I hear it as the two being willing to control and charge ships passing through the Strait. Well, they just realized HOW important the waterway was for the entire world economy. Hadn’t the US gone in, we would’ve – they would’ve never known.

So yesterday, investors swung between hope amid an Iranian memorandum suggesting that the Strait would reopen a month after a deal is reached, and disappointment again after the US denied the reports, with Donald Trump saying that ‘no nation’ would control the Strait. The news somehow cast a shadow over how close the two parties really are to reaching a concrete deal.

In summary, a US/Iran peace deal – and the reopening of the Strait of Hormuz – now looks more complex than it did a few days ago. And the immediate impact is higher oil prices.

US and Brent crude are up by around 3% at the time of talking, while the US 10-year yield has rebounded past 4.50%.

So it’s in this uncertain context that the US will release its latest growth and inflation updates today. In terms of growth, the US economy is expected to have grown around 2% in Q1, with price pressures stubbornly above 3%, and core PCE for Q1 expected to have bounced from 2.7% to 4.30%, reflecting the Iran-led price pressures. On a monthly basis, the core PCE – the Fed’s favourite inflation gauge – is expected to have advanced from 3.2% to 3.3% y-o-y in April, as the initial impact of higher energy prices was already visible in last month’s reading.

Then it’s the good old domino reasoning. Higher rates push yields higher. Higher borrowing costs should limit borrowing and, by doing so, should also limit growth and hiring. Lower growth and lower hiring could tame part of inflationary pressures, but not all, because inflation is not caused by excess demand, but by limited supply.

In fine, it’s up to the White House – and not the global central banks – to ease inflation. Scared?

Tech retreats from record highs

There’s more. Remember, before the Iran war started, there were two major worries in tech.

The first set of worries is forgotten. AI demand remains so strong that investors are joining companies in worrying more about not being able to catch up with rising demand than about investing too much, on debt, with prospects of structurally higher yields...

The second set of worries – which had somehow been easing – just got a fresh boost on news that a Swiss-based pension fund wanted to redeem ALL of its shares in Vista Credit Strategic Lending in Q1. Retail investors wanting to get their money back is one thing; an institution seeking redemption is another level of stress.

The good news is that software company valuations have improved since April, making the news sound a little less dramatic – because today’s software stress is more about not being able to fund businesses rather than immediate business failures due to AI. But the latest news is a warning that private credit stress goes beyond just retail investor exposure and anxiety.

Alas, who cares? Micron – the new king of tech headlines – rose another 3.63% yesterday, pushing its gains past 1’360% since last April. VanEck’s Semiconductor ETF advanced to a fresh ATH before finishing the session 1% lower. Software is down more than 5% in Japan this morning, while the Korean Kospi index – basically reflecting two memory chip makers there – is down 2.76% at the time of talking.

Looking at the extremely narrow market breadth in many major tech hubs – the US, Korea and Taiwan being the top three – there are two possibilities from here.

Opinions are mixed. Goldman Sachs analysts suggest that the S&P500 could hit 8’000 this year, while the European Central Bank (ECB) – another type of folks – warns that asset prices look stretched and that financial markets are in “danger of correction”.

Investor surveys remain incredibly bullish, while Main Street surveys are weakening by the day. And truly, the weaker the Main Street sentiment, the better it feels in financial markets, as weaker consumption and weaker activity only mean lower rates, which are mathematically positive for valuations, when corporate earnings remain robust.

So the best is to chase the dips and stay invested. Part of valuations reflects stock price inflation due to ample liquidity injections that must find a place to go.

And the good news is, if there is no place left on Earth, space is becoming the next shiny option. Procure’s Space ETF, for example, is literally targeting the moon with a 363% rise in two years. Not as impressive as Micron, but clearly exciting for those who have the nerves to jump aboard this UFO (which happens to be its ticker!)

On this note, let’s keep an eye on US growth and inflation numbers, hope for the best, but stay prepared for the worst!