Keep Calm and Delete the Alerts

Markets are sorting through Hormuz headlines, oil volatility, Fed uncertainty, and tech turbulence. The real challenge is filtering noise from fundamentals.

KEY TAKEAWAYS

• Conflicting headlines around Iran, Hormuz, oil, stocks, rates, and SpaceX are creating a classic whipsaw environment. Acting on each push notification is a fast way to confuse noise with signal.

• The distinction between declaring the Strait of Hormuz closed and actually closing it is critical. Markets are pricing tactical escalation, not yet a full structural break.

• Kevin Warsh’s first Fed meeting comes with inflation hot, rates frozen, and geopolitical energy pressure complicating the policy outlook. The Fed cannot easily solve an oil chokepoint with rate policy.

• Tech volatility is being driven less by crude headlines and more by bond yields and Fed expectations. Higher rates pressure growth-stock valuation math even when company fundamentals remain intact.

• The practical investor lesson is discipline. Before acting, decide whether the headline changes the value of the assets owned or merely increases emotional pressure.

MY HOT TAKES

• Headline trading is the enemy in this market. Panic-selling and panic-buying are just two versions of the same bad process.

• The Strait of Hormuz matters enormously, but markets are not blindly accepting every escalation headline at face value. They are assigning probabilities, and that is why the price action looks confusing.

• Warsh is inheriting one of the hardest Fed setups imaginable. Cutting may help growth, but it does not reopen shipping lanes or neutralize energy inflation.

• Tech’s selloffs should not be lazily blamed on oil headlines. Rising yields are a cleaner explanation because they directly attack long-duration growth valuations.

• The right investor posture is not complacency, but filtration. Calm is not the absence of risk; it is refusing to let noise make the decision.

• You can quote me: “The biggest threat to your portfolio right now may not be Iran, oil, or the Fed. It may be you.”

Info overload. You are going about your daily business–perhaps walking your Cavapoo pup Eloise along the Hudson and marveling at the blue and orange-washed JPMorgan building (🙌), and a headline pops up on your smartphone. "Bombers bombing!" You click on it and realize there are 20 more headlines that accumulated during the day. "Strait of Hormuz Closed," "Market tanks," "Market turns around," "Inflation worst in 3 years," "Close to deal," "Rates rising," "Fed stuck!" Tell me where I am wrong.

You know you have these, along with the 25 SpaceX IPO headlines. 🌀 Imagine if you made investment decisions on all of these conflicting headlines! If you did, you would have learned about what we call "whipsawed" on Wall Street.

This morning I flipped on my Bloomberg, and here are the top headlines: "Trump Orders More Strikes on Iran…" "SpaceX Will Mint Billions…" and "Stocks Bounce, Oil Falls as US Ends Iran Strikes." Pretty much a continuation of last night's iPhone headline bonanza, minus Eloise. Oh, and index futures are pointing to a positive open after yesterday's trouncing. The pre-market gainers leaderboard is full of the same semiconductor names that were sprawled out and bleeding just last night. 😵‍💫

Cutting through all that info clutter right now is really important for not just your portfolio, but your sanity. Let's examine some of the current facts behind the eye-popping headlines, shall we?

Here is what actually happened overnight. Iran's Islamic Revolutionary Guard Corps posted a message on their official Telegram channel that should, in theory, stop the world's tanker fleet in its tracks: "Effective immediately, due to insecurity in the region, the Strait of Hormuz is declared closed to all vessels, including oil tankers and commercial ships. Any vessel attempting to transit the strait will be targeted." Bold statement, but material enough for me to copy it down word for word. And the IRGC Navy followed up by claiming two vessels attempting to transit had already been struck. Meanwhile, the US Central Command confirmed it launched additional “self-defense” strikes–Tomahawk cruise missiles targeting Iranian air defense systems, surveillance capabilities, and communications infrastructure. Explosions were reported across Bandar Abbas, Qeshm Island, and several other southern Iranian locations through the early hours of June 11.

Now here is where you need to separate the headline from the trade. There is a critical difference between Iran declaring the Strait closed and Iran successfully closing it. The US Navy has been the active guarantor of contested passage through that waterway, and it has not left. CENTCOM has been very clear that the Strait of Hormuz is an international sea passage and an essential trade corridor, and that roughly 100 merchant vessels transit that narrow channel on any given day. The IRGC has been issuing VHF warnings to ships for months. Some vessels have turned back. But the corridor has not gone dark. 👀

Why, then, are equity futures green this morning while oil is falling? Because this movie has been running since February, and the market has learned how to read it. This is not the first IRGC closure declaration, and it is not the first round of Tomahawk responses. What Wall Street is pricing right now is the probability that this latest escalation is tactical rather than structural. Just another move in a very long chess match, not checkmate. The energy options chains are treating this differently than the equity futures, which tells you something. The bond market has its own opinion. And all three of them cannot be simultaneously right.

