During the week, markets showed a shifting dynamic, marked by a strong initial rally driven by signs of geopolitical relief, followed by rising uncertainty toward the end of the period.

The result: a market that maintains a bullish bias, but remains highly dependent on external factors, especially geopolitical ones.

General trends

Early bullish momentum with fading strength

Major indices started the week on a positive note:

• The S&P 500 posted solid gains, supported by a more favorable risk environment.

• The Nasdaq led the rally, once again driven by technology.

• The Dow Jones advanced, though with more limited strength.

This move was supported by a strong rally in the previous week, where indices rose between 3% and 4.7%, reflecting renewed market optimism.

However, momentum began to weaken toward the end of the week.

Sharp shift in sentiment toward the close

Market tone changed significantly on April 13:

• Futures of major indices declined.

• Volatility increased (VIX moved higher).

• Risk aversion rose.

This shift was driven by worsening geopolitical conditions, putting pressure back on risk assets.

Geopolitics dominates the market

From relief to tension in a matter of days

The main driver of the week was the situation in the Middle East:

• Early in the week, a temporary ceasefire triggered a strong rally.

• Oil prices dropped sharply, easing inflationary pressures.

• Markets reacted positively to expectations of stability.

However, this scenario changed quickly:

• Failed negotiations between the U.S. and Iran.

• Announcement of aggressive measures (maritime blockade).

• Escalation of global tensions.

This led to a sharp increase in uncertainty.

Oil takes center stage again

Oil experienced one of its most volatile periods recently:

• Initially dropped sharply after the ceasefire.

• Later surged back above $100 per barrel.

Key impacts:

• Re-emergence of inflation risks.

• Pressure on central banks.

• Sector rotation toward energy.

Key drivers of the week

1. Inflation concerns return

• Short-term inflation expectations increased (up to 4.8%).

• Signs that the disinflation process may be stalling.

This directly impacts:

• Interest rate expectations.

• Valuations of growth assets.

2. Mixed economic data

• Factory orders showed no growth.

• Consumption and activity showed signs of slowing.

While not alarming, they reinforce a moderate growth scenario.

3. Earnings season begins

• Banks like Goldman Sachs kicked off the season.

• Expectations remain solid, but under macro pressure.

Market focus is gradually shifting toward corporate fundamentals.

4. Geopolitical volatility as the main driver

The market made it clear that:

• Geopolitics remains the main short-term catalyst.

• Movements are not driven solely by economic fundamentals.

Sector dynamics

Technology:

• Continues to lead, especially in the AI narrative.

• Highly sensitive to rates and inflation.

Energy:

• Regains relevance with rising oil prices.

• Direct beneficiary of global tensions.

Financials:

• Mixed performance: strong results but macro pressure.

Consumer & cyclicals:

• Impacted by economic and energy uncertainty.

The market’s underlying message

The market is sending a clear signal: the trend remains constructive, but extremely fragile.

Three key takeaways:

• Risk appetite exists, but is not solid.

• Geopolitics can quickly reverse trends.

• Inflation remains the main structural risk.

What could come next

In the short term, markets will focus on:

• Developments in the Middle East conflict.

• Oil price behavior.

• Inflation and economic data.

• First-quarter earnings results.

A stable environment could sustain the rally, while new shocks may trigger sharp corrections.

This week reflected a market divided between two forces:

• Structural optimism, driven by technology and growth expectations.

• Immediate risk, driven by geopolitics and inflation.

The result is a market that moves forward, but with high sensitivity to any change in the environment.

More than a defined trend, volatility is what dominates.

The opinions in the preceding commentary are as of the date of publication and are subject to change.  Information has been obtained from third party sources we consider reliable, but we do not guarantee the facts cited are accurate or complete.  This material is not intended to be relied upon as a forecast or investment advice regarding a particular investment or the markets in general, nor is it intended to predict or depict performance of any investment. We may execute transactions in securities that may not be consistent with the report’s conclusions.  Investors should consult their financial advisor on the strategy best for them.  Past performance is no guarantee of future results. For illustrative purposes only. Does not represent an investment recommendation. For more information, please see our Social Media Disclosure.

Securities offered by Northbound Securities, LLC Member FINRA/SIPC 

Sources: Bloomberg, Reuters Energy, CNBC Markets, ISM Manufacturing Report