Good morning, investors. The Iran war has entered its fifth week. Markets have sold off, investors are rotating out of tech names, and geopolitical uncertainty is still high.

That said, the underlying resilience of the economy could pose its own kind of risk.

Economic complacency or confidence?

The US economy hasn’t seen an extended downturn for over a decade and that track record has become a double-edged sword.

Since 2010, the American economic machine has only contracted for three months and it happened during the once-in-a-lifetime 2020 pandemic.

Every other macro shock from European debt crises, policy errors, sharp rate hikes and oil shocks have had no real impact.

That streak, according to DataTrek Research, has distorted how investors respond to risk.

While some Wall Street banks have raised their recession odds for 2026, markets continue to price in effectively zero shot of a slowdown given that:

Most of those variables are positive.

Yet in DataTrek’s view, an economy full of participants who believe it to be recession-proof comes with its own set of problems.

The Fed, for one, has much less reason to rush to the rescue if it operates under the assumption that the US economy can withstand a beating.

Ongoing uncertainty with Iran and oil prices have generated chatter of a potential rate hike.

But it’s the assumed resilience of the economy that even allows that to be an option.

Long-term rates, too, remain elevated for the same reason.

Markets have concluded that the neutral rate of interest is likely higher than it used to be, and the strength of the macro outlook gives bond investors no reason to believe otherwise.

The risk, of course, is the looming threat of complacency.

“Capital markets, be they for Treasuries or risky corporate bonds or small US public companies, all use the idea of a nearly recession-proof US economy as their current baseline,” wrote DataTrek co-founders Nicholas Colas and Jessica Rabe.

“As long as the underlying assumption (no economic contraction, ever) holds true, financial assets can continue to perform well.”

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🛢Oil settled above $100 for the first time since 2022. The Iran war is entering its fifth week, and mixed reports suggest that the US and Iran have yet to establish terms for a ceasefire or the end of the war. (CNBC)

🏦 Jerome Powell sees no threat of a private credit contagion. He said the sector is instead going through a “correction,” and while some people will lose money it doesn’t appear as if it will catalyze a systemic event. (Yahoo Finance)

✅ Nike reports earnings Tuesday and Wall Street sees it as a consumer health check. Analysts expect $0.29 per share on $11.22 billion in revenue, with the stock down roughly 60% over the past five years. (TastyLive)

🗓 March 31, 1980: President Carter signed the Depository Institutions Deregulation and Monetary Control Act, the most sweeping US banking reform since the Great Depression. The law phased out Depression-era caps on deposit interest rates and expanded Federal Reserve oversight to every US depository institution

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