Yeah, the American market made one of those moves that seem to defy all logic. More than a month after that whole scare in the Middle East, the S&P 500 fully recovered and has gained about 10% since the end of March. Meanwhile, the Nasdaq 100 gained 12% in the same period, closing higher for 10 consecutive days — the longest streak since 2021 for this index. Yesterday, the S&P 500 completely erased all the decline it had accumulated since the conflict began.

What stands out most is how Wall Street simply decided to ignore the geopolitical noise. Rich Privorotky from Goldman Sachs noted something interesting: the market seems to have declared victory in this "war" with Iran, even though the actual conflict hasn't officially ended. The Houthis haven't escalated operations in the Red Sea, drone attacks haven't increased, and there’s been no breach of the ceasefire. Still, Privorotky thinks it’s premature to celebrate now — but the stocks have already voted, and they voted heavily.

Chris Hussey from Goldman Sachs was very straightforward: it’s impressive that the S&P 500 is up 1.6% this year, considering the chaos a few weeks ago. He explains that stocks are forward-looking instruments, and the market simply can’t afford to wait for problems it knows will eventually be resolved. This dynamic explains why the S&P 500 recovered its outperformance so quickly.

Data confirms this narrative shift. The chip sector was one of the main drivers of this recovery — profit expectations for chips rose about 10% in just three trading days, significantly impacting the overall earnings projection. NVIDIA and Micron alone are expected to contribute more than 50% of the S&P 500’s EPS growth this quarter. The Mag 7 continued strong with a 3% gain, accumulating 15% in 10 trading days.

Now here’s where it gets interesting: it’s not just stocks rising. Bitcoin surpassed $76,000, gold is above $4,800, Treasury yields fell while the dollar weakened. Market liquidity also normalized — ETF volumes dropped from 50% to 29% of the total.

Behind this rally, a lot is happening. CTA funds are buying heavily, while hedge funds are selling and leaving these purchases for the CTAs to absorb. Short covering is accelerating — the most shorted stocks are being squeezed. Institutional investors have refocused on fundamentals, which the data supports. Results from big banks like JPMorgan and Citigroup showed that households and businesses are still solid, despite concerns about inflation and AI.

But here’s the curious detail: while the S&P 500 celebrates victory, the oil market is much more cautious. WTI fell below $91, and the Brent forward curve suggests that the oil market believes that resolving supply issues will take more time. This contrasts sharply with the optimism in the stock market.

Some strategists remain defensive. Lori Calvasina warned that if the narrative about the conflict changes, the S&P 500 still has room for a potentially deeper decline than before. Mark Hackett doubts that the S&P 500 will surpass its all-time highs before substantial progress in negotiations. And some people still don’t believe inflation will continue to fall as the market is pricing in.

Ed Yardeni is more optimistic — he maintains his view that the S&P 500 hit bottom on March 30 and that financial markets are learning to live with this war, just as they did with the Ukraine conflict. The point is: the recovery of the S&P 500 is real, but some risks still linger.