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Geopolitical events, when sustained long enough, end up morphing into economic events. They can be episodic, or they can be permanent, creating a new paradigm. The Iran war is starting to affect the energy sector globally, but as you can see in the chart below, we are in the early innings of what can happen. Both oil and Natural gas are well below their historical highs, and they are already the headline news around the world: (1) Japan refiners are requesting to tap the str

The first casualty of the potential closure of the Strot of Hormuz is South Korean stock market. In the top chart below you can see the correction of the KOSPI index since Friday. Today, it had to close temporarily as it hit the circuit breaker of 8% fall. One of the reasons for that fall is that 75% of South Korea oil consumption comes from Middle East. What’s interesting is that Hormuz is not physically blocked, ships can still go through it. The problem is financial. Insur

The private credit sector continues to be under pressure. As Blue Owl continues to deal with redemptions, now Blackstone Private credit fund BCRED ($82Bn), is facing record redemption requests in Q1 2026. Investors sought to withdraw 7.9% of shares, exceeding the typical 5% quarterly limit. If you look at the top chart below, BDCs (Business Development Companies) share price of those managers that are most exposed to redemptions continue to go down, experiencing drawdowns of

Oil is up 8% this morning. The strait of Hormuz has not been officially closed, but following U.S. and Israeli strikes on Iran, Iran’s Revolutionary Guard Corps (IRGC) began broadcasting VHF radio warnings to vessels stating that “no ship is allowed to pass the Strait of Hormuz.” Consequently, Ship-tracking data shows a 70%+ plunge, with tanker transits near zero in recent days, hundreds of vessels anchoring or holding outside the strait. Insurers have withdrawn coverage or j

The U.S. is at war with Iran. Reports of the death of Iran supreme leader Khamenei, might shorten the conflict, but it’s not clear if this is a precise short term attack similar to the one in Venezuela or a conflict that will require the U.S. military to deploy boots in the ground, and consequently, a long and costly conflict. What’s the goal? It appears to be another proxy war between the US and China, whereby American are trying to hit chinese choke points: Venezuela and Ir

There is a new narrative in the market, with its genesis in AI. The agentic economy narrative is hitting hard, partly because companies valuations are high, and AI is decreasing the visibility of future cash flows. The key metric has changed: growth rate is no longer the most important metric, it’s duration. How far into the future are the cash flows of consumer cyclicals, or software or healthcare services companies, visible and solid. You never had 20/20 into future cash fl

Do you want or know if Trump will keep a congress majority in the midterm elections on November? Take a look at the two charts below: on the top one, you can see the results of the Google search “help with mortgage” over the last 20 years, which happen to include the GFC, where mortgages where the epicenter of the crisis. Today, we’re way above the 2008 peak. On the bottom chart, you can see wages over the last 5 years. Nominally, they have grown 31%, but when adjusted for in

Investors are supposed to be rational and markets are supposed to be efficient, which should lead to a truly unpredictable returns. But markets exhibit some patterns and cycles, that force us to add the words “most of the time” to the efficient and rational hypothesis. Take a look at the chart below. It shows a chart with 10 year rolling reruns for the S&P500. Your brain, is automatically trying to complete the chart into the future with a downturn, because that si what would

It looks like Japan’s plan it’s working. After securing the snap elections a few weeks ago, to take full control of the government, investors seems to have cleared the uncertainty regarding who is in charge, andaré looking at Japanese bonds with a fresh look. In the chart below, you can see the open interest of 20 year JGBs futures. As Japan has opened the floodgates of price discovery in its long end of the curve, and international investors are taking the bait. When hedged

The situation between the United States and Iran is highly tense, marked by a combination of renewed diplomatic negotiations over Iran’s nuclear program and a massive U.S. military buildup in the Middle East, raising fears of potential conflict. The attention is once again devoted to what happens in the Middle East where the odds of a military conflict remain high. Israel is pushing hard for a regime change and for ending Iran nuclear enrichment program. The U.S. looks at I

