Cease-Fire Sparks Risk On: Investors Swap Fear for FOMO
Stuart Katz
Executive Summary
Stocks traded higher for a second consecutive week as a ceasefire announcement between the U.S. and Iran triggered the strongest single-day rally in roughly a year. The S&P 500 gained +3.7%, the Nasdaq rose +4.2%, and the Russell 2000 returned +4.3%. Most of the rally occurred Wednesday following news of a two-week ceasefire contingent on Iran reopening the Strait of Hormuz.
The S&P500 declined 9.1% from the all-time high to the March 30 low. Since then, stocks appreciated 7.5% and are approximately 2% below the all-time high. The S&P500 forward P/E peaked last year at 23x October 2025. It proceeded to decline 17.8% to 18.9x at the Marh 30, 2026 low. Over the same period, the S&P500 forward earnings rose 12.7%. Investors are awaiting the release of Q1 earnings this week and forward guidance to reassess their outlook along with the geopolitical headlines.
Last week, 0il fell -11%; the VIX dropped below 20 approaching its long-term average, and international stocks rose as energy-importing nations benefited from lower oil prices. Non-US developed EAFE markets returned +3.0%, Europe +4.0% while Emerging Markets returned +0.3%. U.S. natural gas prices fell 5.4% while European gas fell 11.5%; both remain volatile based on war-related headlines. Gold rose 1.6% to $4,750/oz, while silver rose 3.9% to $76/oz. Bitcoin rose 9.8% to $73,388. The dollar index fell 1.4%.
Treasury yields declined modestly, and corporate bonds outperformed as credit spreads tightened to levels from late January. For the week of 3/27/26 – 4/2/26, municipals posted positive performance, in line with taxable fixed income. The Benchmark AAA municipal curve fell 5–13bps while Treasury yields rallied 10-13bps.
A tentative ceasefire has eased market concerns. We believe investors need to be prepared for further volatility as the fear and greed tension ebbs and flows concerning the energy shock, inflationary shock and potential growth shock. We believe in portfolio construction with higher quality allocations to equities and fixed income both domestic and aboard with selective less correlated alternative strategies.
Key Takeaways
Stocks Trade Higher on Middle East Ceasefire Headlines
The U.S. and Iran agreed to a two-week ceasefire, triggering a relief rally. Late Tuesday, the White House announced an agreement contingent on Iran reopening the Strait of Hormuz, less than two hours before a stated deadline to launch strikes. Markets reacted decisively Wednesday: the S&P 500 surged +2.5%, its best single-day gain in a year, the Dow jumped +2.9%, the Russell 2000 gained +3.0%, and international equities rallied +3.5%. Unlike prior headlines, this was an actual agreement confirmed by both sides.
Implication – The ceasefire is meaningful, but it was tested within hours. Israel launched strikes across Lebanon, Iran accused the U.S. of violating three conditions, and the Strait remained effectively closed.
Oil Prices Fall as Market Prices in Hormuz Reopening
Oil fell -16% on Wednesday, its largest single-day decline since April 2020, as markets priced in a potential Hormuz reopening. WTI crude dropped from around $112 to roughly $94, erasing weeks of war-driven gains that had pushed oil up more than +65% year-to-date. The move had immediate ripple effects: airline stocks rallied, and expectations for a Fed rate cut increased as near-term inflation concerns eased. However, the physical reopening of the Strait hadn’t occurred last week, and oil prices were moving back toward $100.
Why it matters: Oil is the primary channel through which this conflict affects inflation, the Federal Reserve’s decisions, consumers, and corporate profits. Wednesday’s swing showed how quickly that dynamic can shift when headlines change. The key question is whether the ceasefire produces an actual reopening.
Credit Market & Volatility Signal Improving Risk Appetite Across Asset Classes
High-yield credit spreads, which measure the extra yield investors require to hold corporate bonds over comparable Treasuries, tightened nearly -0.50% over the past two weeks and reached their lowest levels since late January. The VIX, a measure of expected market volatility, closed below 20 for the first time since late February, after briefly touching 28 intraday Tuesday before the ceasefire announcement.
Why it matters: When credit markets and volatility measures move in the same direction as stocks, it generally signals that the rally reflects genuine improvement in investor confidence rather than a narrow or speculative move. Both confirmed the week’s stock market advance.
Treasury Yields Hold Steady Despite the Ceasefire Rally
The 10-year Treasury yield fell less than -0.05% on the week to around 4.30%, a muted response given the scale of moves elsewhere. The bond market’s reaction reflects the Fed’s policy forecast. Seven of nineteen Fed members forecast zero cuts in 2026, and the Fed’s March minutes, released last week, reaffirmed its patient approach. For 2026, the market expects between 0 and 1 cut vs. the Fed’s guidance of 1 cut. At yearend 2026, the market expects the Fed Funds rate to be 3.58% vs. the Fed’s guidance of 3.25%-3.5%.
Why it matters: The bond market’s muted reaction suggests investors are waiting to see whether the ceasefire meaningfully changes the inflation and growth picture before adjusting their rate expectations.
Earnings Season Kicks Off Next Week
First-quarter earnings season unofficially begins this week, with the major Wall Street banks reporting. Beyond the typical focus on revenue and profit results, investors will be listening closely to management commentary on the conflict’s effects: energy costs, supply chain conditions, consumer demand, and any changes to forward guidance.
