📊 Weekly Market Recap
S&P 500 return Year-to-date were approximately 4.10%
S&P 500 3 month return were approximately 2.68%
S&P 500 return over the past 5 days were approximately 4.54%
This Week in the Markets – 3 Things to Know
Blockade + Ceasefire – The ceasefire between US and Iran took another turn this week when the US started blockading the Strait of Hormuz, to counteract the Iranian imposed blockade on the Strait of Hormuz. This double-negative seems to have actually worked, as the threat of imploding their entire economy forced Iran this morning to declare it ‘open’. Oil prices plunged and the stock market soared.
Dominance Backed Strength– The current rally is being powered by a combination of structural growth in AI and tangible earnings performance, particularly among large-cap technology firms and the big banks. Companies leading the AI wave are not only capturing investor attention but also delivering strong revenue growth, margin expansion, and forward guidance. Earnings expectations of double-digit year-over-year growth are reinforcing confidence that this is not just a speculative bubble, but a heavily supported trend. Capital is increasingly concentrated in these firms, driving index-level gains and pushing valuations higher. However, this concentration risk means that any earnings miss, slowdown in AI adoption, or regulatory pressure on big tech could disproportionately impact the broader market.
Policy Crossroads– Markets are currently balancing two opposing forces: easing geopolitical tensions and ongoing uncertainty surrounding Federal Reserve policy. Reduced conflict risk, particularly in energy-sensitive regions, is lowering volatility and improving global investor sentiment. This has helped sustain equity momentum by removing a key external risk factor. If the Fed signals a shift toward easing while geopolitical conditions remain stable, it could create a strong tailwind for further market gains. Conversely, if inflation forces the Fed to stay restrictive, tighter financial conditions could offset the benefits of global stability and put pressure on equity valuations.
High-Rate, High-Expectation Market
The market surged to record highs this week. However, this strength exists alongside lingering macroeconomic pressures, particularly elevated input costs and uneven global growth, creating a layered and somewhat fragile backdrop. Valuations in certain sectors are becoming increasingly stretched relative to historical norms, suggesting that much of the optimism is already priced in. At the same time, market breadth remains mixed, with a relatively small group of large-cap companies driving a significant portion of index performance. This divergence highlights a market that appears strong on the surface but is more selective and concentrated underneath.
The central focus remains on Federal Reserve policy and the trajectory of interest rates, which continue to influence everything from equity valuations to credit conditions. Inflation, while moderating from prior peaks, remains above target levels, complicating the Fed’s ability to shift toward a more accommodative stance. As a result, policymakers are balancing the risk of tightening too much potentially slowing growth, with the risk of easing too soon and reigniting inflationary pressures. . This has led to more disciplined borrowing and investment behavior, as well as a shift toward alternative financing sources. In particular, private credit has continued to expand as banks pull back from lending, offering investors higher yields and companies more flexible capital solutions, though not without increased risk.
On a broader scale, global conditions are showing signs of stabilization, with easing geopolitical tensions helping to reduce uncertainty and support risk assets. Lower volatility and improved sentiment have encouraged continued participation in equity markets, reinforcing the current rally.
S&P 500 SECTOR SNAPSHOT – Past Week
