The sentiment in markets is one of fear and uncertainty.

On the one hand is the worry that the Israel-Hamas war will metastasize into a wider conflict. On the other is the stated commitment by the FOMC to continue with a high interest rate regime despite the relentless rise in long-term yields, and the impact of this on the economy.

Given the relatively conservative positioning by investors, a short-term rally cannot be ruled out once the market starts to adjust to the reality of the war. Since risks remain elevated, we feel the best way to play this would be using options.