This week, investors are eagerly awaiting the outcome of high-level talks between the United States and Iran. JPMorgan Chase has identified three possible tactical scenarios, each with potential implications for the market. Here’s an in-depth analysis of each scenario and what it could mean for investors:

Scenario 1: DEAL THIS WEEK – Rally Expected

In this scenario, the US and Iran are expected to reach a deal this week, leading to a short squeeze rally. The yield curve is anticipated to bull steepen, with energy prices likely to collapse. JPM believes that the EU would outperform the US in this scenario due to its higher oil sensitivity.

Scenario 2: NO DEAL BUT NO ESCALATION – Market Concentration Continues

If no deal is reached but there is no escalation, the market is expected to continue its concentration trend, similar to Monday’s price action. The S&P 500, Nasdaq, and Dow Jones Industrial Average are anticipated to perform well, with the NDX leading the pack. Yields are likely to be range-bound in this scenario, but crude prices may remain choppy and trend lower.

Scenario 3: NO DEAL WITH ESCALATION – Equities Lower, Tech / US Outperform

In this grim scenario, there will be no deal reached, and oil prices are expected to surge back to $100/bbl. The 10-year yield is also anticipated to exceed 5%. This would lead to a decline in equities, with Tech and the US outperforming on the move lower.