The changing market stew... Inflation numbers are heading higher... The irony of Fed and interest-rate expectations... Kevin Warsh is in Washington... Sentiment changed quickly... Resembling the early days...
War... tariffs... and the 'next thing'...
In a nearly 40-minute phone conversation broadcast live on CNBC this morning, President Donald Trump answered every question a trio of hosts asked, and then some...
On negotiations with Iran, Trump said the U.S. will "end up with a great deal," but also "expects to be bombing" Iran if a deal isn't reached.
Later, after today's market close, Trump said that he would "extend the Ceasefire" so the "seriously fractured" government of Iran could "come up with a unified proposal" in negotiations, presumably about key subjects like the nation's nuclear ambitions.
This morning, the president also briefly discussed tariffs and expressed frustration that Uncle Sam is now on the hook for $165 billion in refunds since the Supreme Court ruled his tariff policy illegal earlier this year.
Trump also addressed the "next thing," as we've described it over the past month or so – high(er) inflation (again) – with the war in Iran raising energy prices.
The Cleveland Federal Reserve is now projecting a 3.6% headline inflation rate for April and a roughly 5% rate for the second quarter. The former would be the highest headline monthly number since August 2023.
As our Dr. David "Doc" Eifrig wrote in the latest issue of his Income Intelligence newsletter...
One hopes the conflict in the Middle East will soon be over. But expect a continued inflationary environment in the months ahead.
The issue is multifold...
While most folks are focused on the price at the gas pump, there are also outstanding questions about future global oil and gas supply.
The last of pre-war Persian Gulf oil has reached its destination, and only a small fraction of what would normally be 20% of global oil supply has moved since.
Even with a "ceasefire" in place, the U.S. will continue a "blockade" of the Strait of Hormuz… while at least part of the Iranian military also maintains it has control of the key passage. Meantime, oil shipments and hundreds of tankers are stalled as part of the battlefield. And emergency reserves aren't enough to fill the gaps without prices rising.
Plus, Qatar's critical liquefied natural gas facility, which accounts for at least 20% of global exports, isn't fully operational (and it likely won't be for years) because of Iranian attacks.
So we also have to consider what continued higher prices for consumers and producers might mean for the overall economy... Fed policy... and the market.
Speaking of the Fed...
For nearly two years, the market has been expecting a lower-interest-rate environment once current Fed Chair Jerome Powell's term expires this May.
Ironically, now that Trump's nominee, Kevin Warsh, is poised to take over, the market isn't banking on rate cuts anymore... at least not until sometime in 2027 because of the resurgence of war-related inflation.
Trump has publicly criticized Powell for not lowering rates since his 2024 election. So on CNBC this morning, journalist Becky Quick asked the president, "Will you be disappointed if your new Fed Chair, if he gets approved, doesn't cut rates right away?"
"I would," Trump said. Though he later added some qualifiers: 1) that he believes interest-rate hikes do help stop inflation, but 2) the U.S. "should have the lowest interest rate in the world." That last part is an important detail when it comes to his Fed criticism.
In the meantime, Warsh testified today at Capitol Hill ahead of the Congressional vote on his nomination. Among other things, he said he won't be Trump's "sock puppet" for policy, as Senator Elizabeth Warren said he would, and that Trump never asked him for assurances that he would lower rates.
Like spring returning, the Fed/White House/Congress gamesmanship begins anew.
Warsh also suggested that there are too many Fed post-policy meeting press conferences. And he also seemed interested in cutting back on the amount of guidance the central bank and its governors give publicly. He said...
Too many Fed officials, past and present, opine in advance about where they think interest rates should be next meeting, next quarter and next year. I think that's quite unhelpful.
If this indicates there will be less "opining" from the Fed under Warsh, then "reading between the lines" of economic data, politics, and policy (which we try to do here) might become even more valuable. Fed "surprises" could also become more frequent.
That was quick...
During the TV interview this morning, Trump also said he was surprised the stock market didn't lose more... and that oil prices hadn't moved higher. That could end up being a warning of sorts...
While market "fear" has dissipated over the past two weeks, and enough investors have been looking past the short-term war risks to deliver a "V shaped" recovery in the indexes, sentiment has also now probably – too quickly – turned to "greed."
As Ten Stock Trader editor Greg Diamond wrote to his subscribers today...
The war in Iran resulted in extreme fear just a few weeks ago. Now there's extreme bullishness among investors. Again, all of this is happening in a very short span.
Many hedge funds had to cover shorts and chase this market higher.
Today, we can see an extreme on the other end of the spectrum. Here's the CBOE equity put/call ratio, which measures the amount of puts versus calls traded on the CBOE exchange.
As Greg points out with the red arrow in the chart above (click here to enlarge), the put/call ratio has dropped to around 0.4. In previous instances, "a low in this ratio almost always marks some type of market top." The last time it happened was in January. As Greg wrote...
So we're back near this level again. Investors seem to think the war in Iran will end quickly, similar to what happened last year regarding tariffs. They may be wrong. Also, private-credit stress is building... President Donald Trump is set to meet with Chinese President Xi Jinping to talk trade (again) next month... And the Federal Reserve meeting next week is unlikely to have positive news around oil and inflation constraints.
These are of course the "whys" behind a potential market drawdown. But if we take into account the extreme bullish positioning of calls versus puts shown in the chart above, it's bad news... The market almost always hurts the most people when everyone is on the same side of the boat.
In this case, a steep decline would do just that.
So, yes, there are opportunities to make long-term investments amid war-related volatility (as we discussed yesterday). But, as we write today, the market may have moved past the associated risks a little too quickly.
If you're anticipating the short-term surge in U.S. stocks to continue, you may want to temper those expectations.
Today brought some possible early signs of a cooldown as the market resembled the early days of the Iran war.
The major U.S. stock indexes were all lower, with the U.S. benchmark S&P 500 Index down 0.6%, and only the energy sector up significantly. Volatility also picked up with the CBOE Volatility Index around 20. And oil futures gained around 5% as the world waits to see what happens next in the Middle East.
New 52-week highs (as of 4/20/26): Arista Networks (ANET), Alpha Architect 1-3 Month Box Fund (BOXX), Cisco Systems (CSCO), Emcor (EME), EnerSys (ENS), Hilton Worldwide (HLT), Hubbell (HUBB), iShares Convertible Bond Fund (ICVT), LXP Industrial Trust (LXP), Nucor (NUE), Invesco WilderHill Clean Energy Fund (PBW), Public Storage (PSA), Ryder System (R), Roku (ROKU), Twist Bioscience (TWST), Texas Instruments (TXN), Vale (VALE), and State Street SPDR S&P Semiconductor Fund (XSD).
A quiet mailbag today... What's on your mind? As always, e-mail us at feedback@stansberryresearch.com.
All the best,
Corey McLaughlin
Baltimore, Maryland
April 21, 2026
