It’s like deja vu all over again. – Yogi Berra
It’s like deja vu all over again.
The market’s path in 2026 bears a striking resemblance to that of 2025. A year apart, markets once again appear to be tracing a familiar arc after another Trump White House-driven shock, one that is unsettling risk assets, reviving inflation concerns and reshaping Federal Reserve expectations. Last year’s drawdown ultimately reversed. Investors now have to decide whether this one will as well.
In 2025, the catalyst was the launch of tariffs and a trade war. Markets did not stabilize on their own. Severe financial stress was followed by a pullback from the Trump administration. The drawdown deepened as policy pressure intensified, and the market reversed only once it became clear that the White House would reverse course as well. Investors might have learned a lesson from that episode: Once market damage becomes severe enough, particularly in bond markets, the administration can step back.
That lesson shapes how markets are reading the current episode, the war with Iran. Investors are filtering today’s shock through recent memory. The tariff episode in 2025 ended with a retreat after financial stress mounted, so markets are asking whether a similar reaction function still applies to military conflict in 2026. The key question is when escalation will give way to de-escalation, and whether markets are leaning too heavily on assumptions that might not hold this time.
The current episode is harder. The macroeconomic symptoms resemble those of last year, but the exit could be far messier. Tariffs and military conflict can both stoke inflation fears, weaken confidence, increase volatility and cloud the policy outlook. Their reversal is very different. Economic policy can be delayed, softened, negotiated or rolled back. Military hostilities introduce a far more uncertain process of de-escalation, and normal commercial flows might depend on conditions outside any single actor’s control. Damage to energy infrastructure, for example, can take three to five years to rebuild.
The comparison to 2025 remains useful, though only up to a point. Investors might again be assuming that the administration will step back once costs become too painful. Markets might still be leaning on reversibility: Hostilities ease, risk premiums fall, and shipping through the Strait of Hormuz normalizes.
Exactly one year ago, markets were destabilized by a shock out of Washington and then recovered after the White House stepped back under intensifying stress. Today, markets face another Washington-driven macro shock. Will this episode end in retreat, or will reversal prove harder to engineer? The chart offers no answer, but it makes the question hard to ignore.
Between the Lines is a weekly blog by DoubleLine Portfolio Managers Sam Garza, Joseph Mezyk and Quant Analysts Fei He, CFA and Sunyu Wang that breaks down topical macro and market issues. For questions or suggestions please e-mail us at betweenthelines@doubleline.com. The views and opinions expressed herein are those of the authors and do not necessarily reflect the views of DoubleLine Capital LP, its affiliates or employees.
