Good morning,
Entering the 7th week of the war, there was no constructive news over the weekend—hardly a surprise. What may be more surprising is where markets sit at this stage. Through Friday’s close, the S&P 500, Nasdaq, Russell 2000, EAFE, and Emerging Markets are just -2.65%, -4.65%, -3.82%, -5.53%, and -5.63% below their respective all-time highs. International markets continue to lag, largely reflecting their greater dependence on oil flows through the Strait of Hormuz.
At their late-March lows, those same indices were down roughly 10–13%. In that context, we’ve seen meaningful repair—markets signals were stretched, but not broken. That resilience still appears tied to the expectation of a sooner, rather than later, end to the conflict.
That narrative, however, received no support this weekend, and patience may begin to erode. For now, the ongoing conflict with Iran is likely to act as a wet blanket over risk assets. While Q1 earnings are expected to be strong, that backdrop may cap upside in the near term.
Early earnings reactions will reinforce that tone. Goldman Sachs, the first major reporter, early this morning, modestly disappointed and is down ~6% pre-market. That fits the current market character: even small misses will likely be punished.
At some point, there will be an inflection—where investor patience gives way to concern that prolonged disruption to a critical global oil artery feeds through to inflation. For now, markets are still extending the benefit of the doubt to the “shorter duration” outcome. My sense is that the window is measured in weeks, not months.
Be well,
Mike