The United States will blockade the Strait of Hormuz.
Both stocks and oil are weak because of Trump’s strategy for the Iran War. But what other options does the President have? Iran is a dangerous rogue regime.
https://www.cnbc.com/2026/04/12/oil-prices-iran-war-strait-hormuz-blockade.html
I continue to believe that China and other nations will persuade Iran to open the Strait. Iran does not want to be completely isolated from the global community. China wants the Strait open to ensure that global growth. China’s economy depends on exports because domestic consumption is weak. The Chinese residential real estate depression weighs heavily on household consumption.
President Trump says the United States will blockade the Strait of Hormuz for all ships, entering or exiting.
https://www.wsj.com/livecoverage/iran-war-latest-news-israel-us-lebanon-2026
I anticipate further negotiations. A major sticking point is Iran’s refusal to give up developing a nuclear weapon. As Thomas Rogan suggests, the United States should adopt a “whack a mole” strategy of bombing when intelligence suggests Iran is close to having a nuclear weapon and the ability to deliver it.
The United States Navy is beginning a mine clearing operation in the Strait.
https://thehill.com/policy/defense/5827218-us-military-demining-strait-hormuz/
Saudi Arabia’s east west pipeline has been repaired and is operating at capacity.
Markets and Stocks
Momentum is positive. The S&P 500 is trading above its 200 day moving average and above the level it had reached before the war started at the end of February. Last week’s stock performance was the best since November. Earnings growth should be strong. Economic growth is positive though soft because of the war. Work by economists at the Dallas Fed demonstrates that the inflation spike should be temporary. Core inflation remains well behaved. Very importantly, Jason Furman confirms that an inflationary wage price spiral is NOT starting. He notes that wage growth continues to slow.
Without wage inflation, overall inflation cannot continue to increase. If people don’t have the money to chase prices, then they cut back on expenditures.
Market Leadership
Semiconductors, the hyper scalers ex Tesla, cyclicals, industrials and financials are leading the rebound.
Goldman Sachs
Goldman Sachs reports later this morning before the opening bell. GS should release fantastic numbers.
Eaton
In the industrial sector, Eaton, ETN, is a favorite. The company is seeing a 200% growth rate for orders in its business for data centers. See CNBC and ChatGPT. The stock is up 25% year to date. I believe that it will go much higher and rival GE Vernova for performance. GEV is up 600% over the past five years.
Importantly, Eaton stock has broken out and is trading at an all time high.
Eaton sells power distribution systems, switchgear and transformers as well as cooling systems.
Caterpillar, Eaton, Rolls Royce and GE Vernova are my top choices in the industrial sector.
Meta
Meta turns capital investment into almost immediate sales through improving ad revenue.
Meta AI Advantage suite is generating revenues of $60 billion on an annual basis. Ad impressions are up 18%. Ad quality is improving, up 12%. Meta invests aggressively but it possesses cash reserves of over $80 billion. I see 30% upside for Meta over the next 12 months.
https://finance.yahoo.com/markets/stocks/articles/meta-stock-needs-show-much-133414875.html
Lumentum, Coherent, Corning Glass and Ciena
The four named stocks are on fire. I expect very strong performance into the next decade.
LITE and COHR are the titans of the photonics and laser industry. They provide the optical nervous system that allows Nvidia’s GPU clusters to communicate at the speed of light.
In the optics space, GLW provides the physical layer, the fiber. LITE sells laser chips and components and COHR provides laser chip modules.
Ciena makes the WaveLogic systems that determine how data is routed on an AI campus.
Ciena sits at a higher level of complexity. While LITE and COHR make the “bulbs” and “plugs,” Ciena makes the WaveLogic systems that determine how data is routed between different buildings in an AI “campus.” See Gemini AI.
Agentic AI
AI is growing at a rate in excess of 100%. Such growth will cause demand for chips to accelerate over the course of the year.
Agentic AI systems behave like digital agents. They understand a task. The system breaks the task down into discrete steps. The system uses tools, like the web, code and APIs to complete the task. An API enables different software protocols to communicate. See ChatGPT.
For example, agentic AI can plan a vacation with a specific price ceiling.
Economics
Staged homes sell faster and at 10% higher price points.
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5880062
Orban of Hungary
Orban is out. That is fantastic. He was a toady for Putin and China. He lost in a landslide win by the opposition. Europe and Ukraine are better off without Orban.