Good morning,
Last week offered a split-screen market performance. Major U.S. equity indices finished little changed on average, while international developed markets were hit hard—falling roughly 3% on renewed concerns over global energy supplies. Then the U.S.-Iran peace talks broke down over the weekend. Despite the geopolitical backdrop, U.S. futures are flat this morning as markets head into what could be a historically consequential week.
Nearly every major central bank is meeting this week, while investors will also digest a heavy slate of earnings reports. Wednesday stands out as the week’s pivotal day.
That afternoon could mark Jerome Powell’s final Fed meeting as Chair. After the closing bell, four of the largest AI hyperscalers—Amazon, Alphabet, Meta Platforms, and Microsoft—all report earnings. Thursday’s market reaction could be intense.
A great deal is riding on those reports—not only the outlook for U.S. growth, but whether current valuations can continue to justify the remarkable 47% rally in the PHLX Semiconductor Sector Index over just 18 trading days.
Have markets gotten ahead of themselves?
There is still an active war underway, and one side appears uninterested in peace negotiations. Oil supplies are becoming increasingly strained for countries dependent on shipments through the Strait of Hormuz. Meanwhile, momentum—one of the market’s most powerful forces—has a firm grip on equities, particularly semiconductors.
New highs in major indices against the backdrop of war and a growing global energy strain hardly feels like firm footing.
In sum, I don’t see the ingredients for a market crash, but a pause—or even a healthy pullback—feels increasingly likely. This morning’s calm may prove temporary.
Be well,
Mike