Iran War Risks Haven’t Stopped the Market Rally. Why These Investors Are Sitting Out.

Stocks are edging only modestly lower in early Thursday trading, despite reports of tit-for-tat strikes between the U.S. and Iran that could threaten the fraying cease-fire talks. Stubbornly high Treasury yields suggest inflationary pressures are likely to remain a fixture for markets over the back half of the year. The Federal Reserve’s preferred inflation gauge is likely to show the biggest two-month increase in five years on Thursday, with the PCE price index rising to around 3.9% in April, a level that will keep bond markets wary and hold longer-dated yields firmly north of recent multiyear highs.