More Than Just Iran
By Peter Tchir of Academy Securities
Without a doubt, trading at the start of the week will hinge on developments in the ongoing ceasefire negotiations.
As Spider, Bret, and I discussed on Friday’s podcast the range of possible outcomes has not narrowed significantly. Anything from a serious deal, to walking away and restarting the attacks seems plausible. Spider “guffawed” at the comparison of Regime Change to Welcome Back Kotter – well, the names have all changed…
You know we live in a weird world, where in less than a week, the President posting on Truth Social that a “civilization will die tonight” barely registers as something to talk about.
Academy will continue to stay in front of you this weekend and next week as the situation develops, but the podcast (and much of our writing from this week) remains relevant until we get a clear direction on the talks. So far it has been compared to two sides repeating their list of demands to each other, but at least they are communicating.
More Than an Easter Ceasefire between Russia and Ukraine?
With all the attention focused on Iran, there are stories circulating that Russia and Ukraine could be heading towards something more lasting (while at the same time, there are concerns that even the limited Easter ceasefire won’t hold). Easter (for those following the Julian calendar) is this weekend, while for those following the Gregorian calendar, it was last weekend.
Why could this war finally be headed towards a deal?
Ukraine.
Depending on the U.S. for big support has already seemed like a weak strategy. With the U.S. un-sanctioning Russian oil, it seems even more dangerous to tie your hopes to U.S. aid (also, the U.S. has been using up missiles in the fight in Iran, so will be less likely to want to ship military equipment elsewhere, until our stockpiles are replenished).
Relying on Europe has always been difficult at best. The EU has not been prepared for war, and the framework of the EU makes it difficult to do anything major, quickly. For me, when Brussels vetoed the taking of Russia’s frozen reserves, I largely gave up on the EU.
Russia. Given the two previous paragraphs, it would seem that Russia should be foaming at the mouth to increase attacks and not even be thinking about peace. But…
From a “carrot” perspective, this might be the easiest time for Russia to “ease back” into the global economy. With sanctions already lifted, it might make sense to do a deal now and have those sanctions permanently lifted (politicians have an easier time maintaining the status quo, than changing it).
Ukraine has a factory in the UK. Ukraine is working with some countries in the Gulf. We have already seen what asymmetric warfare can do against even the biggest, best, most well-prepared military in the world – and that is not what the Russian military is. If you are Russia, you may have to worry that Ukraine is getting better at drones. Also, while Russia and Ukraine largely kept away from infrastructure targets, those seem more likely to be on the table as attacks (and threats of attacks) on those targets moved the needle
It would be a pleasant surprise to see some progress on this front. While it still seems unlikely, maybe we have finally reached the point where conditions on both sides warrant some sort of a deal.
On Any Other Weekend This Would Be the Main Focus
Stocks averages did so well this week that weakness in an important sector has been largely ignored.
This ETF is comprised of some of the biggest, best “software” brands in the world. Yet, while everything else was rallying this week, this ETF had its lowest close since 2023. The recent selling, at least in part, coincided with a new AI model, which also triggered an “emergency” banking meeting in D.C.
What was interesting, and in direct contrast to the Barron’s article linked above, is that the CIBR (a cybersecurity-focused ETF) also did poorly (ending the week barely above its post Liberation Day lows).
SOXX, a semiconductor ETF, had a great week.
I continue to believe that as we near an end to the conflict in Iran, ProSec will once again take center stage, with domestic energy, electricity, and chip manufacturing as the focus.
Having said that, the carnage in software seems like it should have broader implications for the market. Maybe it will once we have fewer “headlines” about the Middle East.
CONsumer CONfidence
If the CON CON didn’t give it away (again), I am not a big fan of this data series. But two things struck me as interesting.
Inflation expectations for 5 to 10 years out remained “anchored” coming in at 3.4%. Up a bit from recent prints of 3.2%, and well above the Fed’s target, but well below readings throughout most of 2025. If the Fed was willing to cut rates with much higher long-run expectations (and they did), then this should help rate cut probabilities inch higher. It isn’t great data, but could have been worse, which is all that a Fed run by Warsh is likely to need.
On the flip side, while I’m not a huge fan of the number, “all-time” records deserve at least some attention
The deterioration has been dramatic and cannot be “just” linked to Iran. Does that mean affordability (and the “working poor”) thesis is about to get some attention again?
The caveat to this is that CONsumer CONfidence is very “political.” Not sure why it is that political, but it is – just look at the chart, and how confidence switched after the election. Long before the President was even sworn into office, the sentiment of Republicans and Democrats did a 180 (the same thing happened, but in reverse, when Biden beat Trump).
I will ignore the Democrats for now, and focus on Republicans and Independents. Both were slightly better than their lowest levels since the election. That mitigates some of the sting of the headline number but it is something to keep a close eye on.
I do hate that I dedicated so much space to a data series that I don’t put a lot of faith in, but this was too big to ignore.
Bottom Line
Sunday night and Monday morning will be heavily dependent on the messaging out of Pakistan (I did a double take as I wrote that, but it seems to be the case).
There is nothing bigger for the global economy than how this conflict is resolved or proceeds. Given the trading over the last two days (where every “negative” headline was met with minimal selling, and every “positive” headline was met with robust buying) a lot of good news is priced in. We will still rally on positive outcomes, but some form of a “deal” seems to be increasingly priced into markets.
Let’s hope that markets are right and we are near the end.
Then for better or worse, we can return to our “normal” programming and figure out what to make of the AI story, the software story, the K-shaped (or working poor) story, the affordability problem (which will be alleviated with a good outcome in the Middle East, but not solved), the jobs story, etc.