Dear Valued Clients and Friends –
Sunday night futures were surprisingly boring (really close to flat), but seeing the overnight action in Asia, I strongly suspected I’d wake up to additional downside. At 3:30 am PT, the pre-market was showing all market indices down close to 1%, and oil was sitting near $100. Then, President Trump tweeted this:
“I am pleased to report that the United States of America and the country of Iran have had, over the last two days, had very good and productive conversations regarding a complete and total resolution of our hostilities in the Middle East…I have instructed the Department of War to postpone any and all military strikes against Iranian power plants and energy infrastructure for a five-day period”
Markets went from down 350 points to up 1,150 points (a 1,500 point bounce), and oil dropped to $84. An hour later (still pre-market), oil was at $91 (so way off the high and way off the low), and the futures were pointing to a +800-point market open. You will see in the chart below how the market fluctuated throughout the day before closing up +631 points, well off the highs of the day, but well off pre-market lows, too. This is the environment we are in. It is not a good world for market timers.
I will cover all this and more in today’s Dividend Cafe.
Dividend Cafe on Friday questioned the wisdom of today’s “private credit contagion” narrative. The written version is here (my favorite), the video is here, and the podcast is here.
Off we go …
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Market Action
- Markets opened up over +800 points this morning and fluctuated throughout the day, with 1,100 points between Friday’s close and today’s intra-day high.
- The Dow closed up +631 points (+1.38%) with the S&P 500 up +1.15% and the Nasdaq up +1.38%.
*CNBC, DJIA, March 23, 2026
- One of the most bullish things entering today (in a sea of non-bullish things) was the big pick-up in bearish sentiment (52% bears vs. 30% bulls in the recent AAII Survey is the stuff contrarians love to see).
- The big move higher in bond yields as oil prices have risen is understandable on a short-term basis, but I do suspect it sets markets up for a pretty face-ripping rally in bonds at whatever point it is that oil prices stabilize. Bond yields are highly likely to drop, and not only would Fed cuts get repriced into the short end, but the long end would fall, as well. In the meantime, the VIX, bond yields, oil prices, and, yes, stock valuations, are all very positively correlated. But correlation cuts both ways. I am more agnostic about the medium-term for equity valuations (they had challenges before all of the oil drama and bond yield escalation), but the bond side feels very much to me like a pile-on in the short end that will not match the long end for long. Of course, a lot of this was evident just today as the 10-year yield dropped 4.4 basis points on the mere news of a Trump tweet suggesting some de-escalation. But there is a long way to go …
- The ten-year bond yield closed today at 4.35%, down 4.4 basis points on the day as mentioned above but still 35 basis points higher than just three weeks ago
- Top-performing sector for the day: Consumer Discretionary (+2.46%)
- Bottom-performing sector for the day: Health Care (+0.03%)
- Gold is now down over -16% since its all-time high a month before the Iran war began, but was down -23% before losses reversed earlier today. This is all generating a lot of conversation, especially from those who assumed gold was a “safe haven” asset. The reality is that the dollar has been the safe haven, and of all the correlations that turn on and off all the time around gold, yet still get called “correlations,” the one that has rematerialized in recent weeks is the inverse correlation to the dollar. Put differently, the dollar is up, and gold is down. For now.
- Let’s pretend for a moment that today’s modest rally in markets means the Iran war bottom for the market has been placed (I do not pretend that in real life for a second, and haven’t the foggiest idea if the Iran operation bottom is in or not – my base case is that it is not, and that today was an ongoing part of the elevated volatility that we continue to expect). If, and again, I am just throwing this out with no basis or expectation, 6,495 proves to be the Iran bottom in the S&P 500, then a -7.2% peak-to-trough drop (from 7,002 to 6,495) will mean that this bout of market volatility was not even close to the annual average of recurring drawdown that happens. Not even an average drop, with a war and > $100 oil. Interesting.
- Is there a build-up of short positioning in markets that will need to be unwound if a really favorable outcome is found in the Iran operation? Of course. Is that a reason to change positioning? Of course not. It is not knowable, time-able, or in any way actionable.
Iran War
- President Trump said over the weekend that the United States is going to obliterate power plants in Iran if the Strait of Hormuz is not open in 48 hours. Oil hit $100 Sunday night, as it did not appear markets believed Iran was going to respond as President Trump had requested.
- One thing I have wrestled with has been where the market would be if there was not a perception that President Trump is going to capitulate and look for an off-ramp in Iran. In other words, that “TACO” component from the old tariff issue is now likely helping President Trump in that markets would arguably be pricing in a worse outcome if they didn’t believe he was unlikely to tolerate high oil prices and elevated market volatility longer. That implied market perception may explain why market price action had not been worse these last couple of weeks, but I think we saw it in spades this morning when Iran basically denied that they were in talks with the U.S. after President Trump’s tweet, and markets more or less stayed up a thousand points. In other words, even if the substantive progress the President speaks of is not believed in markets, his intent to off-ramp is the market’s predominant expectation.
- So what is actually going on? Given Iran’s denial that there are substantive negotiations going on with the U.S., but the market’s reasonably positive response to President Trump’s claim that there is, I believe the markets do not care if it is happening or not – they care that the President says they are, indicating a move towards an off-ramp.
- I did spend some effort today trying to unpack what has actually happened, and I will repeat that anyone who actually knows couldn’t say if they did, nor would they. But in terms of other, more qualified and trustworthy speculators, meaning smart and connected people who are also speculating, they believe there are back-channel assurances from Tehran that negotiations are going to happen and happen favorably.
- What matters for markets this week? Are kinetic attacks continuing against neighboring Middle East countries, and is there any movement in reopening the Strait of Hormuz? Period.
Public Policy
- With TSA continuing to not receive funding, there are efforts underway to put ICE agents in airports as surrogate TSA employees. It is hard for me to envision how this will work, but what do I know?
Federal Reserve
- There is now a greater chance in the futures market for a rate hike this year than a rate cut.
- Fed Governor Austan Goolsbee said he is more worried about inflation than unemployment, while Fed Governor Stephen Miran said he believes they need to cut four more times
- I believe they will cut after Kevin Warsh is confirmed, once. Beyond that, I offer no predictions.
Oil and Energy
- WTI Crude closed at $89, down -9.5% on the day. It got as low as $84.37.
- Midstream last week was up +1.5% last week despite the market’s 2% drop (and it should be pointed out, oil was actually flat last week, believe it or not)
- The idea that 17% of Qatar’s LNG capacity will be offline for “3-5 years” is extraordinary to me, and, as it really does appear to be true, it seems impossible to think we will be dealing with LNG oversupply any time soon. Markets are pricing in that reality quite favorably for LNG suppliers and transporters.
Ask TBG
| “The U.S. is continuing to spend money and accumulate debt with no sign of reversing/improving the debt-to-GDP ratio. Is there something proactive people should be doing to help protect wealth against this? What is TBG’s view?” ~ Brandon R. |
| This is perhaps the subject I have devoted to the most time, attention, and writing to over the last 15-20 years, and what I have spent the most time studying for 25-30 years. I’d start here and go to here. Oh, and this – because Japan has a lesson for us. |
On Deck
- It’s all wait and see on Iran and oil for now
- Off to the Palm Beach office Wednesday for a client dinner event, Wednesday night, team meetings Thursday, and back to NYC Friday night
Reach out any time!
With regards,
David L. Bahnsen
Chief Investment Officer, Managing Partner
The Bahnsen Group
www.thebahnsengroup.com
The Dividend Cafe features research from S&P, Baird, Barclays, Goldman Sachs, and the IRN research platform of FactSet.
