Real fast, before we get to what's been going on in Iran and in markets since we last talked:

I recently spoke with Professor Larry Kotlikoff about "the State of Trump Economics in 2026" on TREUSSARD TALKS.

Larry has a resume that would blow up this newsletter's word count, so I'll keep it short:

Harvard Ph.D., Fellow of the American Academy of Arts and Sciences, Fellow of the Econometric Society, and Research Associate of the National Bureau of Economic Research. And The Economist named him one of the world's 25 most influential economists.

He was also my dissertation chair at Boston University. Larry is a dear friend. I love him. You will too.

The headlines from our conversation:

Listen to the episode: BU Economics Professor Larry Kotlikoff on TREUSSARD TALKS.

It may be comforting to claim that we didn't see this coming.

And sure, very few people knew the exact time and day when the U.S. and Israel would initiate this "military operation." On that topic, here is a fun coincidence for you.

On the other hand, the U.S. military build-up in the Gulf was hard to miss over the last few months.

But that's not the point.

And I'll be the first one to tell you that I don't know what happens next.

But here we are. Let’s talk through a couple of implications of it all.

How big has the move been?

Let’s look at 2026 so far relative to the distribution of crude prices over the last three years (2023-2025).

Now… This is moving fast. Who knows what this will look like tomorrow (or yesterday, by the time you read this, as it were).

But as of the evening of March 12, 2026, the move in crude oil prices (+66.7% year to date) was extreme indeed.

The last three years had seen an annual decline of roughly 9% on average, and volatility of 30% around that.

2026 blew well past the two-standard-deviation mark.

This is what we call a proper shock in the business...

I hope for everyone's sake (and wallets) that the blue line comes back in, hard and swiftly.

What is also interesting is that international equity markets were punished harder than U.S. stocks in the days that followed the beginning of the conflict.

This reflects the obvious reality that Europe and Japan (and others like them) have a domestic energy deficit and import oil and gas as a result, while the U.S. is largely oil and gas independent.

And yet, despite the hit to local assets and foreign currencies that reflects this import-export differential, international stocks (up about 3%, in U.S. dollar terms) are still ahead of U.S. stocks (down roughly 2%) so far this year.

Now, beyond keeping score at home, what is there to learn from the last two weeks?

It boils down to what appears to be a near-universal feature in human behavior:

How often in history were people given a chance to think through "bad outcomes" ahead of time and work out a game plan for themselves, and they just didn't?

This is why I’ve focused on risk management, going back 20 years at this point.

You see, my first love as a doctoral student was microeconomics, game theory, and the science of “making decisions under uncertainty.”

And then, I walked into the business school and met Zvi Bodie, who said to me, “Everything you love about economics, in the real world, we call it finance.”

Zvi became my mentor, and eventually, my father-in-law.

My point is straightforward.

Ask yourself simple questions, like “how would I handle a 30% drop in the S&P 500?” and “would I be OK?”

That’s not predicting anything. It’s just stress-testing your own thinking.

And it’s a function of how you’re positioned for a 30% decline in stocks.

The answer will depend on your circumstances, your own psychology, and, importantly, your portfolio.

This is why I talk about downside risk with clients.

Let me take you through a hypothetical.

Claire and Richard Weston’s family trust is $25M.

These people are not real… Let’s keep their portfolio as straightforward as it gets.

60% in the S&P 500, and 40% in the Bloomberg Bond Index (or “the Agg,” as they call it).

Complex or simplistic, the engineering means nothing to the Westons. Nor should it.

What is meaningful is to know that a crummy 6 months in markets could very reasonably lose them somewhere in the neighborhood of $2.3M.

That a redux of 2008 could erase $4.4M from their balance sheet.

Or that a full replay of the Great Financial Crisis (from the Winter of 2007 to early Spring of 2009) could cost them $7M or so.

Of course, that’s not how human history works.

But we have the past to use as a guide.

Not precise.

Or accurate.

But directional and along the “right vector,” as some might say.

We would be silly not to consider it.

Because knowing you have downside of $2.3M, or $4.4M, or $7M tells you a lot more than knowing you have 60% stocks in your portfolio…

This is what I talked to Chuck Jaffe about recently, on his show Money Life with Chuck Jaffe.

The episode is called 'Would You Be OK If the S&P Were Down 30% Next Year?' — which seems like a decent question to ask yourself.

Listen on Apple Podcasts or right on the web.

And please don’t think I am being flippant by calling this piece “War Games.”

I may be trying to be funny. But I am not dismissive. Not in the least.

In fact, this is personal.

In the aftermath of the invasion of France by Nazi Germany, a young married couple that lived in the Parisian outskirts rode their bicycles — along with many others — from Paris to Brittany, where the husband was from. Roughly 200 miles, sleeping in barns along the way. In the pursuit of relative safety.

This couple would become my mother’s parents.

I am only asking, do you know what your bicycle is?

Be well.

Jonathan