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Markets are in a more fragile state than people realize.

Fiscal impulse is negative and set to worsen as OBBBA spending gets front loaded into the first half of this year. Global easing is fading, with central bank policy breadth already rolling over. Liquidity offers no margin of safety for anyone to backstop a selloff. And supply-driven inflation is rising again.

Roughly 20 to 30% of crude, LPG, LNG, and refined products flow through the Strait of Hormuz. Even an immediate ceasefire would take months to normalize flows and prices. If oil stays elevated into April and makes a new high, recession could become the base case.

The latest BofA fund manager survey had just 5% expecting a hard landing. Equity positioning has barely pulled back. Markets have a well documented inability to price tail risks until they become the base case.

The recession probability is approaching a coin flip and rising every day. The largest hit to risk assets has always come at the beginning of recessions, which is the part markets refuse to price until it's too late.

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