Stocks quickly rebounded after the crisis, the S&P 500 has even surpassed pre-war levels. But this is what makes me a bit doubtful—if you only look at the stock charts, everything indeed looks "healthy and recovered." The war breaks out, the market rallies, and then everything returns to normal within days. It’s too easy, really, if you think about it.

What’s strange is that bonds and oil don’t tell the same story. The 10-year bond yield has risen 30 basis points since before the war, now at 4.25%. WTI oil still remains at a much higher price—up 37% in 6 weeks. If there truly was a stable ceasefire, oil prices should have already dropped to around $70. But no, prices remain strong here.

The two biggest markets in the world are telling different stories from what the stock market is saying. This is not a signal to ignore. The current market rally seems to assume a series of very ideal conditions: oil prices won’t pressure consumption, the Fed will still cut rates despite persistent inflation, corporate profit margins remain safe, and the Middle East conflict will be resolved within 6 months. That’s a lot of assumptions all at once.

Looking at the 2-year bond yield, which has risen nearly 40 basis points, the story is clear: the Fed has less room to maneuver than the market rally currently expects. The 2-year yield is the most sensitive indicator of the Fed’s policy path—more direct than other assets. The signals sent are very explicit: inflation is still a concern, and the room for rate cuts is not as wide as the rally suggests.

Now, who is right? The stock market could be correct. If a substantial ceasefire agreement is reached, bond yields could drop immediately, and once supply issues are resolved, oil prices could plummet. This isn’t the first time stocks move first, while other assets follow. But there’s another possibility I think is being overlooked: this rally is largely driven by momentum, not strong fundamentals.

Trader behavior that fears shorting in an ongoing uptrend pushes the market higher. Such buying can indeed keep prices elevated longer than they should be. But it doesn’t change the basic reality: oil prices are still high, interest rates are still rising, and the room for Fed rate cuts is more limited than needed.

Fundamental-driven rallies tend to be more sustainable. Momentum-driven rallies—more fragile, shorter-lived. This difference is very important if you’re thinking about adding positions near all-time highs.

What I see now: the stock market is at the most optimistic end of the price range. Bonds and oil are more in the middle, reflecting a world where inflation still exists, the Fed has limitations, and the conflict isn’t truly resolved. This discrepancy will eventually be corrected in one of two ways: either the rally continues because a real ceasefire is achieved, oil drops to $70, the Fed can cut rates clearly, and stocks prove to be right. Or nothing like that happens, and the market must fall to align with bond and oil signals.

Currently, bonds and oil are not showing signs of moving in the same direction as stocks. Instead, it seems stocks need to fall to "match" both. Next inflation data is on May 12. If CPI exceeds 3.5%, the narrative of rate cuts next year will basically end.

If you keep adding positions now, you are basically betting that everything goes perfectly: the war ends smoothly, inflation is controlled, the Fed cuts rates as planned, and corporate profits stay stable. All four must happen simultaneously. If one deviates significantly, a quick and sharp downward adjustment could occur. I prefer to be patient rather than chase a rally that is quietly rejected by the two main asset classes.