Over the weekend the world appeared to change. A new agreement on Iran has more substance than the on-again, off-again headlines that markets had learned to shrug off, and risk assets responded with relief. The temptation now is to declare the episode over and "return to January", to the pre-shock world of narrow, liquidity-fuelled equity gains. Andrew Hunt's counsel is to resist that temptation.

The market's optimism and the real-world plumbing are telling different stories. Even as equities rallied, prediction markets put barely a 30% chance of the Strait of Hormuz being fully open by month-end. A signed memorandum does not automatically un-disrupt a supply chain it appears. The damage has already been done, and it landed at the worst point in the global production calendar. As the 1973 embargo demonstrated, oil-shock inflation is slow to appear and slow to leave: the impulse now moving through Asian export prices, into Japanese import costs and US producer prices, will reach consumer prices over the coming months regardless of what diplomats sign this week. Inflation and demand destruction, as we discussed, are already in the pipes.

It is worth holding three scenarios in mind for the rest of the year. 

The first is the benign "back to January" — the deal holds, tanker traffic normalises quickly, liquidity and Asian capital flows continue to underwrite the tech-led market, and the shock fades. This is the path markets are pricing, but it depends on flows that already show signs of fading. 

The second, and the more likely, is a stagflationary grind: inflation prints climb while real incomes keep falling, growth disappoints, the "recession" word resurfaces, and a narrow market loses the liquidity cushion that has let it ignore bad news. 

The third is a sharper, credit-driven unwind, in which one of the funding pillars gives way. Asian sovereign wealth funds retreating as their currencies weaken, private-credit stress, a less accommodative Fed, or heavy second-half Treasury supply, and the circular flow that has financed the AI boom reverses.

The Flow of Funds data underline why the middle path is the base case. Beneath the strong headlines, Andrew finds reported corporate cash flow that he cannot physically locate, flattered by mis-classified private-credit borrowing and by the accounting treatment of a tariff-refund programme that has barely been paid. Strip those out and the corporate sector is probably cash-flow negative — and therefore dependent on raising capital just as banks turn cautious and external buyers thin out.

For portfolios, the message is steadiness rather than alarm. Trim the hottest, narrowest parts of the market and expect more volatility. Do not rush into bonds,yields have not yet topped, and a better entry point should come later this year. Cash is a legitimate defensive holding for now; traditional duration is not. And favour the neglected, reasonably valued, genuinely cash-generative producers with pricing power that tend to sit outside the index. The headline has changed; the pipeline has not.