And just like that, stocks are at all-time-highs

The stock market’s comeback has now turned into a full recovery to fresh all-time highs, with the S&P 500 over 7100 and the Nasdaq over 24,400 in intraday trading on April 17. What makes the move so notable is the speed: Reuters reported the S&P 500 had been down as much as 9% from its peak after the February 28 start of the U.S.-Iran conflict, while the Nasdaq had fallen into an official 10% correction before roaring back to records in just a matter of weeks. The latest leg of the rally was driven by a sharp collapse in oil after Iran said the Strait of Hormuz was “completely open,” sending crude down more than 11% and easing fears of another inflation shock. The rally is also broadening beyond just mega-cap technology, with the Russell 2000 hitting a fresh intraday record high after recently slipping into correction territory. From a historical standpoint, the Nasdaq’s momentum has been especially unusual, as it was on pace for a 13th straight gain, which would mark its longest winning streak since 1992.

• The rally, which began before the ceasefire announcement last Tuesday has been very swift
• Since the ceasefire announcement last Tuesday the rally has gained momentum and breadth
• The market clearly believes that the worst of the conflict is behind us
• From this point on, the market will focus on whether the situation in Iran and Lebanon continues to stay calm
• Oil prices will be in focus as the backlog in the Strait of Horzmuz is cleared
• The market will shift its focus to any inflation that may filter through to the economy, although this is mitigated if oil prices continue to stay lower
• The market will also likely focus on the transition of the Fed Chair next month, any complications to a smooth transition would be negative
• In addition, Trump’s summit with Xi Jinping will be a major focus
• Beyond this, the market will focus on mid-terms, which have historically served as a source of uncertainty and volatility
• Ultimately, we believe some of the trends that existed before the war, will be reconstituted
• In particular, this should be bullish for pro-cyclical equities, commodities and small caps
• Software stocks, while rebounding, will continue to deal with developments in AI
• Financials will trade with rate cut expectations

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