Rumours of an imminent end to the Middle East conflict, alongside SpaceX momentum, supportive US macro data and lower expectations of further Fed tightening, helped the S&P 500 return to gains. Attention centred on Pakistan’s statement that the final text of a US-Iran memorandum had been agreed, with Tehran saying the two sides’ positions were closer than before. The University of Michigan consumer sentiment index posted its first increase in four months, while falling petrol prices fed through to inflation expectations: consumers now see inflation at 4.6% over the next 12 months, down from 4.8% a month earlier.

SpaceX debuted 11% above its $135 IPO price, jumped as much as 31% intraday and ended the session 19% higher. Markets are also positioning for Kevin Warsh’s first meeting as Fed Chair, with expectations skewed towards ‘dovish’ messaging on inflation. On equity targets, Morgan Stanley projects the S&P 500 reaching 8,000 by end-2026, while Citigroup lifted its forecast from 7,700 to 8,100; Bank of America indicators flagged ‘bearish’ signals and Wells Fargo pointed to turbulence in chipmakers. Broader support remains tied to earnings expectations, US growth, reduced geopolitical risk, AI demand and anticipated rate cuts, tempered by the possibility of consolidation.

Strategic Positioning for Market Upside

With the S&P 500 breaking through 7,450, we see the combination of geopolitical calm and a dovish Fed creating a powerful tailwind. Our primary strategy in the coming weeks is to position for further upside. This means we are looking at buying call options on the SPX and major ETFs like SPY.

The market has shown incredible resilience, posting an 18% gain year-to-date and making the 8,000 year-end targets from Morgan Stanley and Citigroup seem attainable. Historically, momentum like this tends to persist longer than many expect. We should therefore treat any minor pullbacks as buying opportunities.

We are noting that the CBOE Volatility Index (VIX) has fallen to around 13.5, a sign of low market anxiety. This environment makes buying options cheaper than it has been in months. It presents a cost-effective way for us to add long exposure through call spreads.

Sector Focus and Protective Measures

The successful SpaceX IPO is reigniting fervor for the technology and AI sectors, which continue to lead the market. We are focusing on the Nasdaq-100, which is up 22% this year, as a prime vehicle for capturing this enthusiasm. We see opportunity in call options on the QQQ ETF and select chipmakers ahead of anticipated IPOs like OpenAI.

However, we must also acknowledge the caution from firms like Bank of America. To hedge against a potential sharp, short-term consolidation, we recommend allocating a small portion of the portfolio to protective assets. This includes buying out-of-the-money put options on the SPX with expirations in late July.

All eyes are now on new Fed Chair Kevin Warsh’s first FOMC meeting in July. The prevailing belief is that he will signal a halt to any further tightening, which could be the next major catalyst for the market. We are positioning for a positive market reaction by establishing bullish positions ahead of the event.