Stock markets have surged since the peak of the US-Iran conflict, but this strong trend is finally starting to slow down. After weeks of pushing the market higher, semiconductor giants and the Magnificent 7 are now pulling back, putting a sudden stop to the recent Wall Street excitement.
Geopolitical tensions are still unresolved, and the market’s optimism is fading. Even though yesterday saw a big relief rally after news broke that planned US military attacks on Iran were halted, investors could not keep up the positive momentum today.
The lack of immediate conflict is no longer enough to hide changing economic conditions, and particularly when it comes to Fed expectations.
Now, stocks are under pressure from a sharp rise in bond yields. The new Warsh Trade is especially risky for tech-heavy sectors that have grown too quickly.
With Kevin Warsh confirmed to become the next Federal Reserve Chairman and likely to reduce the central bank’s balance sheet, less liquidity is causing investors to rethink the current extreme pricing of high-growth assets – We will learn more on his views this Friday, date he will be sworn in.
As a result, the strong upward trend that has kept the Nasdaq and S&P 500 rising since early April is now breaking down – But for now, the correction remains quite contained.
With the main drivers of the rally now leading the decline, traders are left wondering if the big peace rally has come to an end.
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