All Portfolio Managers, Risk Desks, Macro Strategy
INTERNAL MEMO
TO: All Portfolio Managers, Risk Desks, Macro Strategy
FROM: The Situation Room (you know which one)
DATE: March 31, 2026
RE: Week Five. Still Going. Please Advise.
Gentlemen, ladies, and you in the back still running a Magnificent Seven overweight — please find below a situational update for your Monday morning positioning review. As always, this memo contains material information. As always, none of it will make you feel better.
I. THE GEOPOLITICAL SITUATION
The war is in its thirty-first day. The Strait remains, in the technical diplomatic parlance now being used by the White House, "not open for business." Brent crude is trading around $115 per barrel, up roughly sixty percent since February 28. For those keeping score at home: the price of oil at the start of this conflict was $72. Gasoline at U.S. pumps is now at a national average of $3.99, which means we are approximately one refinery incident away from the $4 psychological line that has historically caused politicians to do things that are bad for markets.
The diplomatic situation can be summarized as follows. The United States has presented Iran with a 15-point peace framework. Iran has described this framework as "excessive, unrealistic and irrational." Iran has counter-proposed a five-point framework. The U.S. has not publicly described Iran's five points, which suggests they are either being considered seriously or are unprintable. Pakistan is mediating. China is supportive of Pakistan's mediation. The Pakistani foreign minister is doing all of this with a hairline fracture in his shoulder, which, to be candid, is a more admirable commitment to the job than most of us demonstrate on a good day.
Meanwhile, the commander-in-chief told the Financial Times that his preferred outcome is to "take the oil in Iran," floated the possibility of seizing Kharg Island — the terminal through which approximately ninety percent of Iran's crude exports flow — and told reporters aboard Air Force One: "We negotiate with them and then we always have to blow them up." Iran's parliament speaker responded by saying Iranian forces were "waiting for the arrival of American troops on the ground to set them on fire." This is the diplomatic environment in which we are pricing assets.
Trump has also set a deadline of April 6. This is the third deadline. The first two were extended. We will update you if a fourth is issued.
Iran, in a gesture described by Trump as "a sign of respect," has agreed to allow twenty oil tankers through the Strait. As of this writing, there is no confirmation that those tankers are actually moving. We will treat this as a rounding error until further notice.
II. THE MARKET SITUATION
Futures are up one percent this morning on the WSJ report that the President is willing to end military operations even if the Strait remains largely closed. WTI slipped back below $102. Equities attempted a rally. The Dow is holding. The Russell 2000 is not. This is the pattern: each piece of de-escalation noise produces a rally that lasts until the next threatening Truth Social post, which arrives within approximately four to six hours.
The S&P 500 has now logged five consecutive weekly declines — the longest losing streak since early 2022. The Nasdaq is in correction. The Dow joined it on Friday. The VIX is above 30. Market breadth has, as our technical colleagues put it, "collapsed," with fewer than 20% of S&P 500 names trading above their 50-day moving averages. The equal-weight S&P, which had been the optimist's refuge, slipped below its 200-day on Friday and is now down 2.4% for the year.
Gold is up 1.4% this morning. No one is surprised.
To the macro data: import prices rose 1.3% in February, the largest monthly jump since March 2022, driven by a 3.8% increase in fuels and lubricants. Export prices were up 1.5% — the largest monthly advance in four years. Weekly jobless claims came in at 210,000, up 5,000. The March payrolls number is due Friday. Markets will be closed for Good Friday. The number will land into a Sunday evening of futures trading, which is always a calm and measured environment.
III. THE AI SITUATION (YES, THIS IS ALSO HAPPENING)
While we were all occupied with the Persian Gulf, Google quietly dropped a compression algorithm called TurboQuant that reduces the memory required to run large language models by six times with no measurable accuracy loss. The technique compresses the key-value cache from 16-bit floating point down to approximately 3 bits per value. On NVIDIA H100 GPUs, this translates to an eightfold speedup in attention computation at 4-bit precision.
The market did not receive this calmly. SK Hynix fell 6%. Samsung fell nearly 5%. Micron declined over 7%. Cloudflare's CEO called it "Google's DeepSeek," which is the phrase now used to describe any efficiency announcement that causes memory chip investors to have a bad afternoon.
For context: this is a software fix for a hardware bottleneck. The bull case for SK Hynix, Samsung, and Micron was premised on the assumption that AI inference would keep demanding exponentially more memory bandwidth — permanently. TurboQuant does not destroy that thesis, but it revises it. If inference requires six times less memory per user request, you either need six times less hardware or you serve six times more users with the same hardware. The second scenario, frankly, means AI gets cheaper and more ubiquitous, which means more inference volume, which means the memory demand curve does not necessarily collapse — it just reorients. Nomura had already been forecasting a "magnitude-level" DRAM price jump in Q2 2026. TrendForce's Q1 data showed contract DRAM prices up 55-60% quarter-on-quarter.
The sell-off was probably overdone. The TurboQuant paper is still unpublished in production — formal presentation is at ICLR 2026 next month in Rio. There is no official Google implementation. Independent developers had working GitHub ports before the market opened, which is either impressive or concerning depending on how you feel about independent developers.
The more interesting read is structural: this is the second time in fourteen months that a pure software breakthrough has caused hardware-dependent AI infrastructure bets to hiccup badly. DeepSeek in January 2025. TurboQuant now. The pattern being established is that the AI buildout is simultaneously the most capital-intensive infrastructure boom in a generation and a domain where the rules can be rewritten by a research paper on a Tuesday afternoon.
IV. WHAT TO WATCH
The April 6 deadline is the only thing that matters for oil. If it passes without military escalation to Iranian energy infrastructure, markets will rally meaningfully. If the U.S. strikes Kharg's oil export terminals — not the military positions already hit, but the actual loading infrastructure — the scenario shifts from severe disruption to something that commodity desks are using words like "unprecedented" to describe. Do not require us to elaborate on what $200 Brent does to Q2 corporate earnings.
Powell speaks today at Harvard. The event is described as a moderated discussion with an economics class, not a policy speech. Markets will treat it as a policy speech. Watch the 2-year around 4%, the 10-year around 4.5%, and the 30-year at the 5% level — these are the thresholds flagged by Schwab's derivatives team as triggers for renewed equity pressure if broken higher.
Nike and McCormick report Tuesday. Conagra on Wednesday. These are consumer staples and discretionary names that will give us the first hard read on how households are absorbing $4 gasoline. Read their guidance, not their beats.
V. FINAL NOTE
Commodities are up 75% year-to-date in Q1 2026. The Magnificent Seven are down double digits. This is not a market doing what anyone's 2025 year-ahead outlook said it would do. When the geopolitical picture clears — and it will clear, eventually, because everything clears eventually — there will be a rotation of significant violence back into oversold equity names. The question is whether you are positioned to benefit from it, or whether you spent Q1 averaging down into Microsoft.
We do not offer specific advice in this memo. You know this.
Good luck out there.
This memo is fictional and for informational entertainment purposes only. Nothing herein constitutes investment advice.