The Middle East "powder keg" goes silent, becoming a strong support for US stocks! The S&P 500 is just one step away from a new high

According to Zhitong Finance APP, the US stock market has begun to show an optimistic outlook due to the ceasefire agreement in the Middle East significantly reducing the likelihood of drastic fluctuations in energy prices. Coupled with the continued robustness of the US economy, the "clouds" of tariffs and geopolitical issues that previously overshadowed the market are rapidly dissipating. Over the past two months, the US stock market has demonstrated resilience, with the S&P 500 index rebounding significantly from its April lows, now just 2% away from its historical highs.

Barclays Bank strategist Emmanuel Cau stated: "It is dangerous for investors to overreact to such events, as these events are often just the starting point for a market rally, rather than a sustained selling opportunity. In the medium term, this could actually become a factor driving the stock market higher."

The US stock market is expected to reach historical highs in a tumultuous year.

There is sufficient evidence to suggest that bullish investors have enough capital to further drive the market higher. Since the rebound in April, fundamental investors have not significantly increased their equity exposure, which gives them room to take on more risk. Other market forces—systematic investors, options traders, and retail traders—may also have a significant impact.

After Iran launched missiles at the US Air Force base in Qatar, Goldman Sachs' trading department released a report on Monday stating: "Market price movements reflect dynamic changes in geopolitical aspects, which are seen as a liquidation event. Our trading department's orders today are orderly—more of an offensive posture rather than a defensive one."

It is certain that systematic funds have played a significant supporting role in the market over the past few weeks, but given that these trend-following funds have already built up substantial positions, their influence is now weakening. Additionally, as the second-quarter earnings season approaches, more companies are entering their buyback quiet periods. Fortunately, as long as the market remains optimistic, systematic investors are unlikely to sell off in large quantities.

Meanwhile, after the expiration of $6.5 trillion in options last Friday, the positioning in the options market has also been reset. Since the hedging funds of market makers are currently at a cyclical low, this will allow the stock market to fluctuate more freely. Tier 1 Alpha's options strategist pointed out that ultimately, this "will translate into a more natural price movement in the stock market."

Some areas of venture capital have already taken off. Renewed optimism about artificial intelligence has driven stocks related to this theme to reach historical highs, while broader indices are in a consolidation phase. This indicates that the drivers that propelled the market upward over the past two years may once again become a bullish force.

Additionally, as oil prices rapidly decline, the threat of rising inflation is gradually fading. The tariff deadline set by President Donald Trump on July 9 will become the next key event determining consumer price trends. The second-quarter earnings reports will also soon become a focal point. According to data compiled by Bloomberg Intelligence, analysts expect the earnings per share of S&P 500 constituent companies to grow by 2.8% year-on-year, but the focus will be on how companies respond to the forward-looking comments on trade conditions Academy Securities macro strategist Peter Tchir stated: "The best bull market scenario is that the tariff suspension measures will be significantly extended—possibly even interspersed with one or two agreements—so that we can anticipate some potential positive outcomes, thereby increasing the likelihood of an upward trend."