Was it for being constantly accused to chicken out ? President Donald Trump had finally chosen to strike 3 Iranian military targets well before the end of the 2-week period he had given himself. The TACO trade (Trump Always Chickens Out), the term investors coined to refer to the US President’s frequent backpedaling on various issues, may well have led to a major geopolitical act. And yet, since the sudden acceleration of conflicts in the Middle East, the markets have seemed surprisingly resilient. It is true that oil gained 15% when Israel struck Iran, but equity indices reacted very little, while the volatility index remained cautiously around the 20 level: this is not complete serenity, but it is a far cry from the stress levels reached beginning of April... After the US attacks and mild Iranian response, equity markets bounced back and oil price sharply corrected. We are discussing in this newsletter the reasons for such a dichotomy. To get to the point, the allocations have not changed drastically since the start of the conflict. With respect to that, the positioning adopted reflects the statistical evidence and the widespread expression that in financial markets the worst is never certain.
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