We Asked a Macro Trader Why War and Oil Haven’t Broken This Market

Stocks require constant bad news to decline

Donnelly argues equities have a natural upward bias due to perpetual money flow from deficits; they need a steady stream of negative catalysts to fall, but only 'nothing' to rise.

Energy shocks are less threatening than headlines suggest

Despite oil volatility, $4 gasoline is less economically damaging than in 2005 because wages and overall price levels have inflated significantly, while energy now represents roughly 18% of consumption versus 35% historically.

Consumer bifurcation masks underlying strength

While low-end consumer credit metrics show stress, the upper-middle class holds disproportionate spending power and remains insulated from marginal price changes in fuel or staples.

Rolling shocks favor mean reversion over trend following

Unlike structural trends where contrarianism loses money, transient policy shocks create mean-reverting opportunities because the shocks themselves trigger policy responses that dampen the initial move.

The 'observer effect' in policy-driven markets

Market moves alter the policy reaction function—extreme moves in yields or equities force government U-turns, creating reflexive feedback loops that cap volatility and encourage V-shaped recoveries.

Trade state capitalism, don't protest it

Government intervention is now a permanent market feature; traders must accept that companies with state shareholders trade at a premium and position accordingly rather than shorting on philosophical grounds.

Bullish while holding the 200-day moving average

Donnelly is long equities based on pattern recognition from 2018 and Liberation Day, where V-shaped bottoms above the 200-day MA led to sustained rallies; a break below would invalidate the view.

Big Tech earnings are the real risk factor

Geopolitical risks and oil are distractions; the primary threat to the market would be a rollover in Magnificent 7 earnings or a collapse in AI capex enthusiasm, which comprise 40% of market cap.

Immigration policy has created labor equilibrium

Zero net job growth since Liberation Day reflects constrained labor supply from immigration crackdowns rather than collapsing demand, keeping unemployment stable at 4.3% with minimal slack.