Did you miss the equity melt-up?
And are you worried that getting in now is to be the greater fool who buys at all-time highs ahead of what everyone knows is a looming “physical crunch” from the ongoing closure of the world’s most important maritime energy chokepoint?
If the answer to those questions is “yes,” don’t worry: You’re not alone. In fact, I imagine most investors were reluctant to buy the Iran war dip — which never even made into correction territory on the S&P — and are just as reluctant to jump aboard a moving train given a lot of scary-sounding headlines about “inevitable” payback from disruptions in the Strait of Hormuz.
The figures below, from crowd favorite Charlie McElligott, give you a sense of what’s just happened.
McElligott’s annotations tell the story, but just in case: Everyone was hedged for the worst, which paradoxically put a floor under the market, and when it (the market) turned, no one had exposure to the right-tail, creating a panic grab for upside.
The result of that panic grab was higher realized vol on up days this month than down days, and by the sixth- and second-widest margins since 2020 on the S&P and Nasdaq 100, respectively.
“Nobody owns enough of the market to capture the extent of the equities rally and is forced to grab back into upside optionality,” Charlie wrote.
In the week to April 22, global equity funds took in nearly $26 billion on EPFR’s tally. $18 billion of that went to US-focused funds, which’ve seen inflows every week since the March lows.
The figure above, from BofA, gives you some big-picture context for 2026 in terms of flows: Equity funds are on track for a record year of inflows north of $1 trillion.
Out of a net $313 billion YTD inflow to global stock funds, US shares are responsible for more than $115 billion — so, well more than a third.
“When it comes back to it right now, ‘It’s the economy, stupid,'” McElligott said, channeling Carville. “The US remains the ‘cleanest dirty shirt’ and you can see it in the EPFR flows.”
And yet, he acknowledged the quandary mentioned here at the outset. Nations are burning through their emergency oil reserves and Iran’s staring down prospective shut-ins amid the US blockade, a situation which could make an already irascible Ahmad Vahidi even more dangerous.
Although central banks can’t counter energy supply shocks, they have to stay vigilant given the potential for higher input costs to seep into consumer price growth at a time when inflation expectations are still fragile. Hawkish central banks can exacerbate any growth drag as consumers are forced to divert scarce disposable income to higher pump prices and energy bills.
“The ugly truth,” McElligott said, is that as long as the Strait stays closed, “left-tail risk builds further at the same time people are being forced back into the market.”
What to do? According to Charlie, some pros are inclined to barbel their equity exposure by pairing longs in red-hot semis with longs in energy. He called that “the new 60/40.” Clients are also long convexity via VIX calls and the S&P put wing — you know, just in case.
You mentioned not letting your politics interfere with your investments earlier this week. I find it very hard to invest in this face-ripping rally, as to do so would somehow feel like I am turning a blind eye and supporting Trump’s decision to go to war. Some sort of “ethics tax” I suppose.
George W. Bush waged an unprovoked war in Iraq, a war which continued under Barack Obama. Did you invest at any point during that nearly decade-long boondoggle? Because somewhere between a quarter million and a half a million Iraqis died over that period as a result of our noble efforts to promote democracy. So far, the death toll in Iran’s less than 2k. Point being: This isn’t about “the war” or any “ethics,” it’s about Trump. That’s what you have to avoid. If you want to invest based on your moral principles, and stick to that assiduously, great. That’s admirable. I couldn’t do it. But if your principles only apply when Trump’s president, they aren’t principles, they’re political bias.
Incidentally, that’s not an endorsement of the rally. It’s just a general comment on investment psychology.
Understood.
You’re right of course, and those are the horns of my particular dilemma. My comment was meant as more of a lament that I cannot seem to separate my feelings from my investments, rather than a philosophy that others should subscribe to, quite the contrary. I used to be a moderate Republican — a now nearly extinct species (I actually voted for George’s father). I abhorred George W. Bush, not just because I found him unethical — which I certainly did — but because — and I apologize for having to say this — I found him to be somewhat unintelligent and rather poorly advised.
I really wasn’t invested in the markets back then at all (except for gold, money markets, and CDs), but I did make money during Obama’s two-terms. Did (do) I find Barack Obama to be more ethical or moral than Donald Trump? I must confess I did (and do). But I digress, I am not making as much on my investments today as a result, and I suppose that makes me a (greater) fool somehow (damn my Catholic upbringing!)
For what it’s worth… You”re not alone there, brother.
Thanks.
I invest for income so I only look at one thing, whether my income this year will be bigger than it was last year, and the year before etc. I pay little attention to assets, commodities, stocks, etc., just income. It’s risen every year since the Millennium by at least 5%. What’s wrong with that? I reinvest a third of what I take in, sometimes more. I donate a quarter to my favorite charities. I don’t “beat the market.” I don’t care about the “market;” it has no honor, no soul. I invest to get paid so that’s what I do.
that’s a nice position to be in Mr. Lucky. reading it reminds me of the dividend kings crowd back on seekingalpha long ago when H used to post there. i don’t miss that site.