Good morning investors,
President Trump's deadline for Iran to reopen the Strait of Hormuz arrives tonight at 8 PM ET. The penalty for non-compliance is said to be strikes on power plants and bridges. The stakes could not be higher for short-term market direction.
Markets spent Monday in a state of confused optimism. The S&P 500 gained 0.4%, the Dow added 0.3%, and the Nasdaq rose 0.5%. Oil prices climbed despite the green close, reflecting the market's genuine uncertainty about what comes next.
This morning, futures are lower as hopes for a deal before the deadline fade. The Wall Street Journal reported that negotiators are not optimistic an agreement can be reached before 8 PM. Some US officials believe the gap between the two sides remains too large.
Opening Bell
Dow ($DIA ( ▼ 0.03% )) futures have shed 201 points or 0.4%. S&P 500 ($SPY ( ▼ 0.23% )) futures are down 0.5%. Nasdaq 100 ($QQQ ( ▼ 0.65% )) futures have fallen 0.6%.
Trump reiterated his warning Monday that the US will destroy Iran's power plants and bridges if the Strait is not reopened by tonight. He said he extended the original deadline because "it was inappropriate the day after Easter."
"They have 'til tomorrow," Trump said Monday. "Now we'll see what happens. I can tell you, they're negotiating, we think in good faith. We're getting the help of some incredible countries that want this to be ended, because it affects them also."
Axios reported that the US, Iran, and regional mediators are discussing terms for a potential 45-day ceasefire that could lead to a permanent end to the war. Reuters reported that both sides were reviewing a plan brokered by Pakistan. But neither report suggests a breakthrough is imminent.
I do not believe a full / final agreement will be in place by tonight, but since Trump needs a deal, the US has achieved the bulk of its strategic objectives, negotiations are still ongoing, and Iran has made some small concessions on Hormuz, it's likely that the Pentagon and IDF don't commence a scorched earth campaign against civilian infrastructure targets later today.
The pattern of the past six weeks has been clear: Trump sets deadlines, threatens escalation, then extends the timeline as negotiations continue. Iranian officials reportedly expect the same pattern to repeat tonight.
The Market's Bet
BD8 Capital's Barbara Doran summarized the prevailing view on CNBC Monday: "Everybody was betting that it's going to be short term and I think the market still is, and frankly, I still am too. The market will say, 'OK, it's going to be over soon,' and then we can resume where we were going, which is starting the year very bullish."
She noted that continued fiscal stimulus from defense spending provides an additional tailwind once the conflict resolves. That is an important point. The munitions expenditure from this campaign will require years of replenishment regardless of how the war ends.
Trump's comments Monday offered some reassurance on the direction of travel. He said that while he would "like to take the oil," he acknowledged that "unfortunately the American people would like to see us come home." That messaging points toward lower odds of extended escalation.
Broadcom-Google-Anthropic: The AI Infrastructure Story Continues
Broadcom announced Monday that it has signed a long-term agreement with Google to develop and supply future generations of custom AI chips through 2031. The company also signed an expanded deal with Anthropic that will give the AI startup access to approximately 3.5 gigawatts of computing capacity drawing on Google's tensor processing units, starting in 2027.
Broadcom shares rose 3% in extended trading.
The disclosure underscores the continuing surge in demand for AI infrastructure. Anthropic's annualized revenue has now exceeded $30 billion, up from around $9 billion at the end of last year. The company counts over 1,000 business clients spending more than $1 million annually, double the count from just two months ago.
"This groundbreaking partnership is a continuation of our disciplined approach to scaling infrastructure," Anthropic's CFO said. "We are building the capacity necessary to serve the exponential growth we have seen in our customer base."
Mizuho analysts estimated that Broadcom would generate $21 billion in AI revenue from Anthropic in 2026 and $42 billion in 2027. Most of the new infrastructure will be located in the US.
This is exactly the kind of news that reinforces my conviction in the AI thesis. While the market has been consumed by geopolitical headlines, the underlying buildout continues accelerating. The companies providing picks and shovels for the AI gold rush are signing multi-year deals worth tens of billions of dollars. That secular demand does not care about the Strait of Hormuz.
