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Just a shorter note from me this week ahead of the Easter Bank Holiday weekend. And in the short term I can bring you some better news from equity markets. If I look at the price action for Monday to Wednesday it is telling me that the markets think the war in Iran will be over soon. Here is a refresh of the table I sent round last week showing price action for the first 3 days of this week compared to the whole of March.
Part of what is going on here is that forever wars and higher inflation are not good politics in the US. Here are Trump’s latest approval ratings. I have no doubt the true MAGA believers will stay with him forever, but it is the centre ground that swings elections and, for now, this war does not look to be popular:
But before we declare the all clear here, I think there is a gap between what oil and commodity specialists say needs to happen soon and wider expectations of when the war will end. I have heard from a few separate sources that we will need a return to normal-ish by the middle of April to avoid nasty disruptions in refined products like jet fuel and diesel. On the other hand, here are the latest Polymarket probabilities for when a ceasefire will be declared:
Maybe Hormuz can re-open without a formal ceasefire being declared. But, if not, then it is pretty clear to me that the bettors on Polymarket are much more pessimistic today than equity market investors. Maybe there is a way to arbitrage this? But, if not, I am always wary of hard negotiations without any firm deadline which is what this situation looks like to me. I am afraid I think Polymarket may have it right.
So, I am not sure we are out of the woods yet. As it is the end of the quarter I will also be writing my quarterly overview and outlook piece for clients over the next few days. This cartoon is not quite targeted at people like me, but it is near enough that I thought I would finish with it here. And I hope you all get to enjoy a relaxing Easter break.
Chris Brown, CIO
cbrown@ipscap.com
The value of investments may fall as well as rise and you may not get back all capital invested. Past Performance is not a guide to future performance and should not be relied upon. Nothing in this market commentary should be read as or constitutes investment advice.
