¶ Intro / Opening
Today's markets move fast. Get the insights you need in 10 minutes with the Barclays Brief, the new podcast from Barclays Investment Bank. Through sharp dialogue and scenario based analysis, our leading experts analyze key market. So, whether you're managing a portfolio or leading a business, the Markley's Brief Podcast. You make smarter decisions. Stay sharp. Stay briefed. Find Barclays Brief wherever you get your podcasts.
🎵 Music
¶ Market Attempts to Buy the Dip
Investors want to believe so bad. They want this war in Iran to be over so they can get back to the happy, shiny world they had imagined at the start of the year. More than anything, they want to buy the dip. This week they once again grabbed the apparent opportunity to do just that. Donald Trump, for it is he, declared he had reached a ceasefire with Iran. Pete Hegzith, defence secretary, said Iran had in fact begged for one. Rob, I can hear you slurping your coffee.
Sorry.
Oil prices drop. Stock prices jumped, happiness and joy across the world for like a day. Today on the show, the ceasefire seems to be shaky, but markets are trying to cling on to it. Why? What is that about? This is Unhedged, the Markets and Finance podcast from the Financial Times. I'm pushkin from Katie Martin, a markets columnist here at FT Towers in an unseasonably warm London. It is no coat.
Up, people. Joining me down the line from New York City is the coffee slurper who spawned a million memes, Mr. Robert Armstrong.
Good morning.
Uh have you finished your have you finished your breakfast now?
No, I'm right in the middle. By this time of the week I'm a little tired and I need a pretty continuous drip feed of caffeine to keep the machine going, you know.
Intro V
More slurping incoming, Katie Martin. Yeah.
So, um, we need to talk about this this bounce of peace, this peace bounce and and what it tells us about the broader world. But first of all For listeners who have happily been trapped under a rock for the past few days. Let's just have a bit of a recap of what has happened'cause it's a lot, right? So first of all, Trump was saying he was going to end civilization in in Iran unless it did a deal. And then he says he had a deal?
And it's deal question mark. I think that's right. There was still drones smashing into things. Israel was still uh bombing Lebanon. They're the strait was still closed, so it's not at all clear. The the deal got off to a shaky start. I think that's a fair one.
Yeah, and and crucially there are n basically no ships heading through the Strait of Hormuz. It's it's supposed to be open according to to Trump and his people, but The satellite imagery doesn't lie. There are no ships.
Right. And this this I think is what we were warned about. It's not like turning a tap on and off. No. There is quite a lot of things that have to be lined up to get traffic going. Insurance has to be dealt with, crews, equipment. where is the oil gonna go once it leaves, et cetera, et cetera. So I don't think that's so much of a a a of a surprise as it is just a reality that uh and this I think was probably gonna be a theme of all our comments.
You can't snap your fingers and get back to where we were in February.
No.
Which is why I find it odd that in a way that markets are so keen to jump on signs that this is all gonna be over. Like i in real life this is not gonna be over overnight, but but markets are kind of trying to make that happen, like We saw some pretty big jumps in Asian and European and and and US Stocks.
Yeah.
yesterday which w which was Wednesday and And already that's kind of slightly falling apart because we've got the oil price heading up back close to a hundred dollars a barrel. I think last time we checked it was about ninety-eight on Brent, which is the big European benchmark. Well, I'm not sure. I feel like a bit of a yo-yo here.
Yeah, it's true.
¶ US Market Resilience and Advantages
Zoom out a tiny bit and let's look at the very big numbers. Big number number one. Number one number SP five hundred stock index. That is within a percent or two of where it was before the war began. So it's had in the last week or so, it's had a decent bounce. And US equities are saying we're just about back. Big number, number two, number two number is the 10 year yield.
That's not back to to where it was where the w when the missile started to fly, but the ten year yield is back to where it was in February. Yeah.
Bonds and borrowing costs are pretty steady, really.
Are pretty steady. And there's there's exceptions to that we should talk about, but The market is not only saying, you know, we want to come back, there is at the at the very top line a sense that the market is saying, we are roughly where we were before we went on this. terrible excursion in Iran.
I mean a couple of points that I think are interesting there. Like if if you look at what stocks are doing like so far this year, most European markets are doing well right actually. Four C one hundred is up nearly seven percent the the Let's not talk about Germany, that's a bad one. But the French stock is that Italian stocks are doing pretty well, yada yada. US stocks, the the S P five hundred that you just mentioned is still down by about a percent so far this year. So it is it is lagging.
That is true.
I don't think that will last but we can come back to that.
S P five hundred, I would describe it as follows trending sideways since September. And part of that has to do is is, you know, when it hit the highs of last fall, it was like the hottest stock market that there's ever been. Right. So there some of that is just there's no room, you know, there wasn't much room for that to go any higher. What I would mention about about the US stock market though is that what has not happened
is analysts are not pricing in damage to company earnings from the war. That's true. In fact, the opposite has happened. where analyst estimates for earnings, you know, in the first quarter, which is about to report, and for this year and for next year, are just basically going up, up and up. So every analyst who covers the car companies and the retail companies and the software companies and everybody else has just been merely
upping their view of how much money these companies are gonna make. The analysts have basically decided the war is not their business and they're just gonna look at the fundamentalists of these companies and the fundamentals are pretty good.
in the States.
Yeah.
The same alas is not true of Europe. So one thing that people keep saying to me about big investors where they're putting money to work for the rest of this year, a lot of them had gone into this year Let's not forget, we opened up 2026 on a really high note. People thought this was going to be a really good year for for markets globally and for markets outside the US. Everyone was kind of rah-rah emerging markets, rah-rah Europe.
That has really not worked out very well and now there's a bunch of people I've spoken to in the past few days who are saying, Yeah, we're taking off that overweight for Europe. We're taking off the you know, we're no longer gonna have more in Europe than our than our benchmarks would suggest. And instead we're rotating that back into the States because sure, the US is subject to the same global energy prices as as everybody else, but the US is a net exporter of of oil and gas.
And so it's in a much better position than, you know, the UK or Europe or large parts of Asia or whatever. So...
It's not just it's not just our energy. I say R. That's the royal R coming from America over here. Uh it's not just our energy position. I think our economy Yeah. And certainly less inflation sensitive than emerging market economies. It's less energy sensitive. I mean, you talked about how Germany has struggled. Germany is a very energy intensive industrial economy. That's why it's hurting.
So it is another example of our war your problem for US and the rest of the world because of these great intrinsic advantages that the US economy has over global economies.
Yeah. The big win here in financial markets over the course of this year is gonna be the US, which I'm gonna say is highly irritating. But But nonetheless it is.
That's true. Yeah. I think that's right. Let me say something else about American markets that helps you know, you you were puzzled about their resilience. You know, they came down a little bit. Analyst estimates went up. And the result of a slight decline in prices and a big increase in analyst earnings estimates for companies is that the market starts looking less expensive.
So you have especially like the big tech companies look a lot cheaper than they did a month or two ago because the analysts have marked up their profit estimates, their prices have come down a little bit. And I was talking about this with somebody else yesterday. Microsoft, just to pick one example, which has had a terrible year as a stock, is now trading at twenty times earnings. And, you know, history teaches you That when Microsoft is trading at twenty times earnings, you buy it.
Right. Yeah. Yeah.'Cause normally it's trading at a lot more than that. Yeah.
It's usually it's trading a lot more than that. It's a very resilient company. It grows well. Microsoft is the America of companies in that whatever happens in the world, it turns out to work out well for Microsoft.
Yeah.
Fairly or unfairly.
¶ Bond Market Rejects Rate Cut Hopes
Yeah, yeah, exactly. But one thing that sticks out to me here is stock markets really wanna recover and and bond markets are saying Something slightly different though, which is look, all of those interest rate cuts that you were all kind of banking on over the course of this year, they're not gonna happen. When the the market doesn't necessarily think that central banks are gonna raise interest rates, but I think a lot of the cuts have simply got to go. And that sort of
keys into my key like my main assumption about how this crisis pans out long term, which is yes, everybody wants this whole thing to blow over really, really quickly. But there is no path back So February the twenty seventh, before the bomb started falling on Iran. Like oil has reset at least sort of twenty dollars higher on the
Right.
All right. there is there's an inflation thing that is like baked into bond markets that wasn't really there before. The rate cut expectations are in serious trouble. Well There isn't a way back, is there?
I think that's right. And I think, you know, I w we went through a couple of prices earlier saying this price is back, that price is back. A price that isn't back is the short end of the interest rate curve. So looking at two-year treasuries and for our non-nerd listeners, the two-year treasury yield basically moves with expectations for what the Federal Reserve is going to do with rates.
Before this war began, that yield was at under, you know, quite a bit under at times, under three and a half percent. And now it's like three point eight. And interestingly, yesterday when everything was going up, two year bonds did not go up. And I thought that was kind of the most uh interesting event of yesterday actually. And what that tells you is
Yesterday being
Yesterday being Wednesday, thank you for catching me there. And what I think you know, before the war we were in this dreamy state where the economies of the world were gonna grow and the central banks of the world were gonna cut rates, which is a kind of Christmas, Easter, Halloween, and the Fourth of July all combined for equity markets.
And even oil aside, I think the shock of the war has made people look at that expectation and say, actually the world is not such a perfect place. Look, before this war began. Inflation in the United States was a full percentage point above the Fed's two percent target. And yet we were all living in La La Land, like somehow the Fed was going to look past that and cut rates anyway. That was a dumb thing for us to think.
And even you know, whatever the war has done, it's like injected this measure of realism into people's expectations about what kind of place the world is.
Right.
And so So I I I think that is the most important sense where we're not we're not going back. We know that even if oil stays here, doesn't go up, the war doesn't continue. The balance of risks for the world central banks and their four investors are much more imbalance than we thought a month and a half ago or whatever.
¶ Iran's Bid for Bitcoin Tolls
Yeah, yeah. There there is no way of going back. Now just one little additional wrinkle to the rapid news flow that we've had o had over the past few days is um The FT was reporting that Iran wants paying for its toll to use the Strait of Hormuz in Bitcoin, which is interesting.
Yes. Well this is bad news for Bitcoin haters like you, Katie. Because the world has finally found a use for Bitcoin, which is setting up a huge waterborne toll booth in the Strait of Hormuz where you have to throw a bitcoin into the little basket as you go by. I'm I'm old enough to remember that when you used a toll booth you took your thirty five cents and threw it into this thing where the change would go down. That's what it's gonna be like.
Courmoose, but you're gonna throw your Bitcoin in the little basket as you drive by in your huge oil tanker.
Yeah.
I mean we should say we don't know if this is gonna happen.
This is like a
Some Iranian official saying we're gonna have untraceable funds paid to us every time your ship goes by. We're gonna take them in bid.
I mean two things here. First of all, the price of Bitcoin hasn't responded that much to it, which suggests that even the crypto bros are a bit skeptical that this Not the most sceptical crowd in the world, but even they are potentially a bit skeptical this is gonna happen. Although, you know, I kind of buy the argument that Iran would be
Collecting Bitcoin and then transferring it into something they can actually spend rather than hoarding it. So maybe that's not positive for the price of the thing.
twenty million barrels a day under normal conditions flow through the strait. They're talking about something like a dollar a barrel. So now you got twenty million dollars worth of tolls that you gotta do I mean, th that money's gotta go somewhere and that's real money, right? That doesn't fit in a briefcase, basically.
No. Or a crypto wallet for that matter.
It's a very large amount of money that Iran stands to collect, and they don't want this money tracked and sanctioned by the United States and they would prefer it did not touch the dollar based international system at all. The problem is, and I found this out when I talked to a lot of Bitcoin market experts yesterday, is If you want to buy stuff at the scale Iran wants to buy stuff with the proceeds from this toll, you do have to flip the stuff into fiat at some point.
Into proper currency.
