No. of Recommendations: 41
There’s a ton of noise in the media right now about the US negotiating with Iran for access to the Strait of Hormuz. While many are understandably skeptical, given that Iran said there have been no negotiations, I think the situation is actually much worse for the US than the market is currently pricing in.
Here are my four big predictions:
1. The S&P 500 (currently at 6400) is going to be substantially lower by May 30. I know, calling short-term moves is usually a fool’s errand, but the disconnect here is too big to ignore.
2. Iran’s closure of the Strait to US-related trade will last at least six months. Almost no-one is forecasting that now - the talk is whether it will be just days or a few weeks. During these 6 months China and Iran-friendly nations will keep their access, but anything with a US link is going to be made illegal by Tehran. From their perspective, the higher shipping costs hitting everyone else are just a way to receive part compensation for the damages caused by our non-strategic, illegal (and profoundly immoral, which is often left out) bombing.
3. Access through the Red Sea will also be shut down by Yemen on and off for the next six months. There is market talk that this is a long-shot but bad possibility - but I'm putting it as a definite. This creates a massive "dual blockage" effect. Usually, the Red Sea acts as a safety valve when Hormuz is not available - without this safety valve, the economic fallout gets amplified significantly.
4. The US will keep up the bombing campaign and Iran will keep retaliating with proportional force. The media is seriously lowballing the combined military tech and willpower of Iran, Yemen, the Iraqi resistance, and Hezbollah. Plus, our so-called democratic Western leaders still don't seem to get that Iran’s government is fundamentally stable and isn't just going to fold.
The US is left with two real options:
Option 1: Capitulate. This is the only real path to peace.
Option 2: Escalate. An Iranian collapse isn't happening, so doubling down just leads to more trade destruction than anyone expects.
My verdict on the above? History says the US won’t take the "L" on Option 1, so they’ll go with Option 2. Here’s how I’m looking at the "fun" part.. the actions investors can take:
Actions to Consider
Build Cash: Increase your cash exposure for the next two months (until May 30) or until the S&P 500 drops 15%. This isn't necessarily calling the "bottom" but I'm using 15% as an actionable cushion. Even a 20% haircut from 6400 only puts the CAPE ratio at 20.. which isn't a "fire sale," it’s just the 20-year average.
Selective Holdings: If you absolutely have to stay in the market, a few names might actually benefit from this chaos:
TRMD: Strong fundamentals; they run product tankers between Europe, the US, and Asia.
EQIX: Could act as an emergency host for data moving out of Gulf State war zones.
NTR: Set to capture phosphate price spikes and benefits from a sulfur cost advantage.
CNQ: This is a pure play on the narrative. Their assets are all in North America (with tiny exposure in the North Sea/Africa), so they have zero physical risk from a Middle East blockade but get 100% of the upside when oil prices spike. The forward earnings look ready to explode.
The Exit Plan: Plan to move back to your original portfolio once we hit that May 30 window or the 15% drop. These aren't necessarily "forever" holds.. just ideas for those who see the same thesis playing out.
The Reality of the US Predicament:
If we’re being honest, the US bombing campaign is essentially state-sponsored intimidation. If you look up the definition of terrorims, the first result Google gives is "the unlawful use of violence and intimidation, especially against civilians, in the pursuit of political aims." Well sounds like exactly what we are doing to Iran whilst cheering for regime change. Let's be honest at another level - it is terrorism. The administration calls it "regime change" because that sounds better on the news, but the goal is the same: use extreme violence to force a political shift.
The problem? It’s backfiring. Just like a foreign power bombing the US would only make Americans more patriotic, this has unified Iran. Domestic support for the government is higher now than it was before the first strike.
The US is also running into a literal wall - the most important military targets are deep underground. Frustrated by the lack of progress, the focus has shifted toward civilian infrastructure. This doesn't trigger a revolt; it just reinforces the resolve of a population that includes 600,000 soldiers and millions of motivated civilians. If this turns into a ground war, the US is going to face a level of "real war" (trenches, heavy bombardment, veteran commanders) that it hasn't seen in decades.
Ultimately, the idea of "air dominance" feels like a myth. US planes aren't even flying over Iranian airspace without getting targeted. Between the layered leadership of the resistance and the overwhelming support from the Muslim world (regardless of what bribed Arab monarchies might say..) the US is in a much tighter spot than the markets realize.
Anyway I have fallen to the dark side in giving a short-term market prediction of the S&P500 (being at least 15% some time in the next 2 months, which can be used a trigger to re-enter, or wait the entire 2 months and enter regardlessly). At least the theory can can be tested not to far way!
