Recession risks are fading (at least according to markets), conviction risks are fading, and S&P 500 is performing. Trump is in a sweet-spot and his approval ratings are generally in the higher end of the range, which also means that the Democrats need a meltdown in S&P 500 in order to have any chance of convicting Trump and/or beating him in November. Escalations in the US/Iranian conflict are hence likely to be driven by the Iranian camp as the POTUS does not need further conflict in the Middle East. The same cannot be said about the Ayatollah in Iran as he was in urgent need of a geopolitical frontline to distract the focus from the widespread domestic protests. Trump, on the other hand, had the chance to kill a guy that was high on the US wanted list (by the way after substantial Iranian aggression on both 27th and 29th of Dec), and he took it. We do not need to read any more into it than that. The risk of Iranian retaliatory attacks on Saudi Arabian soil as well as the risk of a complete collapse of social order in Iraq likely means that Oil will have to trade with a risk premium for the time being. That is probably the most important market take away for now – World War III is not around the corner. In (not so) related news, The Fed won the year-end repo battle and ”all it took” to win it was double the nominal of outstanding repos as in 2008. Usually it carries a lagged negative pass-through to the USD spot level, when the USD liquidity outlook improves as substantially as seen in recent months. Judged solely from USD liquidity, the USD looks vulnerable through Q1 broadly speaking (see below).