Bill Ackman's Bold Move on Universal Music
Pershing Square announced Tuesday that it is planning to acquire Universal Music Group in a cash and stock deal worth approximately 55.8 billion euros or $64.4 billion.
Under the proposal, UMG shareholders would receive 9.4 billion euros in cash and 0.77 shares of new stock for each share held. That amounts to 30.4 euros per share, a 78% premium to UMG's closing price on April 2. UMG shares surged 11% on the news.
Ackman has long argued that UMG trades at a substantial discount to intrinsic value due to its Amsterdam listing and limited US investor access. The deal would create a newly merged company listed on the New York Stock Exchange.
"UMG's stock price has languished due to a combination of issues that are unrelated to the performance of its music business," Ackman said. He pointed to uncertainty around Bolloré Group's 18% stake, the postponed US listing, and suboptimal shareholder communications.
The transaction highlights something I have been emphasizing: there is substantial value being created in quality businesses even as markets gyrate on daily headlines. UMG owns the catalogs of Taylor Swift, Lady Gaga, and dozens of other artists generating reliable royalty streams. That business model does not depend on whether Trump extends his deadline.
Dimon's 48-Page Warning
Jamie Dimon published his annual shareholder letter Monday. At 48 pages, it is significantly longer than the dozen-odd pages Warren Buffett would send each year. Whether that disqualifies him from the "next Buffett" conversation, I will leave to you.
The key theme was concern about inflation, which Dimon called the potential "skunk at the party" if price growth accelerates rather than continuing to moderate toward the Fed's target. He covered the Iran conflict, AI transformation, credit concerns, trade policy, and the American consumer.
Dimon has been more cautious than the consensus for several years now. His warnings about tail risks deserve attention even as his base case has proven too pessimistic. The market has delivered three consecutive years of double-digit gains despite his concerns.
Nike Hits 15-Year Low
Nike fell to its lowest closing price in 15 years yesterday at $44. The company reported last week that its turnaround is taking longer than management expected, with persistent weakness in China and slow progress clearing older inventory.
This is a reminder that stock selection matters even in bull markets. The Nike brand remains iconic, but execution challenges have compounded for years. The stock is down more than 50% from its 2021 highs. For value investors with patience, these levels may eventually prove attractive. For now, the turnaround thesis requires faith that has not been rewarded.
AI's Impact on the Labor Market
Goldman Sachs published research on how AI is affecting employment patterns. While the overall impact remains small, one result stands out: displaced workers are taking longer to find new jobs. Tech workers in particular see job searches lengthen by a month on average, with earnings dropping when they do find new positions.
"A key mechanism behind these worse outcomes is occupational downgrading," Goldman wrote. "Workers displaced by technology are more likely to move into more routine occupations requiring fewer analytical and interpersonal skills, likely because the same technological shifts that eliminated their positions also eroded the value of their existing skills."
This dynamic supports the hiring freeze approach we have seen from Microsoft and others. Rather than dramatic layoffs, companies can allow natural attrition to gradually shift their workforce composition. The result is less headline drama but real structural change in which types of roles get filled.
Today's Calendar
Durable goods orders for February arrive this morning, expected to show a 1% decline. The New York Fed's one-year inflation expectations will be watched closely given the surge in energy costs. Levi Strauss reports earnings and will provide insight into consumer spending patterns through the conflict.
Final Thought
Tonight's deadline creates binary risk for short-term traders. Either the pattern of the past six weeks continues with another extension and continued negotiations, or Trump follows through on his threat to strike civilian infrastructure. The market appears to be betting on the former.
For long-term investors, tonight's outcome matters less than the trajectory. Both sides have expressed willingness to negotiate. The economic pressure on all parties grows daily. The question is when, not if, this conflict ends.
The AI infrastructure buildout continues regardless. The best companies in the world are signing multi-year, multi-billion dollar deals to expand capacity. Valuations have compressed. Short interest remains at extreme levels. And history suggests that geopolitical conflicts produce short-term volatility, not long-term direction changes.
Stay disciplined. The playbook continues working.
As always, feel free to reach out with questions about navigating this environment.
Best regards,
Dan Sheehan [email protected]
Subscribe: https://substack.com/@dansheehan3
This newsletter is for informational purposes only and should not be considered as investment advice. Please consult with your financial advisor about your specific situation.