The terms of a preliminary post-war treaty seem to be relatively clear. As former president Obama has put it, they’re similar to the deal he made with Iran in 2015, only a little worse–this even though Trump repudiated the Obama agreement as insufficient during his first term. Put another way, the bombings and killings have most likely put the US in a worse position than before they started.

Iran will apparently also receive $300 billion in, essentially, reparations as the price for opening up the Strait of Hormuz again. The money is reported to be coming from third parties, not the US. While this may be true in some highly technical sense, my guess is that those third parties have been told they’ll be compensated by Washington for their outlays. I can’t imagine they won’t demand to be paid in advance.

How will this affect the US stock market? These are my thoughts:

–any effects will be indirect–through the hit to consumer spending–since the entire oil and gas sector is only about 3% of the index, or 2/5 of the weighting of Nvidia, the S&P 500’s largest member. So there’s no need today to have an opinion. You can neutralize the sector by holding the market weight, or simply have nothing in the sector at all, since a 20% upward move in oil and gas stocks, with everything else flat, would only clip 0.4% from the portfolio’s return.

–the price of crude oil, and ultimately the price of products refined from oil, will drift down to their pre-war levels, or slightly above.

–the fragility of the global oil supply chain that the war illustrates will accelerate the move toward other energy sources, even in the US, where the administration is opposed, in true Luddite style. This will sooner or later (my bet is way sooner) make sources of heavy, tar-like crude no longer economically viable (think, Venezuela, where the US oil majors are not keen at all to develop that country’s reserves).

–presumably, the ease with which Iran shut off a major supply route for crude through the Strait of Hormuz has been a big shot in the arm for alternative energy sources.

–the apparent lack in Washington of effective pre-strike planning, intelligence or logistics is probably not a plus for the US brand. …nor is the culling of women and people of color from the armed services, in support of the administration’s vision of white male culture.

–and the lack of any opposition from Congress, on either side of the aisle, to the administration’s moves is arguably doing the most damage. This implies that the multiple investors are willing to pay for $US earnings should be lower than has been the norm since WWII. And, of course, those profits themselves are weaker than normal, given tariffs and government efforts to shrink the workforce.

In a normal business cycle, investors, US and foreign, portfolio and corporate, would already be rotating away from tech. They’d be rooting through the bargain bin of domestic-oriented consumer firms, in vintage Warren Buffett style. …and in particular, for strong brand names and distribution networks, on the idea that one would be buying at a steep discount intellectual property that took many years–and lots of advertising expense–to establish (a geekish note: except in the case of acquisition, none of this appears only on the income statement as a cost, but nowhere on the balance sheet as an asset). We’re now the country of sub-par growth, ICE, murdered protesters, foreign prison camps, however. So it’s no longer clear what those brands are worth.

As a result, we continue to be in a stock market that favors industry rather than consumer, firms with $US costs and foreign currency revenues, and intellectual property that can be quickly shifted outside the US. This continues to be so, even though this idea is already pretty long in the tooth. Valuation spreads would in most other circumstances have already prompted, I think, rotation away from the AI names.

I think the question of how long the current situation can last is the most important one in today’s US stock market. For what it’s worth, I think the mid-term election in November is the next possible trigger for a change in portfolio strategy.

PS: In my investing career, which began in late 1978, shockingly long ago, I can think of three periods when political developments made a difference for financial markets:

–the revaluation of the Japanese yen in the 1980s,

–the formation of the EU in the 1990s, and

–Brexit, which occurred in 2020, after a vote in favor in 2016.

So thinking of the rise of Trumpism as a market-moving event isn’t without precedent.

In some sense, the sands have already begun to shift. Over the past three months Nasdaq has outperformed the EAFE index of foreign stocks by a lot–enough that the US is no longer the laggard to the rest of the world’s stock markets that it has been since early 2025.

There have also been significant turns of the wheel within NASDAQ itself. The latest is the move from software to the firms that make semiconductors and their suppliers. Customer demand for memory chips is so high that the makers are saying that, although they are all adding capacity, supply won’t be able to meet the current level of demand for three or four years. Two reasons: the fabs themselves are complex things and take several years to come online; and ASML, the principal manufacturer of the machines inside them, tries to avoid boom/bust in its own business by keeping its output at a steady pace rather than expanding capacity during industry upturns (thus avoiding the worst negative effects of the inevitable subsequent bust periods).

