S&P 500 Hits Records Near $100 Brent as Markets Bet on Lasting State Backstops

3 articles · Updated · Financial Times · May 12

Brent crude near $100 and a closed Strait of Hormuz have not stopped the S&P 500 from setting records, with investors treating geopolitical and energy shocks as manageable.
That resilience reflects a "Bliss trade"—the belief that governments and central banks will again deliver large, lasting support, much as advanced economies did with pandemic aid averaging 25% of GDP.
Bond markets are signaling more strain: long-term yields have risen across the US, Europe and Japan since the Iran conflict began, and the term premium on 10-year Treasuries is about 100 basis points above pre-pandemic levels.
The argument is that fiscal space is thinner even as politics still favors spending; the IMF says a severe Iran-war scenario could cut global growth to 2% from 3.1% and push debt above 120% of GDP.
If markets discover governments cannot provide the backstop they expect, the result could be synchronized sell-offs in both stocks and bonds and a turn to more distortive crisis measures.