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Morning Notes — US-Iran Tensions Ease

US-Iran Tensions Ease

January 8, 2020

The initial market response to Iran’s missile attack followed the script, but the event is now viewed as a small positive as it appears both sides seem eager to deescalate. As long as there are no American casualties, it seems unlikely the US will respond. Tehran’s military actions in the region will likely continue after a brief pause, but it’s leadership doesn’t seem interested in antagonizing the US or its allies into war. Yesterday, we explained how ongoing US-Iran tensions were likely to act as a restraint on multiple expansion. We think this is the appropriate way investors should view almost all geopolitical headwinds…at least initially. And de-escalation, depending on its degree, will move US-Iran further to the periphery and refocus investor attention back to the Q4 narrative (central bank accommodation and favorable macro developments) that caused multiple expansion/equity re-rating.

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