A Step Back From the Brink

While, as you've noticed in recent weeks, as diversified as it is, our core allocation can indeed experience quite the day-to-day volatility, in either direction.

This morning, of course, we're talking the direction everybody loves, and rightfully so... Per the note below, weekend events were resoundingly bullish for virtually all things, save for those that are energy/oil-related and economically defensive (read consumer staples and healthcare).

Speaking of oil, while the (yet to happen) opening of the Strait makes the price more palatable, make no mistake, over the course of the next few months a not-small quantity will go straight to storage (to replenish drawn inventory, and to establish new inventory in a world startled by how one actor can shut off meaningful supply), and, thus, not into the economy for consumption.

I.e., ~$75-$80/barrel makes durable sense to me going forward... We started the year at around $60.

As we continue to emphasize, the relief in markets, in the pocketbook, and in overall sentiment resulting from a Mid-East resolution ultimately does little to combat the structurally higher inflation case.

We've been actively testing our allocation against various go-forward scenarios... Our -- subject to change as conditions evolve -- base case involves a risk-on rally over the coming weeks/months predicated upon a reopening of the strait of Hormuz and upon Fed Chair Warsh essentially convincing the FOMC that present inflation is all about oil, and that a tightening (raising rates) right here will potentially do serious damage to the labor market, etc.

Beyond this fall's mid-term elections, however, and into next year the market will have to come to terms with the structural nature of this inflation and the impact on equity market multiples, lending rates, etc., as the long end of the curve remains elevated, even trends higher... The short-end, however, will have to be contained by the Fed, as massive amounts of treasury debt is coming due over the next two years while the US continues to run record budget deficits.

I.e., we anticipate making notable allocation adjustments as conditions unfold late-year and into next... But, for now, we like where we sit.

Here's your morning roundup*:

A Step Back From the Brink* — June 15, 2026

Markets opened sharply higher this morning on news that the United States and Iran have reached a framework agreement to end the war and reopen the Strait of Hormuz. Over the weekend, the administration announced the deal was complete, authorized the removal of the naval blockade, and called for the free flow of oil through a waterway that has been effectively closed for more than three months. A formal signing is scheduled for later this week in Switzerland, with a number of issues left to be negotiated over the coming weeks. The major equity averages responded in kind, with broad gains led by large-cap technology, and crude oil fell more than four percent to its lowest level since the conflict began in late February.

This is a meaningful and welcome development, and I want to be clear-eyed about both what it changes and what it does not. The most immediate economic consequence runs through energy. The closure of Hormuz had squeezed global supplies of oil and gas and pushed prices well above pre-war levels, and that elevated energy cost has been a central pillar of the inflation problem we have been navigating all year. A durable reopening of that corridor would, over time, ease the most acute source of price pressure in the system. That is the channel that matters, and it is why this morning's move in oil is more important to the longer arc than the move in stocks.

I would temper the enthusiasm with a dose of realism, though. The strait does not physically reopen on the announcement; it reopens after the deal is signed and after mines are cleared, which takes time. A framework is not an implemented agreement, and the next sixty days of negotiation will determine whether this holds. Just as importantly, the inflation picture we have been managing around is not solely a function of oil. Consumer prices are running at a three-year high, the Federal Reserve remains effectively on hold, and those domestic dynamics do not reverse on a single weekend of good news, however genuine. Lower oil helps, but it helps with a lag, and the underlying mix of slow growth and sticky prices that has defined our positioning remains intact for now.

That is precisely why the portfolio has been built the way it has. We hold deliberately offsetting exposures so that no single outcome — escalation or resolution — dictates the result. Our real-asset and inflation-sensitive holdings are designed to perform if price pressures persist, while our defensive ballast and protective hedges are structured to limit damage and, in some cases, to benefit when the tape moves sharply in either direction. This morning, those hedges are doing exactly what they were intended to do. We did not need to predict the headline to be positioned sensibly for it, and that is the point.

For now, I am treating today as encouraging confirmation that the more dangerous scenarios have receded, while keeping our discipline against chasing the relief further than the facts on the ground justify. We will continue to watch energy markets, the path of inflation, and the Fed's response closely, and I will write again as the picture develops.

This note is for informational purposes and is not a solicitation to buy or sell any security. Past performance is not indicative of future results. 

*Prepared by Marty Mazorra, Chief Investment Officer, Private Wealth Advisors. Research synthesis and drafting assisted by AI tools under advisor review. All market views, analysis, and recommendations are those of the advisor.