Market Briefing For Monday, March 30

Also we want China 'not' to use this crisis as an opportunity to attack Taiwan; if anything the advent of this kind of 'Terminator war' (machine vs. machines is just starting; although we've already seen it in Ukraine) should tame human aspirations regarding either controlling Taiwan 'or' prevailing in a conventional war.. which we may be watching it one of it's last iterations. Why? Because it's pretty clear the United States and Europe developed but did not produce new era drone or similar (attritable / kinetic or defensive counter-drone) weapons; at least not soon enough and not affordably in quantities needed for this fight.

I realize everyone knows that now; but perhaps Congress might have worried less about DoD (okay...DoW now) contracts for their 'home state' companies and instead taken lessons from Ukraine; which was the precursor to much of what you see as far as drone warfare and anti-ship weaponry (very successful vs. a conventional Russian Navy). We've noticed this for a couple years; shifting a focus from regular S&P monitoring (as was expensive much of the time) and specialty focus on 'Quantum Computing' (holding only D-Wave now), to the theme from last last year into this year: 'Global Defense and drone warfare' (to cut to the chase in simple terms obviously with ancillary business including motors, parts and optics such as active & passive infrared; with aviation and data-analytics involved; but somewhat on-hold with Federal spending delays).

Market X-ray: needs little discussion beyond what 'AI' summarized below (it's the first time I ever asked AI to assess 'odds' of war resolution or anything like that).

A 'line in the sand' for S&P was the 200-Day Moving Average and of course broke a couple days ago; now that former support becomes resistance, from a macro perspective. But we aren't heavily in mega-cap techs; and bearish on S&P valuation since last year (actually early; but as I say, beats being late as for fading those gains then)..and our 'next-gen' / 'new-era' tickers hit too; but it is notable not all in equal fashion with some trying to hold around these levels.

After my 'conversation' with AI below; I mention the 'Battle of Midway' as the seminal shift for Allied forces in the Pacific war; and the market sensing the reversal of fortunes for Japan's Navy. Certainly today's allies are looking for a seminal event or regime capitulation; we simply don't have that and while all want to avoid a quagmire in the region; there seems to be consensus that it's essential to get rid of Iran's capacity to ever threaten the free-world again with terror proxies or nuclear weapons. In this regard it's not just Netanyahu; also it is Trump that believes this, and increasingly NATO nations belatedly 'grasp' it.

So we'll see, and it's hard to say what kind of resolution evolves; all pending. Hence we are not yet at the 'Battle of Midway' pivotal equivalent; as much as the parties for 'freeing Iran from tyranny' are striving to achieve just that. In that regard it's hard to imagine negotiating as opposed to just 'buying time' in a sense, for what is likely the next phase of the conflict being positioned for..

Personal note: I disengaged more last year; partially because of the high S&P valuation; and partially as health pushes me a bit closer to full retirement (but would be bored); stopped MarketCast intraday in-favor of occasional X-posts; more than before as easier to post regardless where I'm at; also as because I promised that I would continue this given the Global Defense & Drone focus. Now I don't think I should fully retire; and actually see market opportunity from this; albeit can't identify the day or week given obvious international aspects. I will persevere; probably most of us do; as we're living through history again.

By the way a 4-day trading week just ahead; market closed for Good Friday. AND... Negotiator Steve Witkoff just said in Miami (at a Saudi-sponsored gig) that we should expect face-to-face meetings with Iranians this week. Really?

The war's 'not' a reality show; obviously Iran's not playing by scripted rules; and clearly the mullahs and IRGC are not just fighting for their theocracy, or just against Israel and the USA. I think they fear 'their own people' who, of all involved, have a clear right to demand retribution for what that regime did.

So now an 'independent (AI) perspective of sorts':

Almost unprecedented scenarios for modern times; so I asked AI to reflect on 'odds' of resolution, and got quite an answer (scary as 'sort of' in my style.. The following entirely from AI..aside my parenthetically inserted remarks.. and I will post it without segments broken-up with graphics just to show the flow):

AI:

'You're right to doubt anyone can pin down precise "odds" here—geopolitics isn't a casino with fixed probabilities, and Mideast history is littered with failed predictions on regime fragility (1979 Iran being the ultimate cautionary tale in reverse). No think tank, intelligence agency, or veteran analyst (myself included) has a flawless track record on these calls.

That said, I can give you a grounded, source-driven assessment based on the latest as of March 27, 2026: the ongoing US-Israeli air campaign (launched late February), Khamenei's assassination, leadership decapitations, strikes on IRGC /Basij /security infrastructure, earlier January protests from economic collapse, and Iran's retaliatory closure/disruption of the Strait of Hormuz.

Odds of Overthrowing the Regime

Near-term (next 3-6 months): Very low -- roughly 10-15% at best. Multiple analysts and on-the-ground reporting emphasize regime's resilience despite massive damage. Strikes have hit repressive apparatus (Basij commanders, intelligence minister, internal security sites), energy infrastructure, and senior figures, but there's been no widespread military defections, no coordinated uprising, and security forces remain loyal.

Protests spiked in January over (social suppression/inflation) but were brutally suppressed (thousands killed/detained); recent celebrations after Khamenei's death were fleeting and mixed with mourning. Iran's regime is built for siege—ideologically rigid ("resistance" as core identity), decentralized security, and no viable internal "moderate" successor pool left after targeted killings.

"Conditions" for change; but officials have already dialed back regime-change rhetoric. Netanyahu pushes it harder; Trump / Pentagon voices (e.g. Hegseth) have downplayed it as not a "regime-change war." History shows air power alone rarely sparks successful revolts without ground support or organized opposition—which isn't visible here. (Or at least not as of yet, I'll insert.)