Why it matters: Corporate earnings calls will offer the first direct read on how the energy shock has worked its way through company costs, pricing, and demand. Forward guidance and tone may matter more than the headline numbers this quarter.
Weekly Commentary
Cease-Fire Sparks Risk On: Investors Swap Fear for FOMO
Stuart Katz
Executive Summary
Stocks traded higher for a second consecutive week as a ceasefire announcement between the U.S. and Iran triggered the strongest single-day rally in roughly a year. The S&P 500 gained +3.7%, the Nasdaq rose +4.2%, and the Russell 2000 returned +4.3%. Most of the rally occurred Wednesday following news of a two-week ceasefire contingent on Iran reopening the Strait of Hormuz.
The S&P500 declined 9.1% from the all-time high to the March 30 low. Since then, stocks appreciated 7.5% and are approximately 2% below the all-time high. The S&P500 forward P/E peaked last year at 23x October 2025. It proceeded to decline 17.8% to 18.9x at the Marh 30, 2026 low. Over the same period, the S&P500 forward earnings rose 12.7%. Investors are awaiting the release of Q1 earnings this week and forward guidance to reassess their outlook along with the geopolitical headlines.
Last week, 0il fell -11%; the VIX dropped below 20 approaching its long-term average, and international stocks rose as energy-importing nations benefited from lower oil prices. Non-US developed EAFE markets returned +3.0%, Europe +4.0% while Emerging Markets returned +0.3%. U.S. natural gas prices fell 5.4% while European gas fell 11.5%; both remain volatile based on war-related headlines. Gold rose 1.6% to $4,750/oz, while silver rose 3.9% to $76/oz. Bitcoin rose 9.8% to $73,388. The dollar index fell 1.4%.
Treasury yields declined modestly, and corporate bonds outperformed as credit spreads tightened to levels from late January. For the week of 3/27/26 – 4/2/26, municipals posted positive performance, in line with taxable fixed income. The Benchmark AAA municipal curve fell 5–13bps while Treasury yields rallied 10-13bps.
A tentative ceasefire has eased market concerns. We believe investors need to be prepared for further volatility as the fear and greed tension ebbs and flows concerning the energy shock, inflationary shock and potential growth shock. We believe in portfolio construction with higher quality allocations to equities and fixed income both domestic and aboard with selective less correlated alternative strategies.
Key Takeaways
The U.S. and Iran agreed to a two-week ceasefire, triggering a relief rally. Late Tuesday, the White House announced an agreement contingent on Iran reopening the Strait of Hormuz, less than two hours before a stated deadline to launch strikes. Markets reacted decisively Wednesday: the S&P 500 surged +2.5%, its best single-day gain in a year, the Dow jumped +2.9%, the Russell 2000 gained +3.0%, and international equities rallied +3.5%. Unlike prior headlines, this was an actual agreement confirmed by both sides.
Implication – The ceasefire is meaningful, but it was tested within hours. Israel launched strikes across Lebanon, Iran accused the U.S. of violating three conditions, and the Strait remained effectively closed.
Oil fell -16% on Wednesday, its largest single-day decline since April 2020, as markets priced in a potential Hormuz reopening. WTI crude dropped from around $112 to roughly $94, erasing weeks of war-driven gains that had pushed oil up more than +65% year-to-date. The move had immediate ripple effects: airline stocks rallied, and expectations for a Fed rate cut increased as near-term inflation concerns eased. However, the physical reopening of the Strait hadn’t occurred last week, and oil prices were moving back toward $100.
Why it matters: Oil is the primary channel through which this conflict affects inflation, the Federal Reserve’s decisions, consumers, and corporate profits. Wednesday’s swing showed how quickly that dynamic can shift when headlines change. The key question is whether the ceasefire produces an actual reopening.
High-yield credit spreads, which measure the extra yield investors require to hold corporate bonds over comparable Treasuries, tightened nearly -0.50% over the past two weeks and reached their lowest levels since late January. The VIX, a measure of expected market volatility, closed below 20 for the first time since late February, after briefly touching 28 intraday Tuesday before the ceasefire announcement.
Why it matters: When credit markets and volatility measures move in the same direction as stocks, it generally signals that the rally reflects genuine improvement in investor confidence rather than a narrow or speculative move. Both confirmed the week’s stock market advance.
The 10-year Treasury yield fell less than -0.05% on the week to around 4.30%, a muted response given the scale of moves elsewhere. The bond market’s reaction reflects the Fed’s policy forecast. Seven of nineteen Fed members forecast zero cuts in 2026, and the Fed’s March minutes, released last week, reaffirmed its patient approach. For 2026, the market expects between 0 and 1 cut vs. the Fed’s guidance of 1 cut. At yearend 2026, the market expects the Fed Funds rate to be 3.58% vs. the Fed’s guidance of 3.25%-3.5%.
Why it matters: The bond market’s muted reaction suggests investors are waiting to see whether the ceasefire meaningfully changes the inflation and growth picture before adjusting their rate expectations.
First-quarter earnings season unofficially begins this week, with the major Wall Street banks reporting. Beyond the typical focus on revenue and profit results, investors will be listening closely to management commentary on the conflict’s effects: energy costs, supply chain conditions, consumer demand, and any changes to forward guidance.
Why it matters: Corporate earnings calls will offer the first direct read on how the energy shock has worked its way through company costs, pricing, and demand. Forward guidance and tone may matter more than the headline numbers this quarter.
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