General Market News

Rising oil-driven inflation concerns are delaying expectations for Fed rate cuts, but the 10-year Treasury real yield has risen 43 basis points since late February, signaling a 'higher-for-longer' repricing driven by inflation rather than economic growth concerns. The real yield remains a key indicator to watch for signs of deteriorating economic outlook or flight-to-safety behavior.

• The 10-year Treasury real yield has increased 43 basis points since the conflict with Iran began in late February, reflecting higher-for-longer rate expectations without increased macro uncertainty
• The Fed faces a policy dilemma where rate cuts could fuel inflation while rate hikes could damage economic growth
• A significant fall in real yields would signal investor concerns about future economic growth and a flight to safety, but current rising yields do not yet indicate growth risks

The Strait of Hormuz remains largely closed to commercial shipping despite President Trump's ceasefire extension with Iran, with only about six ships transiting daily compared to over 100 before the conflict. Iran continues controlling traffic and attacking unauthorized vessels while the U.S. maintains its blockade of Iranian ports. The disruption has caused what's described as the largest oil supply disruption in history, affecting 20% of global crude supplies.

• Daily ship traffic through the strait remains at only 6 vessels compared to 100+ ships before the war, with Iran's Revolutionary Guard seizing ships and firing on vessels attempting 'unauthorized' crossings
• The security situation remains dangerous with multiple attacks this week, including Iranian forces firing on cargo and container ships, causing heavy damage
• Oil supply recovery will be slow, with flows not expected to reach 90% of pre-war levels until July, and processed products taking up to two additional months to reach refineries globally

BlackRock's investment team is recommending investors buy into AI-related companies as the 'AI trade' regains momentum in 2026. The asset manager sees the AI investment theme broadening beyond U.S. tech giants to emerging markets like South Korea and Taiwan. This shift comes as the Nasdaq Composite touched new highs and tech valuations recovered from first-quarter lows driven by geopolitical concerns.

• Technology stock valuations, especially AI-exposed names, fell to multi-year lows in March but have since rebounded as investor sentiment returns to the AI theme
• The AI trade is expanding beyond the Magnificent 7 U.S. tech companies to include semiconductor suppliers, datacenter builders, and Asian markets like South Korea and Taiwan
• Major AI investments continue with Amazon committing up to $25 billion to Anthropic, while Tesla prepares to report earnings with focus on its transition toward AI and robotics

U.S. stocks and bonds suffered significant losses in March 2025 as conflict with Iran closed the Strait of Hormuz, spiking oil prices and raising inflation concerns. The S&P 500 posted its worst monthly performance since 2022, while bond yields surged to 4.44% and the market completely priced out Federal Reserve rate cuts for 2025. International markets were particularly hard hit due to greater dependence on Middle Eastern oil supplies.

• Oil prices spiked as the Strait of Hormuz closure cut off roughly 20% of global oil supply, causing U.S. retail gasoline prices to increase by approximately $1 per gallon and hitting international markets harder than domestic ones
• The 10-year U.S. Treasury yield jumped from below 4% in late February to a 2025 high of 4.44% on March 27, with the market shifting from pricing two rate cuts to pricing zero cuts in 2025 based on inflation concerns
• Economic data showed mixed signals with payrolls falling 92,000 in February (versus expectations of 55,000 jobs added), unemployment rising to 4.4%, and Q4 2025 GDP revised sharply lower to just 0.7% annualized growth

The CBOE Volatility Index (VIX) fell to approximately 19, down 2.5%, marking its calmest level since March as President Trump extended the Iran ceasefire indefinitely. The decline signals normalized fear levels and returning risk appetite, with equity markets rallying across the board and small-cap stocks outperforming large-caps.

• The VIX has dropped nearly 30% over the past month, falling from a 12-month high above 31 in late March to below 20, with SPY up 0.73%, QQQ up 0.85%, and IWM gaining 0.94% on the session
• Small-cap Russell 2000 (IWM) has recovered 13% over the past month, outpacing large-caps and signaling genuine risk appetite rather than defensive rotation into mega-cap stocks
• Trump's open-ended ceasefire extension with Iran removed immediate geopolitical concerns, though any breakdown in negotiations could quickly push the VIX back toward 22

Shares of business development companies (BDCs), which are publicly traded private credit lenders, are trading at their steepest discounts in over five years. The median price-to-net asset value ratio hit roughly 0.74 in March 2025, implying a 26% discount, the widest since October 2020. Investor concerns center on whether reported valuations accurately reflect credit market strains and exposures to vulnerable sectors like software.

• BDCs use fair-value estimates and internal models to value portfolios, raising skepticism that net asset values may overstate true holdings as these methods can lag shifts in credit conditions
• Redemption pressures are mounting, with some non-traded BDCs like Barings Private Credit Corp. reporting oversubscribed tender offers, highlighting liquidity constraints in the private credit market
• BDCs with material software sector exposure have faced increased scrutiny amid concerns about potential disruption from artificial intelligence

US stock indices rallied on Wednesday after President Trump extended a ceasefire with Iran following requests from Pakistani mediators, despite ongoing regional tensions. The Dow Jones rose 417 points (0.85%), while the S&P 500 and Nasdaq gained 0.67% and 0.72% respectively. Strong corporate earnings and AI optimism provided additional support, though oil near $100 per barrel and unresolved Iran negotiations pose continued risks.

• Trump extended the Iran ceasefire citing 'seriously fractured' Iranian leadership, but tensions remain with Iran seizing ships in the Strait of Hormuz and US naval blockade still in place
• S&P 500 earnings estimates for 2026-27 have risen, with strong reports from Boeing (smaller loss than expected) and Adobe (announced $25 billion AI partnership with AWS)
• Oil prices near $100 per barrel raise inflation concerns that could complicate Federal Reserve policy, while crypto-linked stocks surged on improved risk appetite (Coinbase +4.65%, Strategy +7.4%)