Looking across the valley

Oil supply disruptions in the Strait of Hormuz and a sharp run-up in crude prices have rattled markets, lifting volatility and reigniting inflation concerns even as core price pressures remain contained. While the conflict with Iran clouds the near-term outlook for energy and Fed policy, investors are still pricing in a war that is relatively short and a path for rates to drift lower over time rather than move higher. Underneath the geopolitical noise, US economic fundamentals look resilient, with strong productivity gains, robust ISM readings across manufacturing and services, and accelerating revenue and earnings growth supporting risk assets.

Growth is expected to reaccelerate through 2026 into 2027 as fiscal stimulus flows through, government spending normalizes after last year’s shutdown, and business investment strengthens. For advisors and investors, this backdrop argues for staying invested but being selective: monitoring energy-driven inflation risks and policy shifts while recognizing that solid corporate profits and steady disinflation still underpin a constructive medium-term outlook for equities and credit.