HSBC: US-Iran Talk Hopes Could Test a Very Cautious Market - FJElite

US front-end rates are now almost pricing a full hike by December, while equity and credit performance has remained narrow, with cyclicals and lower-quality credit still lagging. If the reported progress in US-Iran talks over the Memorial Day weekend proves real, that backdrop could shift meaningfully in the coming weeks.

Even so, investors are unlikely to fully buy into the optimism straight away. The more likely reaction is caution, with many pointing to how long it would still take for conditions to return to normal even if talks improve. That helps explain why sentiment and positioning in risk assets still look relatively subdued. Treasury positioning looks neutral, while risk assets only show a very weak sell signal for now, and systematic positioning is still light enough that any real pressure may take time to build.