Bloomberg Surveillance 4/7/2026
Speakers
Summary
- Markets exhibit a dissonance: equity indices are on a 4-day winning streak, credit spreads are tight, and capital markets are wide open (e.g., large tech bond deals), while the oil volatility index (OVX) is at its highest level since 2008, signaling extreme stress.
- The primary near-term risk is the 8 PM ET deadline set by President Trump for Iran to agree to a deal, including reopening the Strait of Hormuz, or face the destruction of key civilian infrastructure like bridges and power plants. Experts see escalation as more likely than a diplomatic breakthrough.
- A significant oil supply shock is underway. The Strait of Hormuz remains effectively closed, with only a trickle of bilateral deals allowing some tankers through. This is a broader macro story, not just a bond story, with global growth estimates being revised down.
- Inflation is an immediate concern. Higher energy prices are expected to push headline CPI toward 3-3.25% in the near term, with a risk of a sharp monthly spike. However, core inflation and market-based inflation expectations (e.g., 5y5y) have not moved similarly, distinguishing this from the 2022 demand-led shock.
- The Fed is in a "wait-and-see" mode. The conflict introduces a two-sided risk: higher inflation pressures versus a potential growth slowdown. Some Fed speakers (e.g., Beth Hammack) have mentioned a rate hike as possible, but the base case for many is a prolonged hold, with potential rate cuts later in the year depending on leadership and economic data.
- Equity market resilience is attributed to strong underlying fundamentals, particularly in tech/AI. Earnings estimates have risen since the conflict began, driven partly by energy stocks. Institutional flows are showing a "reordering" back into beaten-up tech sectors.
- Private credit remains a focal point of fragility, described as "opaque." Recent fund redemptions (e.g., Goldman Sachs) highlight liquidity risks, but the broader credit market shows ample liquidity for large, high-quality issuers.
- A strategic view is that the conflict may not end soon. Iran has gained significant leverage by controlling the Strait of Hormuz, and a U.S. military operation to secure it would be complex and prolonged, suggesting the "fog of war" and high volatility may persist.
- Portfolio strategists advocate for a "barbell" approach: building resilience while using market dislocations to add to long-term themes like AI and related infrastructure/resource plays. Some see high convexity in trades like gold and financials.
Trade Ideas
Berro highlighted the robust demand for bonds from hyperscalers (like Google) and mentioned Broadcom's deal with Google to supply custom AI chips as an example of ongoing strategic investment. In a stable macro and Fed policy environment, demand for high-quality issuers in the tech/AI ecosystem remains strong. These companies are seen as financing long-term growth initiatives that the market is willing to fund. The capital markets access and continued investment in AI infrastructure are positive for the involved companies' growth trajectories. A sharp, unexpected tightening of financial conditions that closes the capital markets window.
Moore stated she would buy gold today if an investor didn't have exposure, holding it as an important "ballast" in a multi-asset portfolio. She added it was originally included due to a preference for it over long-duration bonds as a hedge. In an environment of geopolitical uncertainty and potential stagflationary shocks, gold serves as a non-correlated store of value. Its recent underperformance during the conflict was attributed to poor positioning, not a failure of the thesis. It is a recommended hedge and portfolio diversifier, especially given still-subdued positioning among retail investors. A rapid de-escalation of the Iran conflict and a swift return of real interest rates to sharply positive territory.
Cronk stated his firm downgraded energy and upgraded technology, citing the asymmetry of risk. He noted energy equities are up 33% and crude is up 57%, a 40-point differential, while tech trades in line with the S&P's forward P/E despite having double the earnings growth. Historical analysis shows that when oil becomes the dominant story, it is generally time to move away from energy equities. The risk/reward is now unfavorable after the massive run-up. The sector is at risk of a peak, and capital should be rotated into areas with better upside potential and less crowded positioning. A prolonged, severe supply disruption that pushes oil prices significantly higher for an extended period.
Cronk explicitly upgraded the technology sector, stating it pays no premium for double the earnings growth of the S&P (35% vs. 18%). The sector is seen as a "safe haven" with less cyclicality than in the past. Spending on AI is viewed as existential and the last area where companies will cut capital expenditures, providing fundamental support. The favorable risk/reward and growth profile, coupled with receding valuations, make the sector attractive for re-allocation. A broad global economic slowdown severe enough to force cuts in all corporate spending, including on technology.
Cronk listed financials as a "high convexity" trade, noting financial equities are down 9% and some banks are down 30-50%, implying a lot of bad news is priced in. If the macro environment changes and interest rates move higher (or stability returns), the deeply discounted financial sector could see significant upside as shorts cover and investors re-enter. The sector offers asymmetric upside potential from current depressed levels if the intermediate-term outlook improves. A deep economic downturn leading to significant credit losses, worsening the fundamental picture.
Up Next
This Bloomberg Markets video, published April 07, 2026, features Kelsey Berro, Kate Moore, Darrell Cronk discussing GOOG, AVGO, GOLD, XLE, XLK, XLF. 5 trade ideas extracted by AI with direction and confidence scoring.
Speakers: Kelsey Berro, Kate Moore, Darrell Cronk · Tickers: GOOG, AVGO, GOLD, XLE, XLK, XLF