Domestic Politics
Stay overweight gilts despite renewed political turmoil in the UK.
The US-Iran deal offers temporary relief from oil supply risk, but both Hormuz and trade tensions could revive in 2027.
The US-China trade truce is getting bigger and better, but a grand strategic bargain on Iran and Taiwan is not happening.
Aggregate Senate betting market pricing appears too pessimistic on Democrats relative to state-level odds and early polling, suggesting a potential mispricing and a relatively sanguine attitude towards the still-unresolved conflict in Iran and its aftermath.
Peru is well established to elect a pro-market government in the June 7 run-off, with institutional constraints limiting left-tail policy risks. We will go long Peruvian assets when Hormuz volatility subsides.
Markets may be underpricing a bifurcated political outcome. Unless the Iran deescalation succeeds, the delayed economic fallout from the energy shock could materially worsen Republican prospects and raise the probability of a Democratic Senate victory.