Stocks were climbing for the third day in a row this week as enthusiasm over the expected end of the war in Iran buoyed the market, and investors looked forward to earnings season, which has kicked off this week with strong results from the top banks.
As of 12:22 p.m. ET, the S&P 500 (SNPINDEX: ^GSPC) was up 0.5% and on the verge of an all-time high, while the Nasdaq Composite had jumped 1.2% as investors pivot to tech stocks. The Dow Jones Industrial Average, which has the least exposure to the tech sector, was down 0.4%.
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In an interview with Fox Business Network’s Maria Bartiromo this morning, President Trump said the war is “very close to over,” and added that once it ended, “the stock market is going to boom. It’s already booming.”
Since the Iran war broke out, investors have been hanging on to nearly every comment from Trump about the conflict, and indexes have fluctuated up and down wildly. Stocks soared after Trump announced a ceasefire last week and have continued to climb since then as investors seem increasingly confident that the war will be resolved, or that at least the most bearish scenarios are now off the table.
However, oil prices are still elevated from before the war began, and both sides have not yet come to a peace agreement that would keep the Strait of Hormuz open.
President Trump’s prediction about the stock market warrants some caveats.
First, with the S&P 500 now hovering near 7,000, above where it was before the war started, it appears the war is no longer an obstacle to the stock market’s growth, but other factors are.
Prior to the war, there were concerns about valuations getting stretched, especially amid fears of a weakening labor market or an AI bubble, and those issues haven’t gone away. The State Street SPDR S&P 500 ETF (NYSEMKT: SPY) now trades at a price-to-earnings ratio of 27.6, representing a significant premium to its historical average. Meanwhile, growth in the U.S. labor market has been sluggish over the last year.
A boom is possible as those tend to be driven by sentiment, but it would likely only add to valuation-related fears.
Overall, trying to time the market is generally a poor approach to investing. Investors are better off buying high-quality stocks at reasonable prices.