The more durable story underneath all of this is what happens in five days. Next week, Kevin Warsh chairs his first Federal Open Market Committee meeting as the 17th Chair of the Federal Reserve. You may recall, he was confirmed just last month in a 54-45 Senate vote, which, incidentally, was the most divisive confirmation in Fed history, and he walks into that room carrying a set of problems that no policy textbook was written to solve. Inflation hit a three-year high in April–released just yesterday. The Fed Funds rate has been frozen at 3.50% to 3.75% for three consecutive meetings. The FOMC futures market is pricing a 98% probability of another hold next week. And Goldman Sachs, just days ago, scrapped their forecast for any rate cut in 2026 entirely, pushing their first expected move all the way to June of next year–lol, surprisingly (for Goldman) the last to arrive at the party.

Here is what I've been calling the geo-petro-politics problem for Warsh. The Fed's dual mandate is stable prices and maximum employment. Warsh has publicly stated he believes there is room to cut rates. President Trump agrees loudly and publicly. But the Strait of Hormuz carries approximately one-fifth of the world's daily oil supply which, as you probably know by now, is around 20 million barrels per day. When that chokepoint is under fire, energy prices do not behave like a normal inflation input. They behave like a geopolitical tax. And the Fed has no tool for a geopolitical tax! You cannot hike your way out of a tanker war, and you cannot cut your way into energy security. Warsh is not walking into a policy meeting, he is walking into a Rubik's Cube that someone set on fire.

The practical lesson for your portfolio is this: the investors who panic-sold on last night's "Hormuz Closed" banner and the investors who panic-bought on this morning's futures rally are both playing the same losing game, just on opposite sides of the same headline. The range of outcomes here is genuinely wide. Infrastructure damage across the Gulf is real. Tanker insurance costs have repriced dramatically. Even analysts who are optimistic about a ceasefire are warning that any reopening of the Strait will only be partial, with security challenges and damaged pipelines limiting how quickly normal flows resume. None of that shows up in a two-line push notification.

The real skill being tested in this market is not prediction–it is noise filtration. The same discipline that kept you from making a catastrophic decision last night is the one that keeps you from making an equally costly one this morning. Before you act on any of these headlines, ask yourself one question: does this change the fundamental value of what I own, or does it just change how loud the room got? Take a step back and realize that right now, the biggest threat to your portfolio is…er, you! Ask yourself: do we have a signed resolution? Even if we did, will energy inflation disappear overnight?

Now, let me veer for a brief moment. Why has tech been so volatile lately? Is it crude oil volatility that is driving a fabless semiconductor company? NO, but it is more than likely bond yields and Fed policy expectations. When we talk about interest rate-sensitive sectors, we historically point to real estate and utilities. Those sectors are certainly sensitive, but tech? Most tech can borrow cheaply, but higher yields can be impactful on operating margins, and tech has been on a bit of a borrowing binge lately, specifically hyper-scalers. Honestly, the relationship between bond yields and growth tech is somewhat derived, but it is very real. Growth companies need to produce flawless execution and significant future growth to get over the hurdle of higher Treasury bond yields, so when yields go up, ceteris paribus, tech shares sell off. There is also the mathematical reality of DCF (discounted cash flows) analysis that has interest rates in the denominator and as a negative number in a stocks forever value (terminal value). If you're not good at math, it’s ok, I will just tell you that higher yields lower a company’s theoretical intrinsic value–but it is purely mathematical. Did last night’s attacks have any impact on NVIDIA’s future earnings prospects? Is a closed Strait of Hormuz and rising crude price impactful on NVIDIA’s expense ledger? You don’t have to answer those questions, they were rhetorical.

Last night’s walk with Eloise was a longer one–we call those 2-bag walks (if you have a dog, you know what I mean). That longer walk gave me time to read through all of those accumulated, ominous, and conflicting headlines. I was also able to delete every one of them and remind myself to stay focused, maintain my long-term focus. I even had enough time to run through my investment theses for all my top holdings and conclude that nothing has changed. Keep calm–carry on!

YESTERDAY’S MARKETS

Yesterday, the S&P 500 shed 1.62%, while the Dow dropped 953 points, or 1.87%, to 49,918., and the Nasdaq fell 1.98%. The selloff was driven by a combination of renewed US strikes on Iran and a May CPI print showing headline inflation at 4.2% year-over-year, a three-year high. WTI crude closed just above $90 per barrel despite the escalation, as markets tempered their oil risk premium on lingering ceasefire expectations. The 10-year Treasury yield closed slightly higher on the day, ending the session near 4.53.

NEXT UP

• Initial Jobless Claims (June 6th) is expected to have eased to 220k from last week’s 225k claims.

• Producer Price Index (May) may have increased to 6.4% from 6.0%.

• Important earnings today: Adobe, RH, and Lennar.