Tuesday, 26 May 2026 · London Edition · 07:30 London

Iran escalation meets AI fatigue. Rotation is the trade.

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Signals

Non-AI rotation

Goldman Sachs singled out Eli Lilly, Fortinet, and Chewy as stocks with low AI correlation and strong earnings revisions. Morgan Stanley separately reiterated overweight on LLY with a $1,344 target, and BTIG upgraded FTNT after its Q1 beat. The call comes as the S&P 500 is increasingly driven by a single AI-momentum trade, raising concentration risk. With CHWY still down 38% YTD, the rotation could have room to run if AI leadership stalls.

LLY

Buy Eli Lilly — Goldman Sachs explicitly recommends LLY as a non-AI play; +7.8% in a week already but still 6% below its 52-week high, with a 24x forward P/E that is reasonable for pharma.

$1065 +2.24%
FTNT

Buy Fortinet — Goldman and BTIG both flag FTNT; at all-time highs and +72% YTD, valuation at 39x forward P/E looks stretched, so chase with caution.

$133.9 +3.45%
CHWY

Buy Chewy — Goldman tags CHWY as a top internet pick; down 38% YTD and near its 52-week low, offering a mean-reversion entry if pet spend recovers.

$20.73 +4.01%

Iran escalation

US strikes on Iranian missile sites and the ongoing Strait of Hormuz blockade threaten to push global oil inventories below 100 days of demand. Nikkei Asia flags the inventory threshold, while FT confirms the military strikes. Oil prices have not yet reacted — USO is down 5.6% on the week — and gold is also subdued at -1.1%, suggesting markets are pricing in a swift resolution. A prolonged blockage would force a violent repricing in energy and safe havens.

USO

Buy Oil Fund — Oil inventories below 100 days are a bullish supply signal; USO down 5.6% in the last week provides a lower entry if tensions escalate further.

$140.9 -1.14%
XLE

Buy Energy Select — Energy stocks YTD +30% but off highs; direct beneficiaries of sustained higher oil prices from supply disruption.

$59.49 +0.61%
GLD

Buy Gold — Gold is a classic safe haven; 19% below its 52-week high and -1.1% on the week despite strikes suggests under-pricing of geopolitical risk.

$413.8 -0.76%

Fed rate cut

BlackRock’s Saigal sees 'sufficient factors' to justify a Fed rate cut rather than a hike under new chair Kevin Warsh, according to Bloomberg. The call is a contrarian bet against the hawkish consensus, as Warsh is historically tight. TLT is at its 52-week low, implying the bond market has priced very little chance of easing. A single dovish signal could trigger a sharp short squeeze in long-duration Treasuries.

TLT

Buy Long-duration Treasuries — Rate cut expectations favor long bonds; TLT at its 52-week low and 8% below high offers a deep entry if BlackRock is right, but timing is uncertain.

$84.68 +0.55%
IEF

Buy Intermediate Treasuries — Intermediate Treasuries are also cheap, near their 52-week low; less volatile than TLT for a rate-cut proxy.

$93.88 +0.09%

Singapore banks

Singapore’s financial regulator told banks to speed up account openings for wealthy clients to strengthen the city-state’s position as a wealth hub, reports FT. The move follows delays after money-laundering scandals. DBS Group trades at 14.8x forward P/E and sits 2% below its 52-week high; faster client onboarding could boost fee income and asset growth.

DBSDY

Buy DBS Group — Easing of onboarding friction should attract more wealth inflows; DBS near highs but reasonable valuation supports long holding.

$194.0 +0.04%

Japan rally

Nikkei Asia reports Japan’s Topix closed at an all-time high and the Nikkei surged 3% as investors bet on an Iran deal. The rally is driven by hopes of de-escalation, which would lower oil prices and benefit Japan’s import-heavy economy. EWJ is 3% below its 52-week high, so momentum is strong but upside limited if the deal fails.

EWJ

Buy Japan equities — Japan equities at record highs on Iran deal hopes; EWJ +12.6% YTD, chasing here requires conviction the deal holds.

