offramp to ease tensions, but to a considerable extent, the global economic outlook hinges on whether and to what extent flows of energy and other commodities through the Strait of Hormuz normalize1. Timing is everything.

Quick Morning Note: Noisy by definition!

The budding narrative that sent stocks soaring Tuesday, with some follow through yesterday, got abruptly turned on its head last night.

Reuters this morning:

“Hopes for a swift end to the ​Middle East war faded on Thursday after U.S. President Donald Trump vowed more aggressive strikes on Iran, sending oil prices back well over $100 a barrel in a blow to consumers around ‌the world.”

Me yesterday, referring to Tuesday:

Brief Morning Note

I'm on the road this morning, so I asked our AI engine to draft a succinct macro note.

But first, with regard to yesterday’s market action, while the rally was impressive, and relatively broad-based, positioning and sentiment was notably bearish going in… Thus, that upside move was no doubt exaggerated via short covering, options dealer positioning, etc… Not to discount the message of the market, just putting the extent of the move into its proper context… The second paragraph below is key to the near term set up.

Here you go:

Client Brief | Macro Developments — April 1, 2026

Global manufacturing data out of Europe this morning delivered a meaningful upside surprise, with Germany's PMI printing at 52.2 against a 51.7 forecast and Switzerland beating by over six points — both readings consistent with an economy absorbing the energy shock better than consensus feared. The eurozone's unemployment rate held near historic lows at 6.2%, and purchasing manager surveys across Italy and France showed continued expansion. Separately, the U.S. dollar is showing early signs of weakening after its conflict-driven safe-haven rally, with the euro climbing to 1.1601 against the dollar — a Reuters survey of economists this morning explicitly flagged the expectation that the war-driven dollar rebound is beginning to fade.

On the geopolitical front, the most consequential development of the day is a quiet but significant one: