Markets in Flux as Iran War Drags On

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Chief Investment Strategist or for the world for Mr. Fank and BlackRock this morning. Waley you're out on LinkedIn. Pitch LinkedIn. Okay, you want to join LinkedIn folks for no other reason to watch Waley of BlackRock and Yuri and Timmer at Fidelity. And I'll mention Mark Haynes as well at Pengea in Washington. Waley this chart is spectacular on the emotion evaluation energy up versus earnings or technology continues to win. Whatever the war outcome is on July 4th technology is going to continue to win, right? Well, this is a sentiment emotional market. It's not a fundamental market, the chart that you refer to. Tom shows energy sector is the best performing, not surprisingly so far this year, but in terms of earnings, it's the worst in terms of earnings delivery, but it doesn't matter when markets are repricing risk premier. And by the way, it's repricing risk premier in the extremely, extremely choppy way so far this week. It's just the latest evidence that we cannot predict the blow by blow in terms of announcements, which is why directionally we're flattening exposure to equities. Is that suggesting way that maybe these markets are maybe too sanguine about the risk opposed by perhaps higher energy prices for longer? I would say two things. First is that yes, there is a disconnect between energy market that is pricing in doable disruption and broader risk assets, you look at US aquedies that's just down I think 4% from the beginning of the conflict. So there is definitely a disconnect. And the second thing I would say is that I've spoken to a lot of investors the last three weeks and lots of clients globally as well. There are really just two ways to invest in and navigate this market. The first one is directionally and the second one is thematically. So we're flattening exposure directionally because in the near term, it's just so choppy reacting to headlines but thematically as a result of events in the Middle East, every single company, every single government globally, they are going to think even harder about supply chain resilience, even harder about energy independence and those are the themes that we're going to lean into. So, Walea, are there certain sectors here that even though you're kind of taking down your risk appetite that thematically is it defenses, it infrastructure, is that a place to hide or maybe try to take advantage of this uncertainty? Absolutely. So the adjustment that we have made is to bring broad US aquedies from modest overweight to neutral recognizing that there is a disconnect between the energy market pricing and where risk assets are. And then we're also leaning into, like we up to European government bond from the end from neutral to modest overweight and recognizing government bonds broadly, the front end, they have gone through significant reprising, really notable. So there is a bit of a patch buffer to be to be built, but you talked about infrastructure, defense and energy. These are the themes that we want to lean into. Walea, with us when we continue, with our, she's with BlackRock, his global chief investment at this strategy, pile me here because I'm sick of Duke. And we'll talk about that in a moment, is the University of Cambridge in March madness? No, I don't think they are. They're not in there, okay. Walea, over Duke, which is going to win the tournament according to Paul Sweeney, there's a professor, Cameron Harvey, Cam Harvey, and he is definitive on the idea that bonds lead stocks, that the price dynamics of bonds are out front of what equities will do. Do you buy that within your mathematical work at Cambridge? I think it depends on lead by how much, right? Like it's not unusual that bond markets price in one version of the world and equity market pricing and not a version of the world. This is why we say that bond investors are being more bearish as a personality than equity investors. But jokes aside, I would say that we have seen meaningful, meaningful repricing in bond markets, both on the front end and also to some extent on the backhand, you look at concerns around inflation, concerns around fiscal, and they have yet to be reflected in our qualities. And this is the distance that we are, we are, we're trying to take advantage of and link into with the adjustments that we have made. We've got a radar like no one out there way, Lee, in your visits with BlackRock clients. What not what are they thinking what their emotion is, but what are they doing in a reallocation amid war? Well, the first observation I would make is that actually there has been some continued momentum into US assets. So re-grader was just sharing this. So re-grader was just, can you hear me? Sorry, there is a, no, I'm not. Can you hear me? Somebody is calling me, Sean Balvan is calling me. So re-grader was just sharing this flow chart that shows that inflows into US assets across African bonds have been quite strong. And this is despite the fact that that flationary momentum has been building, right? And I think that has really been the reason behind why this market has been holding up reasonably well, even in the face of a broad supply disruption. So that's one observation I would make around flow. The second observation is that investors are not, meanfully, meanfully, kind of position for extreme scenarios yet because it takes time and also it takes huge kind of a, kind of a conviction to position for a totally different alternative scenarios. So there's a lot of discussions around kind of plan B, plan C, but meaningful overhaul of the scenarios I have yet to see coming through in my conversation with clients. We continue with the way Lee with BlackRock here as well. Marcus Teterade futures in negative 47 right now that VIX 27.54. In oil moving, we're going to get a 104, 103.44 and Brent crude up a solid 3.5%. Paul Sweeney with Wally of BlackRock. Wally 2025 was a really good year for global equity markets. The US did quite well, but a many non-US markets had even better. And maybe I don't know, not sure if that was the sell America trade or just because the dollar was weakened in 2025. How's your allocation geographically these days, US versus rest of the world? We think that over the longer term there is still space for US to continue to play a leading role if you just look at kind of the relative earnings momentum. But as I also said at the beginning of this interview, we have flattened over the very near term in terms of the exposure to actually directionally. And that means US, where flat, neutral, Europe, neutral. Japan, one neutral and broader emerging markets were neutral. And that is really recognizing that so far we haven't seen rangeable avalanche revactions that point to sustained pause to this broader supply disruption. But having said it, over the slightly longer term, we still expect the feedback mechanism from higher oil price to bind is just that the threshold that binds maybe more painful than it looked initially. But you mentioned Waley the modern disease. You say you're neutral here, neutral there, neutral everywhere. I think of Gina Martin Adams on this. Waley, the modern American financial media says neutral is go to cash. What is the trap of going to cash here if BlackRock says have courage in being neutral? Well, I would say that it's very important to be invested. Our CEO and chairman Larry just published his letter. Let me just pull up this key stat. So over time, staying investors has mattered far more than getting the timing right. Over the last two decades, every dollar invested in S&P 500 grew more than eightfold. Missed 10 best days. You would have earned less than half of that. So I think staying invested even in the face of geopolitical uncertainty is important. But neutral is our way to tighten risk exposure. But we're also very dynamic in looking to lean into thematic opportunities and looking to potentially dial up if we see signs of tangible actions. Paul, this is just so great. You and I, it's Mr. Fink, it's Lawrence Fink. Sure. For Waley, it's like share. It's just where are you exactly? We knew exactly who she is referring to. Again, before the Iran war started, the theme for most investors in most markets was AI. How are you playing AI these days because it's gone from being just, we're going to buy whoever's spending the most money to. Now we really need to think about, can generate a return on all this investment. That's absolutely right. And I think the infrastructure to build out layer is still very much well positioned at this point of AI transformation because it may take longer for the winners of the adoption face to emerge. And right now, so far, the narrative this year at least has focused a lot on the losers of the adoption face. So the big picture is that here today, we have seen focus shifting from AI winners to AI losers. If you think about the kind of software and the reasons for that is not entirely left field, right? Like we've been flagging that it takes time for KAPEC to then lead to new revenue generation. Markets can be impatient. And markets are periodically going to just question the return on investment of this investment of this KAPEC's spend. But the conviction in AI transformation has increased, not decreased. And if you look at multiples after the derating that we have seen so far this year, Max7, Nvidia, they are treating it close to the same levels that they were at the beginning of Chatticelli launch. So there are good value opportunities right now, given the derating and we continue to like it as a thing. Yeah, derating is priced down in the University of Cambridge, Shaq Paul forward to the summer of this year. Microsoft PE 22.7. Yeah. I did not know that. No, that's amazing. So, Wayne Lee, as you think about some of the software names that got sold off, I mean, how do you try to differentiate a winner and a loser on the software side because it seemed like for a while there, investors were just kind of selling everything. Yeah, it has been a bit of a discriminate sell of throwing a baby out the bath water, but there is huge room for dispersion and being selective. So retail software providers with little mold could be more vulnerable, whereas enterprise software providers with deep vertical integration that can actually benefit from AI integration and productivity boosted their better position. So I think this is really an environment for active stock selection and being very dynamic. Generous time, Wayne Lee. Thank you. Thank you so much for the perspective today. And again, I can't say enough folks about her commitment to informing the public out on LinkedIn. I'm really with BlackRock, their global chief investment strategist. Stay with us more from Bloomberg's surveillance coming up after this. When the rest of the markets slow down, the futures market keeps moving. The ETF markets volume and liquidity lessons after 4 p.m. Learn more at cmegrope.com/equityfutures. The news doesn't stop on the weekends. Context changes constantly. And now Bloomberg is the place to stay on top of it all. Hi, I'm David Gurra. 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Catch us live weekday afternoons from 7 to 10 a.m. Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube. Joining us right now, Mark Howard, Senior Multasus Specialist at BMP Paribah, under the category many talk, but others do. Mark Howard driving for band of parents. This is a charity you do every year in Isaki. Because pediatric cancer and what you're doing. When you see kids suffer and their family suffer, it is just incredibly heart wrenching. And so band of parents does this thing. Ad Madison Square Garden, we're old guys like I get to go out and whip around the ice and play a game of hockey. And do better than the Rangers last night with nine shots. It wasn't pretty. It wasn't pretty. But it's a tremendous cause. It brings people from across the country. They actually come to play from Chicago and from other places. To be on that Isaki, Madison Square Garden. So it's a wonderful charity. And the outcomes, the research that it supports at MSK and at other institutions actually leads to positive outcomes with kids with these rare cancers. Explain the uniqueness of memorial Sloan covering. Wow, answer. Just world class and very deep pockets and very creative. I've also been an active participant in cycle for survival, which you're probably familiar with a lot of organizations in New York do that as well. Which again, provides funds for MSK to do groundbreaking work, long tail work that requires consistent funding. But leads to really positive outcomes. Mark Hard, Barry Pather on cancer and pediatric cancer. We have a war. I guess the optimism is someday it will be over. Do you prepare now for the good news of an end of the war? I think you have to prepare for multiple outcomes, Tom. Clients I talked to and our trading desks are gaming out using real game theory to anticipate various outcomes because as we saw yesterday with an incredible whipsaw and we could see that tomorrow the next day, you have to be prepared for multiple scenarios. Because this is not like tariffs where a simple strike of the pen can reverse and you go back to close to where we started. The damage to infrastructure is going to take years to replace the damage to trust and the implications on global inflation are going to be here for a while. So I think you have to be prepared for better but not normal outcomes. But you also have to be prepared for weaker outcomes. We haven't seen the knock on to corporate profit expectations. I think we will see that in the months to come. So you have to prepare for both. So how are you positioning these days at BNP Parrybot? Multi-asset specialist. What asset are you guys focusing on these days or how are you positioning amongst the assets? That's a great question. I wish there was one silver bullet, one great asset but there is no one. I think diversification is how you prepare and deal with this adversity. There are also some asset classes that you might have ignored because they seem to little sleepy or perhaps less compelling but stand out now. Like mortgage. You know, the number two fixed income asset class category doesn't get a whole lot of commentary from time to time but it actually is a really compelling opportunity. How much bigger is the yield on a mortgage piece than a full-faith credit? Well, it depends. It varies, but it could be anywhere from 30 to 50 basis points. It's not a tremendous amount, but in terms of a store of value, a place of safety, where you get some extra spread is quite compelling, particularly at a time when treasuries have been kind of backing up aggressively until yesterday. Tom's been making the point that we're not for a ran. One of the bigger issues for global Wall Street and East markets to deal with is private credit and really how much of a risk that represents for investors. We know it's a $2 trillion dollar market Gary Gensner a couple days ago said, "Yeah, it's $2 trillion, but the global capital markets are 120 trillion." So put it into context. How do you guys think about that? Yeah, it's a great concern amongst investors right now. My colleague Calvin C, who you know was recently in Asia, in particular in Japan, and it was the number one question Calvin received from every client he visited in Japan. So it's not just a domestic concern. A lot of money has flown into the asset class, Paul. And so I think the question is not so much the systemic impact, because I think most people who have really thought it through don't see a systemic knock on, but rather they see a rotational effect. They see people halting their investments into what was a hot new category. And now we're seeing actually reversals people trying to put money out. It's a pause, important question folks. I don't think there's any other question more important right now for global Wall Street. Other than this war, Brent Crude right now, $101.73 up $1.79. And private credit in this, the people in the game saying, this is not a big deal. That's the summary. Everybody's radars up. I'm sorry, it's on the cover of Bloomberg, cover the FT and that. Boy, does it feel like 2006? Does it feel like 2006? We're getting there, Tom. We're, yeah, I think six is more accurate than perhaps, oh, eight. And but the on ramp is there. And if certain dominoes don't go the right way, absolutely, that's going to be a real problem. Story, can I do a story? You won't walk out of this studio. I mean, the St. Regis in Beijing, Dumpy Old Hotel before the fancy St. Regis, sitting on a chair, 06, 05, two bankers are giggling about whatever they're giggling about. I got the FTO, but in Gillian Tet is lecturing me on CDO squareds. So it was frozen in time that moment as I listened to this synthetic, unsynthetic derivatives. Why is this, Paul? Why is this any different? You tell me. I hope it is. So Mark, where's the risk in this market here, aside from the geopolitical risk here, what do you guys maybe staying away from? Maybe hedging? What are those conversations like? Well, I think inflation is a risk. Okay. And you know, you had a great speaker on last week, I believe it was, Lupin Rahman. It was great. She's great. She's a great boiler. And she frames some of the important, not so obvious factors around the sovereign debt markets in the developed markets, not just in emerging markets. And I think people take for granted, there's a view that a Trump put exists. There's also a view that the Fed can come to the rescue, that fiscal policy can come to the rescue. And moving on, there's just saying, that's not the case. You can't assume that there's going to be fiscal largest, that there's going to be monetary backstops the way there have been in the past because the degrees of freedom, the flexibility just aren't there. Alexis, what was the shopping show years ago on the channel? QVC? QVC, QVC Fox is Lupin Rahman's new book, the Soppin debt investor. She just happened to him. I am if she was in the other day, this is the best 200 page non-math walkthrough of Mark Howard's world. We thank you and at QVC it's yours for 16. There you go. So Mark, we heard from the Fed recently, what do you think the Fed's thinking about these days? Because it looks like the, if you look at the WIRP function, it seems like the market is no idea. Cut rates, raise rates, kind of, it looks like the market's right now is just pricing in nothing for now. Yeah, it's a really difficult time to be a central banker and not just here, but around the world, particularly in places where inflation is the primary or only mandate. At least here we've got both growth and inflation as a mandate. So they're looking at everything. And as you know, with supply shock, the first order is usually on inflation, the second order is on growth. So they're trying to calibrate the severity and the duration of both the shock and then the knock on to growth. And it's a very impressive thing because you have other vectors such as deficits spending, such as trade, etc. So it's a very complex calculus. Mark Howard, thank you so much. BMP Paribas. Stay with us more from Bloomberg Surveillance coming up after this. Eastern. One of the great joys of Bloomberg is the absolute depth of the academics backing up the news and analysis that we do. Jennifer Welch has chiefed you economics analysts for Bloomberg economics out of the Bucknell East Asian studies combined with Eric Lovkin. Jennifer, I want to start there. Where is China in this war debate? You've done a lot of work on that, including working Beijing. Where do you see China fitting in to the uncertainties we face with President Trump, with Mr. Net Nyaahu and with Iran? I think China is playing a balancing act right now. It's also playing the long game. It is being careful to maintain its rhetorical support for Iran, which has a strategic partnership with Beijing. A pack of formal pack sign in 2021. But it is not going so far as to provide Iran material support in this war, at least as far as we can tell. In part, because China is worried about balancing its ties to other goal states who it also sees important partners in the region. So I think what we're likely to see from Beijing is this continued calibrated approach of. We're taking Iran, but only so far. What is the distinction of that versus Mr. Putin, Moscow and Russia? Moscow is going in a little bit further tilts with Iran. We're seeing reports that Russia is, for example, providing targeting intelligence and other intelligence sharing with Iran to support its actual military activity against the US and Israel. That is certainly further than where China has been willing to go at a date. But I think even for Russia, we're unlikely to see Russia get directly involved in this spray. It remains very much focused on the war in Ukraine. And it is also a little bit leery of doing anything that would draw Washington's iron, maybe push the United States to either support Ukraine more deeply or to heightened sanctions on Russia. Jennifer, the market's very uncertain as to the status of what's going on in Iran, particularly as it relates to negotiations yesterday, President Trump issued via social media that talks were in fact taking place. Yet we've not really heard anything confirming that from the other side. Do you have any insight as to what's actually going on? Yeah, we're actually hearing directly contradictory things from Iran, which is flat out denying that talks are happening, including denying this Axia report regarding specific talks that were happening between Steve Wittkov, Jared Kushner, and Ron's parliament speaker with the Iranian parliament speaker coming out on X and thing, he is not involved in those negotiations. I think to be clear, we should recognize that both sides have an interest in putting out different language on this, that the US wants to reassure markets, and Iranian officials probably don't want to admit negotiating with the United States while still under attack. That being said, the United States does seem to be pursuing negotiations. Talks might be happening through back channels or indirectly through mediators. There does seem to be some sort of communication occurring, but I think the larger question is, does that mean we're any closer to a ceasefire? And at this stage, we would say no. Both sides seem to be very far apart on what the terms of that would be. And so we see the odds of a full resolution of this conflict in the near term is rather unlikely. Instead, what we might see is either further escalation as the United States is considering deploying additional forces to the region or a dip into a lower intensity conflict that could still pose major risks to the global energy market. Jennifer, is there a sense that there's a possibility or probability or likelihood that President Trump may just wake up someday and say, "I'm bored of all this," and say we've achieved our objectives and just walk away. Is that in the cards at all? It does seem, and it has seemed for at least two weeks now that President Trump is looking for an exit ramp. He's referred to the war as having already achieved many of his objectives as being very complete and he did an end to it would come very soon. I think that being said, the fact that we're still continuing to see US strikes on Iran suggests it hasn't achieved or he doesn't feel he has the leverage of the terms that he's looking for to end this war. And I think in particular what he's concerned about is reopening her moves before he can fully back away. Jennifer, one final question. It's outside your remit, but you're more than qualified to handle this. I'm looking at yields higher in many different flavors, including the inflation adjusted yield, the cost of capital, if you will. Does Jennifer Welch believe in markets telling politics what to do? Do you believe it had your Denny's bond vigilantes? Well, I would say this. I think President Trump is uniquely quite sensitive to markets and that's part of what we've seen. in terms of his rhetoric shifting over the last week or two. And in particular, his message yesterday morning when markets were about to open, that he was seeking talks at the run, kind of backing away from his prior threat to strike, running energy facilities. That seemed very much directed at shaping markets as they were opening in the United States. - It's great, Prieve. Jennifer Walsh, hugely valuable. Thank you so much. Chiefs you, economics, analysts for Bloomberg economics. (upbeat music) Stay with us more from Bloomberg's surveillance coming up after this. - I'm Francine Lacqua, an award-winning journalist, and I've got a new podcast. Leaders was Francine Lacqua from Bloomberg Podcasts. I've interviewed everyone from heads of state to fashion icons about the news of the moment, but I've always been curious who are these people as leaders. I don't think there's one right way to be a leader. - Make decisions. A poor decision is always better than no decision. Listen