We use this note to update our portfolio baskets, including the introduction of a new “AI vs AI-At-Risk” long/short mini-thematic that moved sharply higher (up 5% yesterday alone) as positioning and narrative began to return to familiar themes.
Alongside that, we outline a tactical UK rates expression. The recent run of inflation and PMI data has nudged the market toward a hawkish near-term narrative ahead of next week’s Bank of England meeting, and we do not think it is priced correctly.
Before turning to those trades, however, it is worth pausing on a potential macro constraint that sits just ahead. A statutory deadline tied to President Trump’s handling of the Iran conflict could bring Congress more directly into the decision-making process, shaping the next phase of the conflict in a way markets have not yet fully engaged with.
Trump’s D-Day
We could be approaching an inflexion point in US policy toward the Iran conflict, not due to commodity supply chain issues or the Hormuz Blockades-of-all-Blockades, but rather to statutory constraints imposed by the 1973 War Powers Resolution.
Under this framework, the president can conduct military operations without congressional authorisation for up to 60 days following formal notification to Congress. Given that Trump notified Congress on March 1st, the current case sets a key deadline of May 1st.
To date, congressional Republicans have largely supported the administration, blocking Democratic efforts to curtail the campaign. However, the upcoming deadline is beginning to expose fractures within the GOP, which we believe markets haven’t fully appreciated. Several lawmakers have signalled that their support may not extend beyond the 60-day window without explicit congressional approval, raising the probability of a policy pivot or heightened political tension as the deadline approaches.
What are Trump’s options? Beyond the 60-day mark, the president faces three main pivots.
Seek formal authorisation from Congress
Begin a withdrawal of US forces
Invoke a limited 30-day extension to facilitate a safe exit
Notably, this extension does not legally permit continued offensive operations, constraining the administration’s flexibility.
Importantly, precedent suggests the administration could challenge or sidestep these constraints, which wouldn’t surprise us with Trump. Yet, in terms of the precedent we speak about, it was actually President Obama who continued the 2011 engagement in Libya beyond the 60-day mark and argued that US operations didn’t involve sustained fighting or ground troops. This did incur bipartisan backlash, so any similar move by Trump risks increasing political pressure, particularly as some Republicans have already framed the 60-day mark as a meaningful legal and institutional boundary.
We could term the May 1st deadline as “a discrete political catalyst.” What we mean by this is that Trump is going to struggle to keep this conflict going on his own terms. Rather, as of next week, Congress is likely going to have a much larger say in deciding the path of the war. In some ways, it should help resolve the question of where the conflict goes from here, given that the range of outcomes is relatively constrained; the conflict is either extended, curtailed, or escalated through congressional involvement.
Notable Mini-Thematics
We’ve added three new standalone baskets on Plutus this week, focusing on topical areas where we believe investors can generate alpha in the coming months.
AI vs AI-At-Risk
We believe this group of 20 names is well-positioned for the current regime, as the market increasingly distinguishes between beneficiaries of AI capex and those exposed to its second-order disruption.
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