Featuring John Fagan and Brendan Walsh, Markets Policy Partners
In the April 2026 edition of CAPIS’ Monthly Research Briefing, Ed O’Dowd welcomes back Markets Policy Partners’ John Fagan and Brendan Walsh to discuss the geopolitical and macroeconomic forces shaping markets. The conversation focuses on the Iran conflict, energy-market disruption, Fed uncertainty and the political backdrop heading into the midterms.
Below is a timestamped recap of the conversation.
00:00: Introduction
Ed O’Dowd opens the call by welcoming clients and introducing Markets Policy Partners, noting the timely relevance of a big-picture policy discussion amid elevated global uncertainty.
01:04: From January’s Growth Outlook to a Geopolitical Shock
John Fagan looks back at MPP’s January base case — stronger growth, sticky inflation and fewer Fed cuts — but notes the Iran conflict has overtaken the macro narrative, shifting the outlook toward supply disruption and uncertainty. What was expected to be a more constructive economic period is being reassessed through the impact of energy shocks and geopolitical risk.
02:36: Iran, the Strait of Hormuz and the Market’s Core Assumption
Fagan says markets are rebounding on expectations of near-term de-escalation that allows President Trump to declare victory and move on. That “TACO” assumption — Trump stepping back from escalation — has again become a key driver of risk sentiment. A prolonged U.S. ground operation remains a tail risk, with the more likely path centered on reopening the Strait of Hormuz and restoring energy flows through a negotiated, face-saving outcome.
05:49: China’s Role and Why a Near-Term Accommodation Still Looks Most Likely
Fagan argues China’s dependence on Strait oil flows creates strong incentive to push Iran toward accommodation, reducing the likelihood of prolonged disruption. This reinforces the base case for a negotiated outcome, though timing remains critical as extended disruption would continue to pressure oil markets, shipping costs and supply chains.
07:21: Energy, Food and the Return of a Stagflationary Setup
Fagan says the key macro shift is back toward stagflation. Higher oil prices and fertilizer constraints are expected to lift food prices and keep inflation elevated into the back half of the year. He notes lower-income consumers are already under pressure, and expected fiscal support is increasingly likely to be offset by rising costs across fuel, food and other petroleum-linked goods.
09:27: Washington Update: Limited Legislative Movement, Little Immediate Relief
Brendan Walsh describes a relatively quiet policy backdrop, with Congress out of session and limited progress on key issues. TSA-related disruptions appear contained, and while airline merger speculation has surfaced, he notes the administration is unlikely to prioritize consolidation at a time when travel and fuel costs are rising.
11:29: A Push to Get Federal Money Out the Door
Fagan highlights a shift from earlier funding freezes to active deployment, with agencies now pushing capital into the system through grants and projects. While not enough to offset energy-driven drag, it reflects a broader effort by the administration to support growth through administrative channels.
14:31: Fed Leadership, Powell, Warsh and a Policy Bind
Walsh says Fed leadership uncertainty is increasing, with the Warsh nomination process tied up in a DOJ investigation and Trump applying greater pressure on Powell. He characterizes the situation as a standoff, with unclear timing for any transition and growing political tension around Fed independence.
15:34: Why the Fed Is Still Likely to Sit Tight
Fagan argues the Fed is likely to remain on hold despite political pressure. Inflation risks remain elevated due to supply shocks, while growth is not weak enough to justify cuts. This leaves policymakers with limited flexibility and a bias toward waiting rather than risking a policy mistake.
17:43: The Challenge for a Potential Warsh-Led Fed
Fagan adds that if Warsh takes over, he will face immediate pressure to cut rates despite a backdrop that argues for restraint. In that scenario, he would be caught between White House expectations and a committee unlikely to support easing that does not align with underlying economic conditions.
19:41: Why Supply Normalization May Take Longer Than Markets Expect
Walsh emphasizes that even with a diplomatic resolution, normalization will take time. Energy and petrochemical supply chains may face months of disruption, with knock-on effects across technology, industrial output and agriculture.
20:40: Midterms, Inflation Politics and a Tougher Road for Republicans
Fagan says the Fed’s likely “wait-and-see” stance comes alongside a weaker political backdrop, as rising prices shift the narrative heading into midterms. Walsh adds that if cost-of-living pressures persist, Democrats are likely to capitalize on that dynamic, with the House appearing more likely to flip than the Senate and overall risks skewing against Republicans.
25:19: Q&A: If the Strait Reopens, Why Won’t Prices Snap Back?
Fagan explains oil prices are unlikely to normalize quickly even if the Strait reopens, citing infrastructure damage, supply constraints and persistent geopolitical risk premiums. He expects a “higher-for-longer” pricing environment rather than a return to pre-conflict levels, while Walsh adds Iran will also face prolonged economic strain if production remains impaired.
28:46: Food Inflation and Demand Rebound as Secondary Risks
Walsh highlights fertilizer shortages and transport costs as key drivers of food inflation, while Fagan notes suppressed demand across parts of Asia could rebound as flows normalize. That combination could keep prices elevated even after the initial shock fades.
31:35: Q&A: What Is the Long-Term Impact on NATO?
Fagan describes a mixed outlook: NATO cohesion has weakened amid political pressure and uncertainty around U.S. commitment, but European countries are accelerating defense spending. In his view, that shift points toward greater regional self-reliance even if alliance unity declines.
34:15: Closing Remarks and May Preview
Ed closes the session by thanking Fagan and Walsh and previewing CAPIS’ next Monthly Research Briefing on Thursday, May 14, featuring Katie Stockton of Fairlead Strategies with a technical analysis-focused market discussion.