to new episodes every other Monday. Follow leaders with Francine Lacqua wherever you get your podcasts. (upbeat music) - You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from seven to 10 a.m. Eastern. - Listen on Apple CarPlay and Android Auto with the Bloomberg Business App or watch us live on YouTube. - Aaron Camer-Jones is in studio right now at CoFounder CEO, clear harbor asset management. - On the moment at hand, I understand this is now uncertainty and not measurable risk. If I stand aside, what do I stand aside into cash? - Well, it's been challenging, Tom. This all began the weekend of February 28th and there's been no place to hide. Gold is off $1,000 in ounce. Bonds are higher and yield lower in price by what, 30 to 50 basis points. And equities are off somewhat measurably. So there's been a very, you know, unless you were just sort of long the dollar and maybe your triple-levard cash, there's very, very difficult place to be right now. - What do you do with duration in the fixed income space and all your work at City Group over the years in RBC? I mean, durations are tool, right? Explain that to people that don't get convexity. - Right, I mean, clearly if you're of the view in your long duration, your for every basis point move in the bond market as you move out the duration curve, your rates move lower, you're capturing oftentimes multiples of the upside relative to when rates move lower in the front end of the curve. By about four or five times and tens relative to twos and about 10 times and 30s relative to twos. So it can work in your favor, but in an environment like the one we've been in over the last month where rates have gone up, if you've been just long the long bond, you would have clearly underperformed relative to just being long, let's say the two year or the 10 year. My view on duration at this point is really a question of where are we on inflation in the long run. If you look at 10 year break-events, they're about 235 this morning. The 10 year is about 435. So, you know, we have a month ago, break-events were about five basis points lower. So really unchanged in terms of long-term inflation expectations. Stocks, bonds, commodities, alternatives. What's your asset allocation look today versus maybe four or five weeks ago? Anything changed? - Not significantly. I would just highlight that we own all major asset classes across many of our client portfolios. Even you mentioned alternatives. Alternatives, we try to own the areas within the alternative segment that are less correlated, negatively correlated, or non-correlated to long only equities and long only fixed income. And I think that's really held in there quite well for us. We're not owning just, you know, sort of long only private equity, long only private credit. That's highly correlated to both equities and high yield in the public markets. That doesn't provide the diversification that we're looking for in alternatives. Within equities, clearly the value trade has been on its heels month to date. But if you look over the course of just year to date or even last year, still the value orientation has generally worked, both home and abroad. The Russell's still up fractionally on the year, equi-desson-piece up fractionally on the year. The rest of the market in the US is down on the year. Japan's up on the year, EM's up on the year. And that's a very value-oriented sector or allocation there. We saw in 2025 as well as the US markets did. A lot of markets outside of the US did even better. In part, maybe in large part due to the weakening dollar in 2025. How do you think about US versus the rest of the world in 2026? It's tricky. I think the real question is, duration of this war in Iran and the degree to which that's going to potentially keep the dollar sort of buoyant relative to possible weakening if there's an off-ramp or if there's a succession of things there. How do you look at shocks? I just had an email come in. Thank you so much, folks, for all the information from listeners. And it's amazing what you can do with this AI. You can convert a leader per pound or a pence into a US gallon by just typing in a couple words. Wow. I spent a cool full-ass or slide rule on the thing that I'd not too long ago. In London, $8.78 per gallon. In Hong Kong with Laura Davidson, $4.13, $15 per gallon. These shocks at some point have to affect all. The bond lift we saw Friday and in the Monday, I'm going to call it a 48-hour structural price down yield up and presidential reaction. Is that what moved the president to make those statements? Well, I have to see. Is this a head fake for strategic reasons? Are they bringing troops in from Asia to initiate more of a ground operation? Or was yesterday's overture at about 7, 10 in the morning a real off ramp that indicates the beginning of the end of things? And of course, we do not know. The public probably knows about 20% of what's happened. But in all your years, the bond vigilantes-- I mean, they're-- you're Denny's