This newsletter is an special, talking about the war in the Middle East and what investors can do in this environment.

Geopolitical Escalation and Market Positioning

The situation in the Middle East has escalated materially. As always during geopolitical shocks, headlines dominate attention. However, while many focus on dramatic images and emotional narratives, disciplined investors must focus on positioning and capital allocation.

There are three key principles to understand in this environment.

First, be extremely selective about whose analysis you consume. During geopolitical crises, a wave of so called experts emerges overnight. Many opinions are driven by ideology, bias, or the need for engagement rather than structured macro analysis. Markets do not reward emotional narratives. They reward positioning based on liquidity, capital flows, and regime shifts.

Second, aggressive shorting during escalation phases is dangerous. Yes, markets can drop sharply. But they can also reverse violently. Government intervention, exchange closures, liquidity injections, or coordinated responses can invalidate crowded short trades quickly. Volatility expands, spreads widen, and risk management becomes significantly more complex. These are environments where retail participants often lose control.

Third, sometimes the highest probability decision is patience. War driven volatility creates emotional extremes. Emotional extremes create poor decision making. If you were not positioned before the escalation, chasing now often leads to suboptimal entries.

What To Do In This Environment

In our Mastermind we had already discussed the increasing probability of geopolitical conflict weeks in advance. We follow geopolitics closely and monitor leading indicators such as crude oil futures. Oil markets often move weeks before equities or crypto when geopolitical tensions rise. The strength in crude oil was one of the early signals we tracked.

As a result, positioning in commodities, particularly energy and precious metals, has benefited from the geopolitical risk premium. That is not emotional trading. That is allocation based on regime awareness.

Going forward, the focus should be on capital preservation and disciplined execution:

Avoid emotional reaction trades.
Reduce leverage if you are using derivatives.
Let volatility settle before deploying size.
Rotate into strength rather than panic into weakness.

In these environments, liquidity and flexibility are strategic advantages. When regime shifts occur, loyalty to an asset class becomes expensive. Allocation discipline becomes critical.

We do not trade headlines. We trade structure.

Stay calm.
Protect capital.
Wait for confirmation.

Then execute with precision.

Bitcoin

Bitcoin closed the month with another bearish candle, reinforcing the broader macro downtrend. The higher time frame structure remains clearly bearish and there have been no meaningful signals suggesting a confirmed cycle bottom.

On the lower time frames, Bitcoin continues to follow the roadmap I outlined in recent months. Price is trading within a defined range, with major resistance between $70,000 and $72,000 and potential downside toward $55,000. A week ago I mentioned that I expected short term strength following a move into the $62,000 area, and that strength is now materializing. However, unless Bitcoin decisively breaks and holds above the $70,000 to $72,000 resistance zone, the probability of a move into the $80,000s remains low. To the downside, there is a possibility of forming a higher time frame bullish divergence, which could trigger a more sustained relief rally before Bitcoin ultimately moves below $50,000.

Economic Data, Rates & the Fed

Last week’s economic data delivered mixed signals, with the main surprise coming from hotter than expected wholesale inflation. Core PPI rose 0.8% month over month and 3.6 percent year over year, marking the strongest annual reading since March 2025, while headline PPI also exceeded expectations. The increase was largely driven by a sharp rise in professional and commercial equipment margins. On the more constructive side, Chicago PMI surged to 57.7, the highest level since May 2022, consumer confidence improved to 91.2, and weekly jobless claims remained subdued at 212’000. Construction spending and inventories were stable, though factory orders disappointed. The Atlanta Fed’s GDPNow estimate for Q1 remained unchanged at 3.1 percent, signaling steady but not accelerating growth.

Despite sticky inflation, Treasury yields declined across the curve, with the 10 year yield falling below 4.00%, likely reflecting a flight to safety amid concerns around private credit, AI disruption, and geopolitical uncertainty involving Iran. The yield curve flattened modestly as short and long rates moved lower. Market expectations for Federal Reserve rate cuts in 2026 remained largely unchanged, with March holding at 5%, April edging up slightly to 20%, and June steady at 57%. Investors appear cautious, acknowledging inflation risks while also positioning defensively amid broader uncertainty, leaving policy expectations relatively stable but sensitive to upcoming data.

Economic: S&P Final U.S. Manufacturing Purchasing Managers Index PMI, ISM Manufacturing, Auto Sales
Earnings: AAON Inc. (AAON), ADT Inc. (ADT), AST SpaceMobile Inc. (ASTS), Credo Technology Group Holding Ltd. (CRDO), EchoStar Corporation (SATS), MongoDB Inc. (MDB), Norwegian Cruise Line Holdings Ltd. (NCLH), Venture Global Inc. (VG)

Economic: New York Federal Reserve President John Williams remarks, Minneapolis Fed President Neel Kashkari interview
Earnings: AeroVironment Inc. (AVAV), AutoZone Inc. (AZO), Best Buy Co. (BBY), CrowdStrike Holdings Ltd. (CRWD), GitLab Inc. (GTLB), QXO Inc. (QXO), Ross Stores Inc. (ROST), Sea Ltd. (SE), Target Corporation (TGT), Thor Industries Inc. (THO), Viking Holdings Ltd. (VIK)

Economic: ADP Employment Report, S and P Final U.S. Services PMI, ISM Services, Fed Beige Book, EIA Crude Oil Inventories
Earnings: Abercrombie and Fitch Co. (ANF), American Eagle Outfitters Inc. (AEO), Broadcom Inc. (AVGO), Brown Forman Corporation (BF/A), Dycom Industries Inc. (DY), Ecopetrol S.A. (EC), Full Truck Alliance Co. (YMM), Okta Inc. (OKTA), Rigetti Computing Inc. (RGTI), Veeva Systems Inc. (VEEV)

Economic: Continuing Claims, EIA Natural Gas Inventories, Initial Claims, U.S. Productivity, Import Prices
Earnings: Alibaba Group Holding Ltd. (BABA), Burlington Stores Inc. (BURL), Canadian Natural Resources Ltd. (CNQ), Ciena Corp. (CIEN), Costco Wholesale Corp. (COST), JD.com Inc. (JD), Kroger Co. (KR), Marvell Technology Inc. (MRVL), Petroleo Brasileiro S.A. (PBR), Samsara Inc. (IOT)

Economic: Nonfarm Payrolls, Average Hourly Earnings, U.S. Unemployment Rate, Cleveland Fed President Beth Hammack speaks
Earnings: Algonquin Power and Utilities Corp. (AQN), Embraer S.A. (EMBJ), Eve Holdings (EVEX), Genesco Inc. (GCO), Tsakos Energy Navigation Ltd. (TEN)

Dates: h4 bold

If you manage a 6-figures or more portfolio, missed the top and want clarity with a structured timing system, make sure to get my free training: https://sonderbergresearch.com/video

Kind regards,
Diego Sonderberg

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