Last week, the S&P 500 Index (SPX) surged by nearly 3.6%, climbing to $6,820, as traders celebrated the announced two-week ceasefire in the Middle East and speculated on a swift, full reopening of the Strait of Hormuz. However, investor sentiment has shifted dramatically over the past few days. Negotiations between the United States and Iran ended in failure—there was no agreement reached or signed, just another diplomatic dead end. As a result, this morning, index futures opened with a significant gap down. Soon after, energy markets started to snap back: Brent and WTI crude are now erasing some of their recent losses, trading above $96 and $100 per barrel, respectively.
Adding to the gloom, President Donald Trump ordered a naval blockade of Iranian ports and the key global artery, effective Monday. As if that weren't enough, March's Consumer Price Index (CPI) data sounded the alarm: inflation jumped to 3.3% year-over-year, slamming the door on hopes for rapid Federal Reserve (Fed) monetary easing.
Amid the wreckage, one positive factor stands out: the upcoming first-quarter (Q1) earnings season, which kicks off this week. Analysts estimate that S&P 500 companies could post 12–13% year-on-year profit growth. If these predictions come true, it will be the sixth straight quarter of double-digit earnings-per-share (EPS) growth. Yes, high energy costs threaten to squeeze margins. But strong domestic demand and ongoing corporate investment should give firms a fighting chance to smash through revenue and profit expectations.
The ultimate recommendation is to sell SPX at the current price, targeting $6,600 within two to three weeks. To manage risks, place a Stop Loss order 1% above the entry level in case the market plays against us. +
This content is for informational purposes only and is not intended to be investing advice.
