Last week's main macro story was the fierce clash between geopolitical supply shocks and risk appetite. The war between the US and Iran sent crude oil prices soaring to $112 a barrel, creating significant market volatility. Fears of a prolonged conflict led to sharp sell-offs in risky assets and boosted inflation expectations. Mid-week, the market narrative suddenly shifted when President Trump signaled a two- to three-week exit plan. Iran's interest in a ceasefire and its preparation of a new protocol with Oman for the Strait of Hormuz quickly reversed the war pricing. This sharp shift between "continuing the war" and "exiting the war" paved the way for a massive liquidity rally in indices.
The market's fundamental tension remains between structural growth and geopolitical inflation shocks. Data center expansions and AI infrastructure investments continue to single-handedly support US economic growth. Investors are now calculating whether the inflationary wave created by $112 oil will derail monetary policy or whether corporate profits will outpace these costs. Global monetary policy expectations have collided with the reality of persistent inflation. The International Monetary Fund (IMF) has made it clear that the Fed has little room to maneuver to cut interest rates as it attempts to bring inflation down to its 2% target by the first half of 2027. This suggests that the terminal interest rate will remain high for much longer than the market initially priced in.
Domestically, the Atlanta Fed revised its first-quarter real GDP growth rate downwards to 1.6%. This decline was attributed to the severe weather in February rather than a structural economic downturn. Despite this revision, the Citigroup Economic Surprise Index remains strongly in positive territory since the start of the year. Labor market resilience continues to make dovish expectations difficult. While the Challenger report indicated 60,620 planned layoffs, the unemployment rate is estimated to have fallen in March from 4.4% in February. With the labor market remaining this tight and energy-related inflation persisting, postponing interest rate cuts will be inevitable.
The S&P 500 index showed a strong recovery, closing the week up 3.43% at 655.83. According to technical analysts, the market officially bottomed out on Monday after a correction of approximately 10% from the January 27th peak. The clear bullish crossover shown by the MACD indicator on the daily SPY chart technically supports this reversal. The Nasdaq (QQQ) index also managed to break its downtrend that has been ongoing since the end of February. The put-call ratio in stock options reached 0.9, hitting extreme fear levels seen at the April 2025 lows. This metric indicates that downside risks have been almost fully priced in by individual and institutional investors.
Global market breadth gave the first buy signal before US indices found equilibrium. In Europe, the EuroSTOXX 50 and in Japan, the Nikkei indices, showed convincing rallies, breaking their downtrends. While US markets initially lagged behind due to weakness in large tech stocks, the market expansion in the middle of the week confirmed the structural shift. Sectoral leadership this week was shaped around war premiums and structural supply shortages. The energy sector naturally led the market with rising crude oil prices driven by global supply threats. The basic materials sector also performed strongly, benefiting from similar inflationary dynamics and supply chain disruptions.
Technology and semiconductors showed strong resilience despite geopolitical noise. On the crypto assets side, Ethereum and Bitcoin in particular outperformed traditional safe-haven assets like gold. This divergence suggests investors are preferring decentralized beta and structural AI growth over passive defensive positions. Interest-sensitive sectors like financials also saw strong buying as the yield curve narrative shifted. In contrast, some high-multiplier giant tech companies and momentum stocks lagged at the bottom of the performance list. It is clear that investors are moving away from overcrowded technology transactions towards energy and targeted AI infrastructure.
The consensus among corporate strategists is that the recent sell-off is an opportunistic bottom rather than a structural collapse. Ed Yardeni argued that Monday's low was due to collapsed sentiment indicators that historically give opposing buy signals. Tom Lee agreed, stating that 95% of the sell-off was complete and recommended a portfolio strategy consisting of a mix of energy and technology assets. Mike Wilson of Morgan Stanley offered a highly bullish view, noting that the market has already priced in war and oil risks. He pointed out that the correction is well underway, recalling that the S&P 500 price-to-earnings ratio has fallen by 17%. Wilson believes the market narrative has shifted from an AI demand shock to corporate efficiency and margin expansion.
Taking a more aggressive stance, Wedbush analyst Dan Ives characterized the software sell-off as a major disruption and described geopolitical risk as a gift for technology investors. He argued that the memory supercycle hasn't been broken, highlighting that AI chip demand exceeds supply by a 12-to-1 ratio. The only data that could refute these optimistic views would be a sudden collapse in forward-looking earnings growth, currently hovering above 20%. This week's macroeconomic calendar largely focuses on inflation and economic growth data. This data will determine whether the Fed can maintain its current stance or whether it will be forced to react to commodity price shocks. Markets are extremely sensitive to any data that could accelerate terminal rate expectations.
CPI and PCE inflation data will be central to the scene for global equities. With oil trading at $112 a barrel, any inflation figure released will act as a direct and highly volatile market catalyst. An upside surprise in this data could crush hopes for rate cuts and trigger a rapid delegitimization in growth stocks. The second GDP revision is also among the week's key data points and will provide critical clarity on the economic impact of the conflict in the Middle East.
The current market regime is characterized by extreme headline sensitivity and highly crowded trading in the technology sector. Despite tensions with Iran, liquidity is returning, but volatility remains high due to commodity price shocks. A positioning strategy requires a clear separation of structural winners from companies dependent on zero-interest rate policies.
Risks:
1- Failure to restore ship traffic flow in the Strait of Hormuz would mean continued rises in oil prices and suppression of equity prices.
2- Hypercap corporations reducing capital expenditures in 2027 would severely damage the valuations of AI infrastructure stocks like Vertiv.
3- Sticky energy-related CPI and PCE data could force the Fed to abandon interest rate cuts, triggering a widespread market sell-off.
4- Supply chain disruptions in raw materials like helium from Qatar could directly negatively impact global memory chip production.
5- Continued tariffs and weak Chinese demand would continue to put pressure on the profit margins of cyclical consumer companies like Nike.
Opportunities:
1- Micron (MU) shares trading at a historical low of 4.7x forward P/E, offering massive upside potential as the memory supercycle continues.
2- Nuclear energy and copper stocks could structurally benefit from the increasing power demand of data centers and the advantages of stable fuel costs.
3- McDonald’s shares entering April, their strongest seasonal month, could find support from consumers turning to cheaper alternatives in an inflationary environment.
4- Companies like Lumentum and Coherent, providing critical optical network hardware for AI, offer deep competitive moats and margin expansion.
This intense market volatility has cleared the weak hands from the table and wiped out valuations in key growth sectors. Panic selling based on geopolitical headlines provided a mechanical entry point, as confirmed by excessively high put-call rates. Data clearly shows that corporate profits and AI infrastructure spending are completely detached from short-term macro noise. Given all this, it is essential for individual investors to approach the market with a balanced positioning. While allocating a heavy position to structural AI and semiconductor growth, it must balance this with energy and interest-sensitive assets to provide protection against inflation spikes.
Buying dips in fundamentally sound but heavily discounted tech stocks like Micron currently offers the best risk-reward ratio. It's absolutely essential to steer clear of highly cyclical consumer stocks like Nike, heavily exposed to Chinese demand and global tariffs. Focusing solely on companies directly linked to insurmountable competitive ruts, pricing power, and multi-year data center construction would be wise.
The information, comments and recommendations contained herein are not within the scope of investment consultancy. Investment consultancy services are provided within the framework of the investment consultancy agreement to be signed between brokerage firms, portfolio management companies, banks that do not accept deposits and customers. The comments in this article are only my personal comments and these comments may not be appropriate for your financial situation and risk return. For this reason, investments should not be made based on the information and comments in my articles.
