“In war, the first casualty is truth.”
Aeschylus
We waited one more day to publish this update.
And the reason is simple. We wanted more clarity… more color… on the evolving negotiations between American and Iranian authorities regarding the current conflict. In moments like this, the sequence of events matters just as much as the events themselves.
As you know, over the past few weeks we have been expecting some form of a TACO from the Trump administration. And, to a certain extent, it has already been delivered.
The two-week ceasefire, announced just as the S&P 500 was threatening to break down and long-term U.S. government bond yields were beginning to push higher, was not coincidental.
It was a response to tightening financial conditions and rising political pressure.
And markets reacted accordingly. Risk assets rebounded sharply, volatility compressed, and the immediate downside pressure eased.
That is what a TACO looks like in practice.
But as we sit here on Sunday afternoon, the situation remains unresolved.
There is still no durable agreement on the table.
And the Strait of Hormuz remains the central issue, not just for energy markets, but for the global economy more broadly. In other words, while the initial pressure valve has been released… the system has not yet been stabilized.
Which brings us to the current setup.
We believe this week’s price action will be particularly telling. Markets now have to digest a more complex reality: a partial de-escalation without a lasting resolution...
The key question is whether the recent rebound was the beginning of a more durable move… or simply a reflex rally within a still fragile structure. From a technical perspective, the levels just below the S&P 500 now matter even more. If they hold, the market may continue to build on the recent recovery. If they fail, we could quickly find ourselves back in a much more disorderly environment.
We are watching this closely.
Because beyond the short-term volatility, what matters most is that our pipeline of opportunities continues to deepen. Dislocations like these rarely come alone. They tend to cluster. And when they do, they create the kind of setups that define entire vintages of returns.
Stay close to our work.
Good investing!
Vasco Marques de Freitas, CFA, CMT
“The greatest danger in times of turbulence is not the turbulence...
it is to act with yesterday’s logic.”
Peter Drucker
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