Despite the interim US-Iran deal and a considerable fall in oil prices, risk assets have barely moved, with the S&P 500 still beneath its record high from early June and credit spreads widening.<\/p>\n
The puzzle reflects four competing forces, Deutsche Bank analyst Henry Allen argues.<\/p>\n
First, the Federal Reserve’s hawkish pivot last week has pushed up real yields, counteracting the initial relief from the geopolitical breakthrough.<\/p>\n
The US 10-year real yield closed at 2.22% on Wednesday after the Fed decision, its highest in over a year, whilst Germany’s equivalent hit a five-month high of 0.89%.<\/p>\n
Second, markets had already priced in a temporary resolution to the conflict through oil futures curves, limiting the upside potential once a deal was actually reached.<\/p>\n
Third, risk assets staged a historically powerful rally over April and May, with the S&P 500 gaining 16% in two months, a move not seen since World War II except in post-recession bouncebacks or just before the 1987 Black Monday crash.<\/p>\n
The CAPE valuation ratio has now reached its highest level since 2000, the dot-com bubble era.<\/p>\n
Fourth, structural supply constraints remain unresolved despite the interim agreement. Tanker traffic through the Strait of Hormuz, which carried 20\u201325% of global oil before the conflict, remains a fraction of pre-crisis levels. Brent crude is still around 30% above its January level despite the deal.<\/p>\n
Deutsche Bank tempers concerns about near-term weakness, noting that stronger-than-expected growth and resilient labour market data underpin the Fed’s hawkish repricing.<\/p>\n
If Fed rate moves reflect upside growth surprises rather than deteriorating fundamentals, markets can weather the shift. Moreover, circuit breakers prevent the mechanical crash dynamics that defined 1987, and the year-to-date S&P 500 gain of 10% is far shallower than the 39% seen before Black Monday<\/p>\n","protected":false},"excerpt":{"rendered":"Despite the interim US-Iran deal and a considerable fall in oil prices, risk assets have barely moved, with…\n","protected":false},"author":2,"featured_media":505606,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[114,15516,3065,232455,85,232456,142930,46,13002],"class_list":["post-505605","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business","tag-business","tag-deutsche-bank","tag-fed","tag-fed-rate","tag-il","tag-initial-relief","tag-iran-deal","tag-israel","tag-the-federal-reserve"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/505605","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/comments?post=505605"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/505605\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media\/505606"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media?parent=505605"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/categories?post=505605"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/tags?post=505605"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}