🍔Identifying A Bull Market

Leading stocks in this rally

Welcome back to MktContext where we study the US economy and time the stock market.

Is the war over? After a 10% decline, the SPX has already recovered back above all-time highs. And yet investors have been skeptical the entire way up. There’s still a lot of cash sitting on the sidelines.

When there is pervasive bearishness, that usually means the rally has longer to continue, not less. In this report, we discuss what’s driving the rally and how much further it could go.

Today’s topics: Iran war update, why the economy is resilient, what stocks are leading, our portfolio.

Underlying economy

With the Iran war all but resolved, the market is rapidly re-evaluating the ongoing economic situation. SPX is telling the story as it rips to new highs. The oil-driven recession is invalidated. So what’s the next narrative everyone is latching onto?

No doubt there has been some disruption to global supply chains, particularly oil supply. But this is not a long-term problem. Markets are forward looking, and the likely and predictable outcome is a normalization of Hormuz logistical flows.

The narrative is shifting back to long-term fundamentals. Without the shroud of war, the underlying US economy is quite strong. Unemployment rate sits at an historically low 4.3% and GDP growth is running just under 2%. We already explained last week why zero job growth is not a problem.

In fact, US is going to produce the strongest growth of the G7 countries for 2026. A resilient economy absorbs all types of disruptions. So what are the sources of this strength? Let’s break it down…

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• Consumers and businesses have lots of cash

• Manufacturing and transport resurgence

• Stock earnings underpinning this rally

• Kevin Warsh’s nomination hearing

• Iran war update

• Which stocks are leading?

• Our portfolio

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