The next large stock market rotation, as I see it, should be a move into firms that either serve domestic consumers, or have global brands that also allow them to sell to the rest of the world as well. One set of potential buyers for these consumer-oriented stocks would be portfolio investors like you and me. Another would be multinationals, domestic or foreign, who, in Warren Buffett fashion, would recognize the potentially immense value of intangibles like brand names and distribution networks.

I decided to begin to nibble at stocks like this early in 2026. Continuing weakness in this arena, however, told me that I was at the very least too early (a technical portfolio term meaning “wrong!“). Two factors working against the move: the domestic economic weakness created by tariffs + shrinkage of the workforce; and the reputational damage done to the US brand name by ICE and, more recently, the bungled war against Iran.

$300 billion+ (about 1% of domestic GDP) in reparations later, Iran is in the rear-view mirror. Within six months, the negative effects of administration policies will have been around long enough to also be in the base against which future earnings will be judged.

Arguably, then–and absent any new negatives from Washington–at some point investors will begin to trim their IT overweights and move money into domestic GDP-sensitive names.

This is a potential issue to be aware of, I think, but one that it’s way too soon to act on. An odd thing has just happened a couple of towns over from where we live, however. There was just a special election in that affluent right-leaning community to vote on a Republican-backed proposal that in future town elections candidates need not disclose their party affiliation on the ballot. The proposal was rejected.

Two companies that I’m aware of, Super Micro Computer (SMCI) and Redwire (RDW)–I have a small position in the second and have consciously avoided the first–have announced new two-part capital raisings.

In the case of SCMI, it intends to raise $7 billion. $5 billion of that will be a traditional underwritten issue of stock. The remaining $2 billion will be direct sales of stock by SMCI into the market. There’s a wrinkle to the underwriting, however. $1.25 billion will be common stock; the $3.75 billion bulk of the offering, however, will be a convertible preferred, whose terms have not yet been announced.

RDW plans to raise $500 million through direct sales of stock into the market.

I can’t recall ever having seen a structure like this before. And now there are two that I’m aware of, and maybe more, since I make no claims to be surveying the entire stock market.

Why are these popping up now?

The as-close-to-tautology-as-you-can-get answer is that the companies need money. I presume that both would prefer to make a traditional underwritten offering of common shares but that there isn’t enough professional investor appetite for that.

Neither issuer will do the direct sales themselves; both are hiring professional brokers to do that for them.

I’m assuming that both companies would prefer to do a regular underwriting, where they transfer issuance risk by selling the shares to a brokerage syndicate at a fixed price right before the stock begins to trade. If so, no one is willing to do this at all for RDW and underwriters are only willing to take on $1.25 billion in straight equity from SCMI. I’m assuming that the $3.75 billion in convertible preferred is going to specialists who will hedge out everything except the preferred dividend. This payment is an after-tax expense for SCMI, which will presumably be taxed at a lower rate than bond interest. Convertible debt would likely have been a better option for SCMI. If so, choosing to go with a preferred shows where the market power lies.

What does all this mean?

The bullish take would be that these companies are still apparently able to raise large amounts of money.

The bearish is that concept alone is no longer enough to get investors to pile in.

Normally, I think this would be a signal to roll out of IT and into more defensive sectors like consumer staples, supermarkets and other mid- to low-end retail, pharma… But the negative effects on the domestic economy from ICE, tariffs and the war with Iran all argue against this. Still, my guess is that for now it’s better to be closer to the index weightings today than to have enormous bets in any direction.

Up until last Friday, the US market has been all IT, all the time. Year to date, the IT sector is +16.9%, with the market ex IT at +3.1%. Semiconductors have been a stunning +42%. For the past twelve months, the figures are +43.6% for IT and +15.1% for everything else. So, at some point the losing team was bound to get a turn at bat–purely on relative valuation.

As I see it. the administration’s economic plan is taken right out of the emerging markets handbook written by post-WWII Japan:

–depress the currency

–use tariffs to discourage imports of foreign goods

–keep interest rates low

–develop export-oriented manufacturing as the main source of economic growth.

Yes, the current generation will have miserable lives …but children and grandchildren will enjoy the benefits of being in the advanced industrial economy built on the ruins remaining after the destruction of WWII.

One other thing, foreigners (creatures that emerge from the darkness) not particularly welcome.

The administration has added two twists to this program:

–reducing the domestic workforce by using ICE to imprison and deport foreign-born workers

–seizing forcing oil reserves and shutting down alternative energy projects, effectively a huge bet that climate change isn’t really happening, and being made for reasons best known to the administration.

