A macro roundtable argues the Middle East war and oil spike are creating a global growth shock that limits Fed action, strengthens the dollar, and pressures risk assets. The speakers think banks and deregulation may provide more liquidity than the Fed near term, while commodities—especially energy and agriculture—look relatively better than equities.
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This Forward Guidance roundup centered on the idea that the Middle East war, especially any prolonged disruption around the Strait of Hormuz, is now the dominant macro driver. Joseph Wang framed the situation as a global crisis that could make a worldwide recession “very, very probable,” with Brent around $100, a weakening U.S. labor market, and central banks forced into difficult tradeoffs. Quinn Thompson agreed and emphasized that energy shocks historically delay rate cuts, keep volatility elevated, and suppress risk-asset multiples for months, even if the conflict de-escalates quickly. A major theme was that the Fed is constrained. …
Tactically, this looks like a risk-off setup: oil and geopolitical headlines can keep front-end rates, volatility, and equity pressure elevated, while the Fed stays sidelined unless labor data breaks materially.
Over the next few months, the base case is delayed easing and a choppy, lower-multiple market if energy stays elevated; the key confirmation is whether inflation prints and labor data start reflecting the shock. If oil normalizes quickly and vol collapses, the bearish growth view weakens.
Structurally, the transcript argues for a post-2008 regime shift away from Fed-led liquidity toward bank-led credit creation and more frequent geopolitical inflation shocks. That implies a world of higher macro volatility, stronger demand for real assets, and less support for broad passive equity multiples.
The Middle East war is the dominant macro driver and could make a global recession very probable.
Joseph explicitly says macro is driven by the war and calls it a real crisis for the global economy.
An extended closure of the Strait of Hormuz would be a severe supply shock because roughly 20% of global crude flows through it.
The speakers point to the strait as the key chokepoint for oil and related flows.
The Fed is unlikely to respond quickly; rate cuts may be delayed for roughly six months unless the labor market weakens sharply.
Quinn says the inflation delay and Fed timing imply at least a six-month pause absent labor deterioration.
How are you thinking about your current macro outlook right now?
Joseph Wang says the macro outlook is being driven by the war in the Middle East, which affects the global economy through high energy prices (Brent around $100). He believes a global recession is very probable, especially since the US labor market was already weakening with rising unemployment and revised-down GDP growth before this negative shock. He thinks rates are far above zero so the Fed is limited, but commercial banks could provide more liquidity.
Quinn, what's going on in your head regarding the macro situation?
Quinn Thompson says there is historical precedent for not hiking into energy crises — in 2001 and 2008 the Fed didn't hike into oil price spikes. He notes that at 2.5-3% federal funds rate with inflation running 2-3ish, you're at neutral, and further Fed cuts historically required 4-8 months of severe job losses (over 50k per month) and 20-40% equity market declines. He believes it's a very bad year to be invested in the stock market broadly, though energy, commodities, and agriculture may do well.
Joseph, how are you thinking about central banks' ability to react to an oil shock, given the single-mandate vs dual-mandate dynamic?
The speaker argues that the Fed would likely look through energy price shocks, citing historical precedent from 2003 Iraq invasion and early 1990s Desert Storm. They believe the market pricing in rate hikes is unlikely and surprising, attributing it to Governor Waller's comments. They think if equity markets continue declining, the market will focus more on growth and price in Fed cuts this year.
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