The S&P 500 just hit 7,000 for the first time ever, and Wall Street is acting like the war is over. Spoiler alert: it’s not. But hey, who needs facts when you’ve got momentum, right?
Here’s the vibe: Stocks are rallying hard, investors are dusting off their champagne, and everyone’s collectively decided to ignore the elephant in the room—or rather, the oil tanker stuck in the Strait of Hormuz. Ed Yardeni from Yardeni Research summed it up perfectly: “As far as the stock market is concerned, the war is over until further notice.” Translation: We’re pretending everything’s fine, and we’ll deal with reality later.
But Craig Johnson, Piper Sandler’s chief market technician, isn’t buying the hype. He called this week’s rally “falling upwards”—a fancy way of saying the stock market’s ten-day advance is “built on hope rather than evidence.” Ouch. That’s the kind of burn that stings because it’s probably true.
Let’s talk about what’s actually happening. Oil is still trading way above pre-war levels, even though prices have backed off from their peaks. The real problem? The Strait of Hormuz—basically the world’s most important oil highway—is still a disaster zone. Goldman Sachs estimates that flows through there are down 90% from normal levels. Ninety percent. That’s not a hiccup; that’s a full-blown supply chain catastrophe.
And it’s getting worse. The U.S. blockade of Iranian ports means even the remaining flows are at risk. The International Energy Agency just cut its oil demand outlook and predicted the sharpest decline in demand since COVID. Their executive director, Fatih Birol, basically said the market is sleeping on how bad this actually is. When oil was trading at $100 a barrel, he warned prices weren’t reflecting the severity of the problem. They’ve since fallen to about $90, but that’s still historically elevated.
Here’s where it gets spicy for your portfolio: the real threat is inflation. If oil prices stay elevated, the Federal Reserve can’t cut interest rates like everyone’s hoping. Worse-case scenario? They might have to raise rates instead. That would be the kind of plot twist that turns this victory lap into a face-plant.
So what’s the takeaway? The stock market is basically a teenager who just got their driver’s license—overconfident, ignoring warning signs, and convinced nothing bad could possibly happen. The rally might continue, or it might not. But pretending the oil shock has disappeared is like pretending your check engine light doesn’t exist. Eventually, you’re going to have to deal with it.
The market’s betting on hope. Wall Street’s betting on evidence. And somewhere in between, your portfolio is just trying to survive.