All in all, this is a recipe for economic stagnation, in my view. This has also become the consensus belief, I think, that has been expressed in the massive portfolio shift away from stocks dependent on the US economy and to IT. Initially, the focus was mostly on software, especially AI-related. Recently, it has shifted to the components needed to build AI centers. This is partly the way that rotation within an industry generally works. In this case, the stock market has also come to believe that AI will force down the prices of many software services.

Then came Friday’s jobs report, which showed that the economy gained +172,000 jobs, vs. expectations of +80,000. The prior two months’ numbers were revised up by a total of +93,000. This apparently sparked two worries:

–that the domestic economy is in better shape than the consensus is expecting, and

–that interest rates may need to rise to cool down economic growth.

This would have two implications for equity portfolio positioning:

–the left for dead domestic economy might actually have some life in it. I don’t see much evidence other than this report. But jobs are a leading indicator. And if so, a heavy bet against the general economy that the current market is expressing might not be the slam dunk the consensus believes

–rising rates would mean PE multiple contraction, as fixed income becomes a more attractive alternative to stocks

The counterargument would presumably be that the job additions are positions that were previously held by undocumented workers who have been imprisoned or deported.

\The most important thing for you and me today, I think, is to observe what is rebounding and, just as important, what is either not going up or moving up at a much sharper/slower pace than the decline last Friday.

Tech consists in two separate S&P 500 sectors–Communication Services and Information Technology, The two were the stars of 2025, with the former outpacing the latter by +32% to +23%.

Both got off to a rocky start in the early part of this year. The simplest explanation is that the economic environment became less certain, so stock investors began to trim their equity holdings. And they sold what they usually sell in the first quarter, as well as in situations like this–things that had gone up a lot in the prior year.

There has been a substantial shift in emphasis within tech. It’s away from Communication services and toward IT. Another way of putting this is that it’s away from software toward hardware.

And it’s not just cutting edge hardware. It’s also fresh-out-of-Chapter 11 highly specialized chip maker, Wolfspeed; DRAM makers like Samsung, Hynix and Micron; and even old-school contract manufacturers. That’s in addition to last year’s stars, like the fabless chip designer, Nvidia. The market has also been nibbling away at companies with AI installation heat-reduction solutions. even to toilet maker TOTO.

–I should mention that I own shares of WOLF, MU and NVDA (on the idea that it’s sort of like an AI ETF, only run by deeply knowledgeable insiders) and TOTO. I have recently sold about half my MU position, though, and have been trading the very high volatility of WOLF, without changing my overall holding much. Strictly speaking, this last is a waste of time, but I find it entertaining.

Anyway, the market has rotated from software to hardware, and in hardware from the obvious to the esoteric to tech adjacent.

What happens next?

Here, no one really knows. So we all make guesses. Here’s mine:

–I think DRAM is a special case. This is an industry plagued by chronic overcapacity. Not now, though. The major players are all working flat out. Despite this, DRAM prices have shot through the roof, because demand is so much higher than supply. New capacity is unlikely to be onstream for at least a couple of years. Ultimately, situations like this end up in product gluts, sharply lower selling prices and ugly share price action. Some people are arguing to take action now. On the other hand, it’s very hard, in my experience, to predict the level of earnings three years out, as well as when the market will begin to take a 2028-29 potential glut seriously.

–for the rest, the market has rolled away from the most direct plays on the AI future to increasingly peripheral ones. This is typically a signal that the current winning sectors are beginning to get long in the tooth.

I think the obvious next move for US market-oriented investors would normally be to Consumer discretionary and staples, as well as other areas sensitive to domestic economic growth.

However, tariffs, weakening the currency, shrinking the workforce, loss of tourism and higher gasoline prices have all damaged the domestic economy. And, to my mind, ICE has certainly damaged the domestic brand name, and hence the global appeal of US company brands. At one point, I thought that foreign corporations would use this period as an opportunity to buy beaten down consumer-oriented firms–especially in the staples sector–with valuable brands built through decades of advertising expense. But that hasn’t happened.

(An aside: the value of intangibles like brand names and distribution networks, which are counted on the balance sheet and income statement as minuses, are, I think, Warren Buffett’s major contributions to equity investing).

As a result, it seems to me that investors, both domestic and foreign, portfolio investors and corporations, are going to mostly sit on their hands until there are clearer signs that citizens want the current domestic economic malaise to change.

As I’m writing this, I’m realizing that it probably isn’t too early to develop a shopping list of consumer firms to buy. Walmart (WMT) is the only consumer name I own–over half of TOTO’s profits now come from tech–so I should get ready to do more.