Crude is at 98 bucks. Gas is over 6 dollars in half the country. The strait of hormuz is still disrupted. Trump rejected Iran's latest peace proposal today. And the S&P 500 closed at an all time high on friday for the sixth week in a row.
Amrita Sen from Energy Aspects went on CNBC last week and called this "extremely misplaced euphoria" and said we're sleepwalking into a recession. Morgan Stanley's chief europe economist said we're "nearing a day of reckoning." These are not perma-bears, these are energy market specialists who watch supply flows for a living.
The bull case is all earnings. 29% Q1 growth, 78% beat rate, great. But that was last quarter. Oil was at $85 for most of Q1. It's been $95-100 for the last 3 weeks. That feeds into transport, logistics, manufacturing, food production. None of that shows up until Q2 and Q3 numbers.
CPI comes out tomorrow. Core was 2.6% last month. Polymarket has traders watching for a possible reacceleration toward 3.7% when the oil passthrough hits. The Fed is at 3.50-3.75 with a 96% chance of holding in June. If CPI comes in hot, the one remaining cut everyone's hoping for in September evaporates.
I'm not selling everything. But I moved about 15% of my equity allocation into short duration treasuries last week. If oil cools and Iran resolves, I'll rotate back and miss a couple percent upside. If it doesn't, I'll be glad I have the dry powder. The risk reward just feels off when crude is doing what it's doing and the index is pretending it isn't happening.