And so it helps you to start in Bitcoin, but you still have to find an off ramp when you want to buy the stuff that you want to buy from crypto world into real money world.
I mean one thing that is kind of fun here is, you know, we've all spent the past few years kind of wringing our hands about like, you know, de dollarization and does the dollar
stop being the kind of glue that holds the financial system together and the and the global trade system together. This is like speed running the hell out of that. Yeah. It's like We've skipped the bit where the petro yuan is a thing and oil ship you know, flips to being priced in in the Chinese currency and gone straight to saying, Sod it, do it in crypto, what's the worst that can happen?
I was actually surprised that they didn't say and we will take our tolls in Rem M B. I would have expected that is what they would say. But and I asked people that question yesterday and they told me actually Ramem B isn't all that useful i in to do the kind of large transactions Iran is going to be able to do. So yeah, I I think you're exactly right. All crises accelerate changes that were going slowly anyway.
I mean maybe I don't know, we live in the world's most ridiculous timeline. Maybe they'll start doing it in like Melania coin or something and and At this stage you have to open your mind to some pretty blue sky thinking about how this might pan.
No, it's like chocolate bars. Diamonds.
All bets are off, but heed our words boys and girls listening. We are not going back to February the 27th. A lot of stuff has changed and this is what So we will come back to you in just one second with
🎵 Music
Today's markets move fast. Get the insights you need in ten minutes with the Barclays Brief, a new podcast from Barclays Investments. Through sharp dialogue and scenario-based analysis, our leading experts analyze keynote. So, whether you're managing a portfolio or leading a business, the Barclays Brief Podcast can help you make smarter decisions today. Stay sharp. Stay briefed. Find Barclays Brief wherever you get your podcasts.
¶ Long Short: Bank Earnings & Anti-Maxing
Okie doke, it's time for long short, that part of the show where we go long a thing we love or short a thing we hate. Rob, what you got?
I'm gonna go ahead and get long uh bank earnings. Goldman Sachs reports on Monday, all the other biggies follow merrily after. And say what you will about war and chaos. It's great for the trading desk. So I'm triggering some really nice numbers out of the Wall Street bond and equity desks. So that will give us something to be cheerful about in that our friends will get big bonuses and take us out to dinner.
Oh, wouldn't that be beautiful? I'm sure that will really raise global spirits. I am
Yeah.
Hooray I am short friction maxing. Friction. The Washington Post writes to inform us that we should introduce minor inconveniences into our daily lives to improve our cognitive function. Uh apparently getting AIs to everything for you makes your brains go all smooth and bad and instead you should do things to challenge yourself, to which I say get stuff.
Well, I you know, it's like turning off the GPS would be an example. Like apparently that is making us all dumber. It's like we used to remember how to get places and now if you turn off the GPS we just like sit in the driveway staring at the tree in front of our house until something happens.
But like some of these things that the Washington Post says we should do to keep our brains alive include making dinner like two or three times a week rather than ordering in. Like that's just called like being alive. Like there's no need for this maxing business. Like there's
It's ridiculous.
But you should do puzzles. See a friend in person and don't look up the answers to things.
Human maxim.
I kind of don't object as such, but this whole maxing thing. really grinds my gears. It's highly irritating. And also, life is already highly annoying. Thank you very much. Washington Post. So we don't need any more things to make our lives worse. Speaking of making your lives worse, we will be back in your ears on Tuesday, so listen up then.
Unhedged is produced by Jake Harper and edited by Brian Erstadt. Our executive producer is Jacob Goldstein. Cheryl Brumley is the FT's global head of audio. Special thanks to Laura Clark, Alistair Mackey, Greta Cohn and Natalie Sadler. FT Premium subscribers can get the Unhedged newsletter for free, and a 30-day free trial is available to everyone else. Just go to FT.com/slash unhedged offer. I'm Katie Martin. Thanks for listening.
🎵 Music
I got an email the other day saying that at the start of Long Short I didn't say Okie doke. It's time for Long Short and someone said, Oh, you didn't say Okie doke. So I have to go back to Okie doke. Okie dokie.