Good morning,
The U.S. and Iran appeared to move further away from a diplomatic resolution over the weekend. Yet markets are largely nonplussed this morning, with futures trading roughly flat after recovering from modest overnight weakness.
Despite headlines suggesting a peace deal remains elusive, equity traders have continued to price energy lower since the start of May. At the same time, the AI-led technology rally continues to advance. Earnings growth has been very real, valuations remain far less stretched than many assume, and any headlines pointing toward de-escalation in the Middle East would likely serve as an additional tailwind for technology shares.
The S&P 500 Index has now risen for six consecutive weeks, gaining more than 10% over that stretch. This marks only the tenth occurrence of such a move in history. In the prior nine instances, the market was higher one year later every time but the first, posting an average gain of approximately 17%.
That said, it remains entirely possible that Iran proves unwilling to relinquish its nuclear ambitions or its influence over the Strait of Hormuz. Such a scenario raises the probability of a volatility spike accompanied by a sharp market pullback. However, the strength and persistence of the current trends suggest that any headline-driven selloff—whether shallow or severe—could prove short-lived, with the broader bull trend reasserting itself relatively quickly.
This week’s earnings calendar is relatively light, shifting investor focus toward inflation data, with CPI and PPI reports due Tuesday and Wednesday. Markets will also be closely watching President Donald Trump’s scheduled meeting with President Xi Jinping in China later this week, as investors look for signals on China’s influence on Iran.
Be well,
Mike