With markets increasingly confident of a peace agreement being signed soon between the U.S. and Iran, investors may be wondering which assets they should be buying when the announcement comes.
A team at Bank of America led by chief strategist, Michael Hartnett offered a few ideas in their weekly Flow Show note to clients released Friday. A contrarian 'winners-of-the-peace' shopping list includes consumer stocks, real-estate investment trusts, European shares, bitcoin, gold and emerging-market currencies, particularly those that have been bashed up the worst, such as India (USDINR) and Indonesia (USDIDR).
Hartnett said President Donald Trump should move quickly to wrap up the U.S.-Iran conflict, because getting asset prices higher is the best way to implement his "America First" strategy. The urgency comes as Trump's inflation approval rating has plummeted to 27% - dropping below former President Joe Biden's - while U.S. oil inventories are hovering at a 45-year low. As well, data released this week showed consumer-price inflation above 4%.
As for those immediate beneficiaries to an end of hostilities in the Gulf, Hartnett and his colleagues noted that REITs were touching new highs this week. The most representative exchange-traded fund, Vanguard's real estate vehicle on the asset class VNQ, is now up 9% on the year. Consumer stocks, as measured by the State Street Consumer Discretionary Select Sector SPDR ETF XLY, are more than 10% off their April lows also.
Hartnett pointed out that given the extent of deleveraging that has taken place in bitcoin (BTCUSD) and gold (GC00), both of these assets are due a reversal. Bitcoin is down 27% so far in 2026 and gold down 2%, but both are still trading pretty much at their lows. The strength of the dollar DXY in recent months further contributed to derisking on those assets.
European shares XX:SXXP are back at the levels at which they traded on the eve of the conflict, but the heavy-dependency on imported energy did push that benchmark index down 10% at one point in April.
India and Indonesia were also badly affected by the spike in energy prices and the difficulty in obtaining sufficient quantities of crude (BRN00). The rupee has fallen 5% against the dollar this year and the rupiah has conceded 6.5%.
Hartnett's 'Bull & Bear Indicator' - a proprietary measure of trading sentiment - is still signaling a sell call with a reading of 8.8 out of 10, but he acknowledges that for now "asset allocation is frozen bullish." He recommended investors keep taking trading chips off the table until tighter financial conditions peak once new Federal Reserve Chairman Kevin Warsh turns hawkish - as the strategist expects - at the central bank's July 29 meeting.
Since 2002, that indicator has triggered a sell call 17 times, proved accurate on 60% of those ,and led to an average loss for global stocks in the following two to three months of 2%-3%.
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