Apr 9, 2026, 4:50 AM ETRoundtable, Interview

Iran Ceasefire: What’s next for markets?

The ceasefire represents a transition into a "new phase," compressing deep downside tails for risk assets, though a full resolution remains distant.
Markets are currently reacting to a narrowing of the distribution curve rather than the elimination of physical commodity shortages.
Equity markets have demonstrated the ability to "look through" short-term physical and economic damage if the probability of worst-case scenarios diminishes.
The S&P 500 drawdown was orderly and capped near 10%, avoiding the extreme daily volatility seen in previous shocks.
The equity sell-off was less severe than commodities and rates because the market never lost confidence in the underlying U.S. growth narrative.
Earnings growth expectations for the current quarter remain robust at 12%, historically a barrier against severe stock market outcomes.
Technical positioning contributed to stability, with the trading community reducing U.S. equity risk exposure consistently since December.

Oil prices are expected to settle at a "level shift" of $78–$80 per barrel, creating a permanent inflationary shock rather than a temporary spike.
The inflation outlook has shifted from a return to 2% to a scenario where headline inflation sees a "big bulge" and core pass-through remains uncertain.
Front-end rate markets priced in aggressive tightening: a "six-high break-even" for the UK and a "three-hike break-even" for Europe and the US.
The Federal Reserve faces a dual mandate dilemma, likely resulting in prolonged policy stasis due to conflicting growth and inflation pressures.
The European Central Bank (ECB) is expected to implement two to three rate hikes over the summer to avoid falling behind on inflation control.
Long-term inflation breakevens (10-year and 30-year) remain "unbudge[d]" near 2.30%–2.40%, signaling persistent market faith in central bank credibility.
Conventional safe-haven assets (gold, bonds, Japanese Yen) failed to provide diversification benefits during the oil shock due to specific structural constraints like term premiums and tightening cycles.

Hedge funds outperformed a traditional 60/40 stock/bond portfolio (approx. +2% vs. -2%) in the current quarter, validating alternative allocations.
The dominant long-term investment narrative remains Artificial Intelligence (AI), with CapEx investment buttressing earnings estimates despite geopolitical headwinds.
Emerging markets and commodity-exposed assets are favored as structurally positive beneficiaries of higher oil prices and favorable terms-of-trade shifts.
The "de-dollarization" and reallocation away from U.S. assets narrative has stalled; the crisis highlighted deeper vulnerabilities in non-U.S. economies.
Capital destination preferences continue to favor the U.S. due to superior earnings power and resilience, despite "hazy" dollar fundamentals.
Geopolitical focus is shifting toward the Gulf States' rebuilding, increased defense spending, and the realignment of the U.S.-China relationship.
Volatility driven by the AI paradigm shift ("who wins, who loses") is expected to persist as a source of upward pressure on market volatility through year-end.

Bond investors should prioritize inflation-protected securities given the repeated inflationary shocks and elevated levels.
Investors are advised to maintain or increase downside hedges as market volatility declines and opportunities to purchase protection become cheaper.
Recommended core assets for long exposure include the Nasdaq, Japanese equities, the U.S. dollar, and select Emerging Markets.
Forward-looking sentiment suggests "dialing back" hedges selectively as the market stabilizes, but keeping them active as the primary risk management tool.