The market is under pressure, but not breaking down:
after the outbreak of the Iran conflict, the S&P 500 fell by less than 3%, with dip-buying still present.
Three core market beliefs are providing support:
the war will not last long
private credit does not pose a systemic risk
Trump will always step in to support the market (TACO)
Capital flows are showing selective withdrawal:
High-yield bonds, emerging markets, and financial stocks are under pressure, but there has been no panic selling in the broader market.
Tail risk is rising:
VIX skew is approaching historical highs, suggesting that the market is paying a premium for extreme downside protection.
The key to stagflation risk is oil:
If disruptions in the Strait of Hormuz persist, rising oil prices could worsen inflation and weigh further on growth.
Two possible market scenarios:
Oil prices fall back → inflation proves temporary, which would support risk assets
Stagflation worsens → equities could face much greater downside pressure
Comment:
To be able to buy and hold, the most important thing has never been courage, but conviction. Whether you own a single stock or the broader market, what you are really doing is believing that a certain assumption will hold true.
In the case of the U.S. stock market right now, the market is effectively built on three very clear beliefs: the war will not drag on for too long, private credit will not blow up, and Trump will always step in to support the market. As long as these three assumptions remain in place, the market can stay stable amid uncertainty, and even continue to attract dip buyers.
I believe that, most of the time, problems eventually do find a solution. The market has also come through crisis after crisis in the past. But the real question is not whether problems exist — it is this:
What will you do when your conviction starts to weaken?
When the assumptions are gradually proven wrong, the market usually does not give you much time to think. And at that moment, you probably already know the answer.
Disclaimer:
The above content reflects personal views and market discussion only. It does not constitute any investment advice or recommendation to buy or sell. Investing involves risk, and readers should make their own assessments and bear responsibility for their own decisions.