Though President Trump has expressed a willingness to end the U.S./Iran war, lack of clarity on the timeline for peace is continuing to influence fixed-income and energy markets.
Alpine Macro analysts highlight that U.S. fiscal and monetary policy are key sources of investor uncertainty after the war, and recommend staying long bond duration.
Dan Alamariu, Chief Geopolitical Strategist, assigns 50% odds to a peace deal in the next 1-2 weeks, with 50% odds that bombing resumes.
The firm sees the blockade as unsustainable and expects a deal including the opening of the Hormuz Strait within 1-2 months.
Q1 earnings season was a blowout, prompting equities to be overbought, but the underlying trend remains bullish.
Analysts note bonds have shown hypersensitivity to the war, while equities remain insulated from geopolitical shocks.
Alpine Macro recommends fading inflation scares and expecting high bond and equity prices in 3-6 months.
Lower energy costs would ease the Fed's job and reduce pressure for fiscal stimulus before the midterm elections.
The firm expects oil prices to settle much lower over the next 3-6 months, with implications for bond and equity strategy.