Longer-term (1-3 years): maybe 25-35% for some form of collapse or major transformation (e.g., military/IRGC-led interim rule, fragmentation, or chaotic power vacuum). Full overthrow still isn't the base case—most scenarios point to a weakened-but-lingering theocracy limping along, or worse (regional warlords/civil strife if it fully unravels).

Polls show 70-80% of Iranians reject the Islamic Republic and really want secular democracy, but diaspora hopes and the fragmented opposition don't translate to street power without weapons, leadership, or external "air umbrella" for protesters. (Insert: I think they have the air support 'at times'.)

Odds of Restoring a Secular Society:

Even slimmer: under 10% probability of a stable, secular democracy (Western style) emerging cleanly. This is the "statistical long shot". Iranian society is ripe for change (overwhelming anti-theocracy sentiment), but post-collapse vacuums historically favor the best-organized armed actors (IRGC remnants, military, or proxies) over liberal democrats.

No Poland-style velvet transition here. So, expect more protracted instability, possible civil conflict, or a new strongman/military regime before any secular outcome. Exiled figures like Reza Pahlavi mentioned; but lack broad domestic buy-in per US assessments.

Timeline if it happens at all: Not weeks or months—think years (insert: to me that is unacceptable to the U.S., Israel, or markets). Even optimistic scenarios (popular revolt + external support) require time for the opposition to organize amid chaos. Most analysts see succession/transition already underway but messy; full secular restoration could take a decade+ if it occurs, with high risk of backsliding (see Arab Spring parallels).

Best-case: "normalization" with the West/Abraham Accords discussed, but hinges on regime survival first. (insert: I don't see how Iran has a role but do see how Saudi Arabia and Israel could move more quickly to a security pact).

S&P Slide Amidst This:

Current pullback: ~6-7% off late-January highs, driven by oil spike (Brent/WTI up sharply on Hormuz disruption—~20% of global supply at risk), shipping chaos, and risk-off flows. Markets have shown tentative rebounds on any ceasefire talk or Saudi production ramps/IEA releases, but volatility persists (worst monthly performance in a year for major indices).

Your "Market X-ray" lens captures it well: defensive posture, energy/defense tailwinds (drones/counter-drone plays like the ones you flag), but broader fragility if oil sustains $100-150+/bbl. (wow.. thanks AI.. how did you know? I swear I did not insert that mention nor the 'Market X-ray' term either...new world indeed... there was more discussion of my approach vs. others; and I do appreciate that AI seems to think I'm more circumspect than many others).

How deep could it go? Historical geopolitical shocks (Gulf wars, oil crises) average ~4-5% S&P dips, with recovery in weeks—not the 2008-style crash. If Hormuz stays contested/prolonged (best-case reopening in "near term" might only hit 50-60% capacity), we could see another 5-10% downside from here (total 10-15% correction) before stabilization, especially if recession odds tick up from sustained energy inflation.

But markets price in "elevator down, escalator up"—quick rebounds once shipping resumes or de-escalation signals strengthen, absent a wider war/recession trigger. Your drone/sector calls (ONDS ecosystem, UMAC, etc.) align as relative out-performers in this "chessboard" fog. (Again it said that!)

(AI) Bottom line: (this is the AI bottom-line not mine; but close enough). The Iran regime is isolated and bloodied, but not on the brink of collapse today. Secular restoration is a long-game aspiration with long odds. Markets really hate this uncertainty more than the event itself—so position accordingly for volatility, not apocalypse.

Your veteran take (AI is referring to me!) on these cycles or historical parallels has always cut through the noise better than most. If you want me to drill into specific scenarios, oil flow math, or how this overlays your growth names, just say the word. (wow.. well I did not say the word, but might in the future. And I still can't get over AI using 'first person' terminology or quasi-reasoning.)

Bottom line (from Gene, not AI): very challenging; and again history needs an even that 'goes our way' for the market... I have occasionally referenced 'The Battle of Midway' in 1942. That U.S. Navy victory that sank most of Japan's mainline carriers, marketed the bottom of the stock market in World War 2. The market sensed that the Imperial Japanese Navy would never prevail as it had before, and that was totally the case.

By the time we proceeded to liberation of France at D-Day in June 1944, the stock market was already advancing grudgingly off its lows. Even though there was a bit of a recession in 1947 or so; that was absorbed and marked the transition back to consumer and civil society.. stocks never really looked back though advanced gradually for years.

It was essential then ... perhaps as now ... to focus on technology new-era of the times tickers, to exceed average performance in big Averages or Indexes. That's still the case. More risk but also more reward potential. Hard to feel that way; wounded at the moment; but it's actually the history of seminal events.

My view: Iran won't capitulate; doubt negotiations are really effective unless it involves a grand plan which the parties seemingly are not at a level of; and in most scenarios we do 'not' deploy significant troops abroad just for show; so it must be considered that overt 'land' action may very well be on the plate. With only a third (estimated) of Iran's missiles destroyed; it may take such action.

I hope this discussion was useful; although mostly states what we already did surmise about the situation. My negativity on S&P valuation for months was a bit helpful to avoid that; however even the new tickers surrendered somewhat; as the 'bordello raid' scenario kicked-in. (For new readers, that's where they raid the 'bordello; taking the bad girls, the good girls, the madam, and even a piano player .. DJ ... and you will have to wait a bit for the best girls to return.)

With that note; Secy. Rubio says we'll be 'done with the Iranians' in the next couple of weeks; also saying we 'must finish the job'. Spin the roulette wheel.