right. They're for real. Yeah. But if you look at the bond market, too, Tom Credit Spreds have widened what investment grade five-year CDS is about 15, 20 basis points wider month today. If you look at high yield, five-year, high yield CDS is probably about 40 to 50 basis points wider. I haven't seen a major move. The two of you had an outbeer. I got a 495, 30-year. Yeah. And I'm watching the 10-year real yield is 2.02%. That was 180, 190. Everything is a pulse-sweeny. Everything's creeped up, right? Right. And absolutely. If you look at the warp function, the market's pulled back on any rate cut here. What did you hear from the Fed last week? And do you think that's being-- to what extent is it being impacted by what's going on in Iran? I think it's interesting. Clearly, the Fed is in a sort of a period of where there's a real predicament, right? They don't want to be accused of what they were accused of in 2021 into '22, which is their relate to the game. Inflation was rising. Headline went to 9.1%. They reacted late. There's a lot of criticism there. But I think when you look at the source of this inflation pressure and the duration of it, which is energy and supply, I think the Fed is being prudent remaining on hold here. And in fact, I would argue that if the duration of this is shorter, and perhaps even if it's longer, if growth is impacted negatively, the Fed's going to be more willing to cut than the raise rates going forward. Aaron Cannon, with us, we continue with Clear Harbor asset management this morning. I'm fixed income. I'm going to suggest for equity participants, right now is a good time to watch all the movements within the bond market. I mean, I rarely do this. It's just a bunch of numbers. But right now, it matters. 3.88% in the two year. Paul Sweeney noted 4% even on the two year a cup of coffee, a creeping up by three basis points. A 4.37 on the 10 year. And a 30 year bond, I'm sorry, 4.95% close to 5% yield 4.95% as well. Paul Sweeney, with Aaron Cannon. We lose fact of some of these other news items in the marketplace. One of them is-- it's an election year. And historically, that introduces a whole level of volatility to the markets outside of some core fundamentals, like earnings and interest rates and so on and so forth. How do you guys position for that kind of volatility? Or do you try to look past it? We do try to look beyond it. We do ask ourselves, how about the fiscal sort of momentum coming into an election year with a big beautiful bill prior to this war? We were sort of constructive, right? You had the impetus for consumers to consume more with potential for paychecks coming in. You had no tax on tips, no tax on overtime. You had the ability to deduct your expenditures at the corporate level by 100% and year one. That was going to accelerate a lot of economic activity. That is accelerating a lot of economic activity. We are very constructive on that theme, but it's being obviously the crosswind of this moment is problematic. I look at the makeup here of equity listening to the bond market. You say spreads have backed up. What if this continues, this fragility continues? I'm going to be up $3 on Brent Crude here in a moment. I mean, what's the history here of what happens to equity markets when spreads widen? Well, I mean, clearly there's a correlation. if we see high yield spreads, you know, move in a pronounced way upward, that probably means that volatility index has spiked and equities are lower. And when fall spikes, we know what investors and hedge fund managers and some institutions do, they reduce their risk, they reduce their exposure. And so that's what we would anticipate. If this is a longer duration occurrence in Iran and not, you know, something that's just going to settle down over the next, let's call it two to four weeks, we would anticipate the VIX to probably shoot about well above 30. And then you would have risk taking come off. We haven't seen the VIX above 30 months today, which is sort of interesting almost, but not not quite. Aaron, thank you so much for the generous time this morning. Aaron Kenan with us here on fixed income, of course, is a measurement of the rest of the market with clear harbor asset management. This is the Bloomberg Surveillance Podcast, available on Apple, Spotify and anywhere else you get your podcasts. Listen live each weekday, 7 to 10 a.m. Eastern on Bloomberg.com, the iHeartRadio app, tune in and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal. I'm Carol Maser. And I'm Tim Steneveck inviting you to join us for the Bloomberg Business Week daily podcast. Now every day we are bringing you reporting from the magazine that helps global leaders stay ahead. We've got insight on the people, the companies and trends that are shaping today's complex economy. That's right, Tim, we're all over global business, finance, tech news all as it is happening in real time and we've got complete coverage of the U.S. market clothes. 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