Morning Note: Repricing Present Risk

 In Tuesday's morning note I wrote:

"As you've noticed, the Middle East conflict has heated back up markedly of late; interesting that risk assets, while taking somewhat of a hit last week (which may have been more about AI concerns than it was about Iran worries), have overall been holding up, I'd say remarkably well.

We can speculate whether, as is often the case, that's due to the sense that, as scary as they often seem, markets conclude that modern-day geopolitical frictions (even when they're kinetic) don't end up moving the needle as one might expect -- or is it that, in this instance, as long as the price of oil stays, say, sub-100ish, current general conditions are sufficiently positive to absorb the cost? Or is it the legitimate belief/understanding that the US administration will aggressively calm the waters if/when markets begin to crack -- thus leaving investors sanguine, and unwilling to capitulate to scary headlines?"

Well, while there were a couple of heavyweight outlook concerns expressed last evening, the market action this morning is hinting that oil "sub-100ish" may indeed go some distance in terms of explaining the relative sanguineness we've noticed in markets of late... I.e., as I type, global equities, save for those energy and healthcare (a presently meaningful weight in our core allocation)-related, along with precious metals and bonds are getting pretty well-hammered, as Brent crude is fetching $100.16/barrel (+6.1% on the morning), while WTI is trading at $91.40 (+4.6%).. Those are big one-day % moves, and, clearly, markets have noticed.

Not that this morning's swoon remotely equates to a "cracking," but, nevertheless, there's no doubt that the next proverbial shoe to drop everyone's focusing on would be: 

"...the legitimate belief/understanding that the US administration will aggressively calm the waters if/when markets begin to crack..."

I'll circle back as usual over the weekend with our latest deep macro dive... In the meantime here's today's morning rundown:

*Morning Update: Repricing, Not Panicking — 7/23/2026

This morning's selling started as a narrow story and is broadening into a wider one — though the difference between the two layers still matters, and it's worth walking through both.

The first layer is concentrated in a handful of the market's largest technology names, where quarterly results — solid on their face — came packaged with capital spending plans large enough to make investors ask, with fresh urgency, when the enormous investment in artificial intelligence begins paying for itself. The headline index, dominated by those names, is down roughly 1.4% as I write. The average stock, by contrast, is off only about a third of a percent. That gap has narrowed a bit as the morning has worn on — the selling is no longer purely a big-tech affair — but the average stock continues to hold up meaningfully better than the headline suggests, and that relative resilience remains an important tell about the underlying economy.

The second layer — and, in our view, the more consequential one — is in the oil market, where the international crude benchmark crossed $100 per barrel this morning for the first time since May. Hostilities in the Middle East have widened beyond the Strait of Hormuz to shipping lanes in the Red Sea, and physical transit — the data we watch, as opposed to the headlines we read — remains badly impaired. As we've noted throughout this conflict, diplomatic announcements and actual tanker traffic are two different things, and it's the tankers that set the price of oil.

Rising crude is doing what rising crude does: feeding through to inflation expectations, and from there to interest rates. The 10-year Treasury yield touched its highest level in a year and a half this morning, taking out its previous wartime peak. Meanwhile, weekly jobless claims fell below 200,000 — a firm labor market that gives the Federal Reserve little reason to ride to the rescue with easier policy. Indeed, market-implied odds of the Fed's next move being a hike, rather than a cut, have risen notably ahead of next week's meeting. It's that repricing of rates, more than the geopolitics themselves, that is gradually pulling the broader market lower as the session develops.

Put simply: the market this morning isn't panicking — it's repricing inflation. The relative strength of the average stock says the economy remains on its feet; the bond market says the price of that resilience is going up. That combination — decent growth, sticky inflation, a constrained central bank — is precisely the environment our internal conditions gauge has been signaling for weeks, and it's the environment our portfolios are built for: globally diversified, tilted toward real assets, energy, and industrial infrastructure, with hedges in place against moves in either direction. On a morning like this one, that construction is doing what it's designed to do — participating in far less of the decline than the headline index.

Next week brings a dense stretch — the Fed's policy meeting, key foreign central bank decisions, and month-end all landing within a few days of each other. We're positioned for that window, not predicting it. As always, we'll let the data, not the headlines, do the talking.

The information provided herein is for informational purposes only and does not constitute investment advice, an offer, or a solicitation to buy or sell any securities. Past performance is not indicative of future results. All investments involve risk, including the possible loss of principal.

*The morning update section was prepared with the assistance of AI research and drafting tools under the direction and review of Marty Mazorra, Chief Investment Officer.