The Congressional Budget office, released its latest report on the US economy a couple of weeks ago, on Fed 11th. The main conclusions are: (1) The federal budget deficit for fiscal year 2026 is projected at $1.9 trillion, equivalent to 5.8% of GDP. Deficits are expected to grow over the decade, reaching $3.1 trillion by 2036 (6.7% of GDP). (2) Over the 2026–2036 period, deficits are expected to average around 6.1% of GDP, well above the historical 50-year average of 3.8%. (3

2026 is a Mid term election year. The same way that in general election years, the market follows a pattern, in years like this one, it tends to follow a similar path than prior mid term years. You can see that in the chart below. It’s more volatile than the average year; tends to peak in April and bottoms around October, right before Election Day on November. This is, of course, an average of all years on record after 1945, and it may be different this time (famous words), b

The Supreme Court ruled 6-3 yesterday, that President Trump exceeded his authority by imposing sweeping global tariffs under the 1977 International Emergency Economic Powers Act (IEEPA). The Court held that IEEPA allows the president to “regulate importation” during a declared national emergency but does not authorize imposing tariffs, which are taxes, a power the Constitution assigns to Congress. This strikes down the centerpiece of Trump’s second-term trade agenda: the broa

One of the major pillars of investing is losing strength. The banaced portfolio, where investors allocate 50-60% in equities and 40-50% on bonds to counterbalance risks and smooths returns through diversification, rests on the fact that correlations between stock and bonds are negative enough that the combination lowers volatility for the overall portfolio. The problem? The chart below shows a study from the IMF where the correlation of U.S. stocks and bonds is trending highe

Business Development Companies, commonly known as BDCs, are the publicly traded proxies of the private credit funds. One of the big ones, Blue Owl inc, has halted redemptions on one of its private credit funds OBDC II, with 13% of its portfolio in loans to the software sector, which is proned for disruption by AI, and fundamentals have weakened recently. In the chart below you case Blue owl BDC vs the S&P500. You can see the 52% drawdown it has accumulated. Of course this cou

The Bank of Japan continues with the reduction in its monthly purchases of Japanese Government Bonds (JGBs). This process, often referred to as tapering or quantitative tightening, began earlier, with a key initial plan announced in July 2024 to gradually reduce monthly purchases from around 5.7 trillion yen to about 3 trillion yen by January-March 2026, via quarterly cuts of approximately 400 billion yen. In June 2025, during its Monetary Policy Meeting, the BOJ conducted an

The last employment report in the U.S., published last week evidenced a problem with the U.S. labor market: no job growth in any sector of the economy with the exception of healthcare. On the top chart below, you can clearly see that. How is the sector doing in terms of market returns? You can see that on the bottom chart by subsectors, all of them have been below the broad index (S&P500) for the past 12 months. How is thr current earnings season going for them? Early preview

The Energy sector is waking up. The sector is experiencing robust performance amid rising global demand, policy shifts toward “energy dominance” emphasizing fossil fuels, nuclear, and geothermal, and challenges from grid constraints, permitting delays, and infrastructure needs. Renewables continue to dominate new capacity additions, accounting for over 90% in 2025, but policy shifts will likely moderate that trend back to fossil fuels. Energy has been the top performer in the

Six weeks into the new year and AI related companies are sragging the market. They are using most of their Free Cash Flow (please see first chart below) to finance data centers and AI related research, and still need to tap the credit markets to fullfill all those commitments. In the second chart below, you can see the impact on the economy predicted by several studies on AI. Look at the Horizon column. They’re talking about decades to hit the real economy meaningfully, while

The stars are aligning for Trump when it comes to the future of oficial interest rates. first the unemployment report on Wednesday where the overall number was not bad, but showed enough weakness, particularly after the adjustments, to reaffirm the narrative of soft employment, and yesterday the inflation report showed CPI slightly better than expected, but just enough to set the stage for the Fed to conclude that tas should be lower. Are the number being “tortured” to confes