Strong convictions, loosely held - Weekly Wrap

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Strong convictions, loosely held - Apr. Macro Snapshot - April 2

The Iran conflict continues to create elevated uncertainty and headline risks. Amidst all the news and propaganda, we highlight where we have conviction.

1. Conviction #1: “Sell America” goes into reverse no matter outcome of Iran war
2. Conviction #2: Money markets think it’s 2022, fade this as forward yields are already too high
3. Conviction #3: Tech equities have large upside IF there is a quick Iran resolution

For cyclical asset allocation, we turn neutral equities vs bonds, and still like gold over nominal assets. The binary risks associated with Iran call for pragmatism.

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Summary

• Energy Shock Analogs: Oil higher for longer, initial equity resilience, front end yields to fall
• Cyclical Asset Allocation: Turn neutral equities vs bonds, still like gold over nominal assets
• Equity: Positive earnings outlooks are decaying without an Iran resolution
• Fixed Income: Real yields remain elevated, yield curve more likely to steepen than flatten
• FX: Terms of trade shock driving USD short squeeze
• Commodities: US LNG the structural winner from Iran conflict

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