$91.61 +0.26%

Indonesia stagflation

A Japanese consumer goods firm warns of 'vicious' stagflation in Indonesia, as reported by Nikkei Asia. EIDO is down 30.4% YTD and sits just 1% above its 52-week low, reflecting severe bearishness. Stagflation implies a toxic mix of rising prices and falling demand, squeezing corporate margins further.

EIDO

Sell Indonesia ETF — Stagflation warning cements the bear case; EIDO near its 52-week low with -30.4% YTD, no signs of recovery, short momentum remains.

$13.09 +0.08%

Yuan carry unwind

Macquarie’s call that the yuan could strengthen to 5 per dollar is based on a potential unwind of massive dollar holdings by Chinese firms, per Bloomberg. A stronger yuan would attract capital inflows into Chinese assets, which have been battered: FXI is down 10.8% YTD and just 2% above its 52-week low. The trade is highly speculative but offers asymmetric upside if even a fraction of the carry unwinds.

FXI

Buy China equities — Yuan strength historically supports China equities; FXI near its 52-week low could see short-covering if Macquarie’s scenario gains traction.

$35.52 -1.03%

Most original take

Iris Ouyang · Bloomberg Markets · 26 May 2026

Yuan May Hit Five Per Dollar on Carry-Trade Exit, Macquarie Says

Macquarie analysts argue Chinese firms’ $1 trillion-plus dollar holdings could spark a carry-trade exit that sends the yuan to 5 per dollar — a level not seen in over a decade. The bet hinges on corporate repatriation flows overwhelming the post-pandemic dollar hoard, and it runs directly against consensus that sees the yuan weakening amid trade war fears.

Read original ↗

Our view

Today’s signals paint a market on the cusp of a rotation. Goldman Sachs is explicitly telling clients to buy non-AI stocks like Eli Lilly and Fortinet, citing an equity market that has become 'one big trade.' Meanwhile, US strikes on Iranian missile sites and a Strait of Hormuz blockade that could drain global oil inventories below 100 days are not being met with higher oil prices — USO is down 5.6% on the week and gold is off 1.1%. That disconnect is either complacency or an overbought unwind, but it sets up for a sharp repricing if geopolitical tensions persist.

The bear case for this rotation: Iran de-escalation is still a possibility, and any deal would send oil and gold tumbling further. The AI trade, despite fatigue, is driven by earnings revisions that remain robust — Nvidia’s forward P/E of 17x is not obviously bubble territory. And the Fed rate cut narrative, while attractive for bonds, requires a dovish surprise from a new chair, Kevin Warsh, who is a known hawk. TLT at its 52-week low is a crowded short that could reverse violently if Warsh blinks.

One glaring absence in today’s coverage: there is almost no discussion of the dollar’s trajectory. BlackRock is talking rate cuts, Macquarie is calling for a yuan surge, but the DXY is barely mentioned. A weaker dollar is the common thread that would validate the emerging market (FXI, EWJ) and commodity (GLD, USO) longs. If the dollar instead strengthens on safe-haven flows, the rotation thesis collapses. We’re watching DXY closely.

The cleanest expression of today’s cross-currents isn’t a single ticker — it’s the dispersion trade. The market is moving from a single-factor (AI) to a multi-factor world (geopolitics, rates, carry). This favors active management and options-based strategies over passive beta. Consider straddles on USO and GLD heading into the next round of Iran negotiations.

Yesterday's signals, today

From the London Edition on 25 May 2026 — 0/6 signals moved in the predicted direction.

Today's scan: 149 articles considered · 8 surfaced · across 10 publishers

Generated Tue 26 May 2026 6:35am London · 4,547 views

Bloomberg Markets · CNBC Investing · CNBC Markets · CoinDesk · FT Alphaville · FT Companies · FT Lex · FT Markets · MarketWatch Top · Nikkei Asia · SCMP Business · The Information · WSJ Business · WSJ Markets

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