Defiance ETFs CIO Sylvia Jablonski on finding opportunities amid Iran conflict
Speakers
Sylvia Jablonski — Chief Investment Officer, Defiance ETFs
— Defiance ETFs CEO
Summary
- Markets are shifting from a "Goldilocks" narrative (rate cuts, stable growth) to an inflationary fear narrative driven by oil price spikes and geopolitical conflict.
- The "Future of Warfare" is defined by "decision dominance" rather than just manpower—favoring low-cost drones and high-tech AI over expensive legacy hardware.
- Financials and Private Credit are viewed with caution due to potential "credit events" and persistent underperformance, while Software is seen as a contrarian opportunity where AI fears are overstated relative to the "stickiness" of enterprise workflows.
Trade Ideas
When asked about Blackstone's withdrawals and Jefferies' exposure, she notes financials have been "continuing with that path of kind of underperformance and lack of opportunity." The combination of an oil price shock (inflationary) and potential "credit default events" in private credit creates a toxic environment for financials. There is no immediate catalyst to catch the falling knife here. Avoid the Financials and Private Credit sector until stability returns. Fed cuts rates sooner than expected, relieving pressure on credit portfolios.
She notes software stocks are suffering from "AI panic" (fear that AI replaces software), but argues companies like Salesforce (CRM) have "highly integrated workflows" that take time to untangle. The market is mispricing the risk of AI disruption. Instead of being replaced, incumbents with deep integration can "level AI on top" of their existing products and charge more for it, turning a perceived threat into a revenue driver. Contrarian Long on high-quality software with deep moats. AI disruption actually accelerating faster than incumbents can adapt; continued sector rotation out of software.
Jablonski states the future of war is "decision priority decision dominance versus just manpower." She highlights the asymmetry of a "$50 million missile versus 250,000 drones" and notes these stocks are performing well amid conflict. The geopolitical conflict in the Middle East is accelerating the shift toward "Modern Warfare" (drones, satellite, AI). Governments are forced to allocate budget to these specific technologies for precision targeting and intelligence, driving revenue for these specific suppliers. Long the "Modern Warfare" basket (Kratos, AeroVironment, RTX, Elbit Systems, Palantir) as a hedge against geopolitical instability. De-escalation of conflict leading to a rotation back into risk-on tech; government budget cuts.
