Markets and analysts were surprised by the jobs number, which beat even the most optimistic forecasts. The economy enjoys tailwinds from high corporate earnings and investment, including AI boom, but the Middle East crisis and high oil prices are being taken in stride.

Notes troubling administration focus on native-born vs. legal immigrants, but sets that aside.

Wages increase costs for companies, but consumers continue spending despite rock-bottom sentiment, with solid household balance sheets. The market is taking the good news as an opportunity to correct, and bond market projections are being reconsidered. This makes Kevin Warsh's first meetings easier as pressure to cut rates is off.

It would be unrealistic to expect a Fed rate cut anytime soon given these numbers. Markets want to see Warsh follow the data, which reassures them.

The president has backed off his earlier bets since being sworn in.

As a portfolio manager, when markets disagree with you, you should question your own understanding. There is a price shock from the Middle East on top of existing inflationary pressures. The Fed should stand pat, not hike, and wait to see how global supply-demand dynamics play out over several months.

The Strait of Hormuz may not reopen fully even with a deal, so doing nothing is the right Fed policy.

There will be breaking points for certain companies and regions, but markets are adjusting: oil via pipelines, other producers (US, Mexico, Kazakhstan, Brazil) ramping up, and some demand destruction in Asia. No big cataclysmic crash is imminent, but more pain lies ahead. The world will not rely on the Gulf for 20% of oil supply anytime soon.

LNG is harder to reorient, but the adjustment is underway.