After the record high close on Friday, we’re not seeing any threatening drop to US stocks ahead of the open later. And that is despite a setback to US-Iran developments, with Trump shooting down Tehran’s latest peace proposal.
From Iran’s point of view, they are saying that the US demands are too much and that they cannot abide by that. On the US side, they are also claiming that Iran is making unreasonable requests. And mind you, all of this is supposed to be the framework to set up negotiations regarding nuclear/uranium. Sure, there are some related side requests involved but this was meant to be the platform for both sides to work with. And yet, they can’t even come to terms on that.
One key factor is also that Iran wants the US to lift its naval blockade. But even if it were to happen, Iran wants to claim sovereignty and maintain some semblance of control over the Strait of Hormuz. It feels like neither side will budge on that without the other choosing to give up their position as well. Hence, we’re sort of in a chicken and egg situation.
And given the fact that Trump is to make a trip to China this week, it is more than likely that any US-Iran developments will be placed on hold. That as we sidetrack a little and focus on the show in Beijing for a few days. And that also means the Strait of Hormuz remains in de facto closure and the oil market tightens further for yet another week. Yet, US stocks are looking rather sanguine and are brushing aside the risks of the situation for the most part.
Oil prices have ramped higher to start the week with WTI crude briefly hitting $100 again while Treasury yields continue to stay underpinned. On the latter, 30-year yields are once again now marching back towards the key 5% threshold.
Yet, US futures while subdued are not really being put under much pressure to be honest. S&P 500 futures are down 0.1% and Nasdaq futures also down 0.1% currently.
We’re coming off the back of six straight weeks of gains now, that being the longest winning streak since October 2024. Tech shares have a lot to do with it as the AI boom continues to grow. Chip stocks and semiconductors continue to outperform heavily, piggybacking another successful earnings season.
It’s a really tough one to square when broader markets are acting with such concern, yet US stocks are ignoring all of that.
It feels like investors are just going to keep partying until the cops come to crash, while choosing to close their eyes and ears to all the warning signals elsewhere.
At some point, it is either the cops really show up and puts an end to the party or the cops fail to live up to the threat and the party just rages on even more.
You have to think at some point economic reality will also come to bite at stock market sentiment. But then again, this whole AI rally has been one that thrives on its own regardless of the economic picture
