Rate Cut Bets Evaporate.
Weekly Plan 3.29.26
Hey folks—
As the clarity around the war in West Asia continues to elude, one victim of this obfuscation in financial markets is the rate cuts bet in 2026.
Many models have now started pricing in a 4% year end CPI which is significantly higher than the current 2.5% annualized rate of inflation here in the US.
As far as the conflict goes, there has been not much clarity in last few days either with the US gathering equipment and forces from all over the world — which seems to indicate the US wanting to dig its heels in and fight.
Reading between the lines amidst mixed signaling from this admin seems to point to a likely ground invasion of Iran. In coming days and weeks ahead, stay tuned to the talking heads and pundits point the existential need to invade Iran so roughly half a ton of enriched Uranium in the rubble can be extracted.
Iran has been very effective in waging this asymmetric warfare but there are 2 key questions which seem to be making this market much more skittish—
Contrary to what Trump has been claiming, there seems to have been absolutely no direct contact between Iranians and the US negotiators. The US negotiators have met and spoken with delegates from Pakistan and other third party brokers but really no contact has been established between the Iranians and the US.
Over the weekend, there are reports of Houthis joining in the conflict. Earlier suggestion was that since Iran has been weakened militarily, they will not be able to fund the Houthis to wage any effective warfare. This seems to have been discredited as well, with reports now indicating the Russians heavily helping the Iran both with intel and potentially with equipment. Financially, Iran is said to be raking it in by selling previously sanctioned oil in open markets now, and per some estimates making about 200 million dollars in revenue a day.
So, I think this could drag in for now and as inflation estimates surge globally, you have a potential for a more drawn down bear market.
If I am right about this conflict dragging on, I think the oil prices and especially oil stocks do not seem to reflect this yet fully priced in.
Closer home, these names like OXY, which was shared by me when it was at 30 dollars, and XOM which was first shared here sub 100 recently, are now pushing past 60 and 165 respectively.
I think even if this conflict were to end yesterday, the lingering effects on oil prices could keep these prices elevated, perhaps for next year to two. A lot of the equipment in Middle East, and wells have been damaged and this is not going to be an overnight effort to bring this oil to the market now.
In such an environment, I think Gold, despite now being down more than 20% from the highs still has room to run. Akin to Oil prices, which I first here in the Substack pointed to a long term floor at $60, I think Gold also has carved out a long term bid at 3500 and I think it is only headed higher from here in the long run but can see some short term pressure due to the oil market dynamics.
All the major indices here in the US are now down from anywhere from 10% to 12% from their respective highs. I think we remain in a downtrend and any rallies could be sold when it comes to risk on assets.
However, this does not mean we cannot see counter trend rallies in a bear market. This is an important point to grasp. A lot of the times these markets will go where they will find MAX liquidity. This is just the nature of markets. While major trend remains down, there can be minor trends in either direction — up or down.
Now on Friday we broke a key support level and traded down into the 6300 handles of S&P500 index. We will need to see if there is any news over the weekend or early next week that can signal continuation of this move lower without any sort of meaningful retracement.
As we look at some of the higher probability levels for the week, keep in mind that this is a very headlines driven market. The flows are very day to day data dependent, with only one thing being clear right now — the markets appears to be selling off into rallies.
At the start of the week, what my thinking right now is that minus a major escalation between now and start of the week, it remains to be seen if there any big takers on the downside here right under 6400.
I am still favoring a retracement on the weekly time frame into 6660s and see what is out there.
Broadly for the week, we can lean on 6350s and 6667s as key pivots for the week.
Scenario 1: If we are able to fend off 6350s this week, I favor a retracement into 6667 which may prove to be next leg of resistance. This does not mean we cannot have a sharp reaction below 6350, especially in wafer thing liquidly asian sessions — what I am more interested in is does this market find a lot of takers below 6350 in the cash session. Do we close on Monday below 6350 or if we can eke out a close above 6350.
Scenario 2: Now if we dip below 6350 and remain below 6350 come Monday and Tuesday, I think this is a bearish continuation scenario and next logical target in this instance will be 6200.
On slightly longer term timeframes, I want to share a note of personal experience. What we have been conditioned to believe from last 40+ years is that the markets only go up. This is absolutely true but must be seen from a lens of recency and data sample size.
What we have seen last 4 decades is that the bear markets tend to recover pretty quickly. Within 12-13 months even the most vicious of bear markets tend to stabilize and in many of recent instance, tend to recover most of their lost gains, in fact they even surpass their prior highs.
These current events in Middle East and West Asia though are something very different from Covid, 2022 bear market, even the 2008 Great recession and 2000 dot com bust. These events challenge the global supply chains and not quite in a way that the governments have any control over. So for instance, during even the direst of days in covid, the governments could keep the essential services running. With this supply shock, a lot of countries can simply run out of fuel or pay double or even triple what they pay on a good day for every barrel of energy.
I have shared my views on how this will go about in recent posts so will not rehash it all, but suffice to say that while Trump started this, he may have very little leverage now on how this ends.
Let us just say that he started it at the behest of other foreign actors who had an agenda or an end stage goal very different from ours (the US). This end goal may be to see a permanent instability and chaos in the region. To the extent this goal succeeds — the financial markets will remain weighed down by this. SO the more they succeed in their goals of long term chaos and strife in the region, the longer these markets remain at or near the lows. Any rallies get sold, major stocks do not move significantly from their lows for years. We have seen these type of conditions in the stock markets before here in the US, but just not in last 40 years.
Are we there now? Will these highs at 6800-7000 now not be revisited for a long time?
My take:
I 100% think so. If Iran descends into civil war and internal conflict after this regime is demolished and several smaller factions take to internal warring, I think we are in for a several years of markets globally just languishing, primarily due to long term displacement in energy markets.
In my mind it is clear that if this war does not end now, Iran is headed for a multi decade guerrilla like insurgency and it will have decade long aftershocks for the global markets.
This can still be avoided by ending this war while the Iranian regime is still intact. For this to happen, President Trump has to reassert control and put an end to this misadventure while there is still a window of opportunity open.
Think of it this way — a functional and organized regime means order and stability in the region. Lack of one means chaos and entropy.
Now if you do not think that markets can stay that low for that long, consider examples like Bitcoin, which arguably has been in a bear market since summer of 2025.
It’s been cut down by half since and I do not personally think there is any robustness to the tape in Bitcoin at the moment. Can this remain range bound or even resumes a trend lower towards 35-40K?
My point is that if the right conditions and circumstances are there, any market can enter bear market and remain there for months to years. Yes, stocks always go up but there can be significant periods of time when the stocks do not go anywhere, or worse, keep going downwards.
~ tic
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