US-Israel Strike on Iran: What It Means for Global Markets & Oil Prices w/ Keith McCullough
Speakers
Summary
- Macro Regime Change: The US is currently in "Quad 3" (Stagflation: Growth slowing, Inflation rising) but is transitioning to "Quad 4" (Deflationary Recession: Growth slowing, Inflation slowing) in Q2 2026.
- The Bond Pivot: While bearish on bonds previously, the speaker is now aggressively bullish on long-duration Treasuries (30-year), predicting the 10-year yield could drop 100 basis points to 3.25% as the economy hits a wall.
- Tech Wreck: The "Mother of All Bubbles" in software and hyperscalers has burst. Revenue growth is decelerating, and AI is not saving valuations. The speaker is short the NASDAQ and specific software names.
- Commodity Divergence: Bullish on Oil (geopolitics + trend) and Gold (safety), but cautious on Silver (lower highs) and Copper (best days are behind it).
- Contrarian Housing Call: Despite the recessionary outlook, housing stocks are a "Long" because falling bond yields act as a massive stimulus for the sector.
Trade Ideas
"We are going into Quad 4 in the second quarter... the best time to be long long-term Treasuries." Quad 4 is a deflationary recession environment. As growth and inflation decelerate simultaneously, the Fed is forced to cut rates aggressively. The speaker predicts the 10-year yield could fall to 3.25% (down ~100bps). Long duration bonds are the highest conviction trade for Q2 2026. Inflation re-accelerates (staying in Quad 3) rather than cooling off.
"We're long steel stocks... We're long water. I think water is a big idea long term." Despite the tech selloff, "unexciting" cyclical and thematic trades are working. The speaker explicitly names Steel and the Water ETF (AQWA) as current long positions based on his signals. Long Niche Real Assets. Global industrial slowdown hurting steel demand.
"Quad 3 means short the financials... If you're still long like JP Morgan... we're short those." In a stagflationary (Quad 3) or recessionary (Quad 4) environment, credit risk rises and yield curves behave unfavorably for bank margins. Financials are explicitly named as a sector to short. Short large-cap financials. A "soft landing" where credit quality remains pristine.
"We're short what we call Moab tech... mother of all bubbles... revenue growth rate slows." Software companies (like Salesforce/CRM) and Hyperscalers (like Microsoft/MSFT) are seeing revenue deceleration. The "AI narrative" is insufficient to prop up valuations when growth slows. The speaker explicitly mentions being short "all four" hyperscalers and software. Short Tech and Software as the bubble deflates. Re-acceleration of revenue growth or a Fed pivot sparking a liquidity rally.
Keith McCullough
Founder & CEO, Hedgeye Risk Management
"As long as my signal says buy every damn dip in oil, I'm going to buy every damn dip in oil." The market front-ran the geopolitical escalation (US-Israel/Iran). Oil is breaking out technically, regardless of the specific news cycle. In a Quad 3 (current state) environment, energy is a top performer. Continue buying oil and energy equities on pullbacks. A sudden geopolitical resolution or demand collapse in deep Quad 4.
Keith McCullough
Founder & CEO, Hedgeye Risk Management
"Housing is a big recent addition... housing is definitely going to see a resurgence in demand." This is a second-order effect of the Bond trade. As the economy slows (Quad 4), bond yields crash. Lower yields mean lower mortgage rates, which immediately stimulates housing demand despite the broader economic slowdown. Long Homebuilders as a rate-sensitive proxy. If yields stay high (Quad 3 persists), housing remains under pressure.
Keith McCullough
Founder & CEO, Hedgeye Risk Management
"Japan... exports just went from essentially flatlining... to up 16.8% year-over-year." While the US is slowing, Japan is in "Global Quad 1" (Growth accelerating). The massive jump in exports signals a cyclical recovery in the Japanese economy, making it a divergence play against the US. Long Japanese Equities. Currency volatility (Yen fluctuations) impacting returns.
Keith McCullough
Founder & CEO, Hedgeye Risk Management
"The things that do well [in Quad 4] are gold, bonds, and utilities." As the economy enters a deflationary slowdown (Quad 4), investors flee to safety and yield. Utilities (bond proxies) and Gold (store of value/currency hedge) historically outperform when growth collapses. Long Defensive Sectors and Precious Metals. Rising real rates (if inflation falls faster than nominal yields).
Keith McCullough
Founder & CEO, Hedgeye Risk Management
"It's down 45%... that is a crash... inviting Wall Street to their party was one of the biggest mistakes." Institutional adoption marked the cycle top. The asset is in a downtrend (crash mode). The speaker emphasizes he is not "faith-based" and the current signal is bearish/broken. Avoid or Short Bitcoin until the signal reverses. A sudden sentiment shift or regulatory catalyst sparking a rally.
Up Next
This Milk Road Daily video, published March 03, 2026, features Keith McCullough discussing TLT, SLX, AQWA, XLF, JPM, XLK, IGV, MSFT, CRM, USO, XLE, ITB, XHB, EWJ, GLD, XLU, BITO, IBIT. 9 trade ideas extracted by AI with direction and confidence scoring.
Speakers: Keith McCullough · Tickers: TLT, SLX, AQWA, XLF, JPM, XLK, IGV, MSFT, CRM, USO, XLE, ITB, XHB, EWJ, GLD, XLU, BITO, IBIT