Nearly two months have passed since the joint air strike by the United States and Israel on Iran at the end of February, which led to the full-scale outbreak of war. Although a short-term peace period of a two-week ceasefire is currently in place, there are still no clear signs that the war has come to an end. An important trend worth the attention of retail investors is that after an initial series of sharp sell-offs, Wall Street institutional investment forces appear to be filtering out these war-related noises. Unlike early March, when the war was seen as a “core variable determining market direction,” they are now beginning to largely “ignore the war noises.”
This also explains why the S&P 500 and the Nasdaq 100 have completely recovered all the losses caused by the geopolitical conflict in the Middle East at the end of February. Since March 27, the S&P 500 has risen nearly 10% and is heading for its third consecutive week of gains. Over the same period, the Nasdaq 100 has risen about 12%, posting gains for ten consecutive trading days, marking its longest winning streak since 2021.
After a five-week decline triggered by the U.S. and Israeli military strikes on Iran, top Wall Street traders are now unfazed by negative developments in Middle East geopolitics. They have chosen to continue pouring into the stock market as the earnings season officially kicks off, with early corporate earnings data and future outlooks showing optimism. Doug Peta, Chief U.S. Investment Strategist at BCA Research, noted that financial markets appear less worried about the effective blockade of the Strait of Hormuz. According to Mark Hackett, Chief Market Strategist at Nationwide, Wall Street institutional investors are the core driving force behind the current stock market recovery, with market attention shifting back to the fundamentals of the earnings season, which are highly supportive.
Many major Wall Street financial institutions attribute the resilience of the current stock market rally to the continuous upward revision of corporate earnings expectations. In particular, the strong earnings expectations of technology companies closely related to demand for AI computing power infrastructure have not been disrupted by the war. As a result, BlackRock has upgraded U.S. stocks and emerging market equities back to “overweight,” noting that earnings growth expectations for the technology sector in 2026 have risen to 43%. Citigroup has also upgraded U.S. stocks to “overweight,” arguing that valuations following the recent pullback are more attractive. The “AI computing power super group,” led by Nvidia (NVDA), Taiwan Semiconductor Manufacturing Company (TSM), AMD, and Broadcom, has become the most sensitive, fastest-moving, and strongest-rising sector in the overall market rebound.
As long as the war does not escalate further, the most worthwhile investment theme for the next phase remains those offensive assets capable of converting AI capital expenditures into real profits. Lori Calvasina from RBC Capital Markets cautions, however, that the lack of clarity regarding the prospects for peace negotiations could increase the risk of a “growth shock” sell-off. But overall, Wall Street is downgrading the war from a “primary variable determining market direction” to a “noise variable that can create volatility but may not necessarily change the pricing logic.”
