Markets are breaking records… but is the real economy supporting this rise?

In the first quarter of 2026, US markets experienced a strong rally, with the S&P 500 reaching a new record high of 7,023 points and the Nasdaq Composite climbing to 24,016 points. This surge was fueled by robust corporate earnings and easing concerns about the ongoing conflict in the Middle East, particularly following talks aimed at de-escalating tensions between the United States and Iran. This was accompanied by a rise in gold and silver prices to new record highs (gold approached $4,850 per ounce, and silver hovered around $80) amid increased demand for safe-haven assets and expectations of further monetary easing. Conversely, oil prices declined, with Brent crude falling from a peak near $100 to around $95, amid hints that Gulf supplies might resume following a temporary lifting of the blockade on the Strait of Hormuz. Against this backdrop, the macroeconomic context remains volatile: US inflation jumped to nearly 3.3% year-on-year in March (its highest level since May 2014) as a result of the energy price shock, while the labor market remains resilient with an unemployment rate of around 4.3%. Monetary policy, led by the Federal Reserve, remains relatively tight (interest rates held steady at 3.50–3.75% in March), with a growing divide among Fed officials between concerns about persistent inflation and the need to lower interest rates to support growth. Given these factors, analysts are divided between a scenario of continued upward growth supported by economic recovery and profitability, a potential market correction in the event of renewed trade tensions or tighter monetary policy, or a stagflation scenario if energy shocks persist.

Performance of the US stock market and the rise of benchmark indices
Optimism returned to Wall Street this month after a sharp sell-off that lasted until late February 2026, as the US president announced that negotiations to end the war with Iran could resume soon.
This was reflected in a broad rally: the S&P 500 surpassed its previous January high, closing at 7,022.95 points, a new record. The Nasdaq Composite rose more than 1.5% to 24,016 points, exceeding its previous all-time high of 24,019.99 for the first time. Tesla shares and the momentum of the major technology companies (known as the Magnificent Seven) led the gains, fueled by strong speculation about growing demand for artificial intelligence, while most market sectors closed in positive territory. This rally was primarily driven by strong earnings forecasts: analysts are raising their estimates for first-quarter corporate profits to around $605 billion, according to LSEG (up from the previously projected $599 billion), which has bolstered optimism that the US economy is still resilient to energy shocks.

Despite this rise, market indicators remain at high valuation levels: the S&P 500’s expected price-to-earnings ratio is around 21.6 times projected earnings, slightly down from 22.5 at the start of the year. Some market voices caution against excessive optimism; some analysts believe that surpassing the peaks is not necessarily a sign of a bubble, but rather a reflection of investors’ confidence in the resilience of the American consumer and the ability of companies to expand in the face of higher energy prices. From a technical perspective, breaking through the resistance level that had held for months suggests an acceleration of buying momentum, especially with the shift in liquidity (the reinvestment of funds in the markets after a widespread sell-off) and a decrease in investor concern—a traditionally counterbalancing signal to the prevailing trend.

Gold and silver movements and upward factors
Escalating geopolitical tensions have boosted demand for gold and silver as safe havens: spot gold prices rose nearly 0.5% yesterday to around $4,815 an ounce, while silver also touched new record highs (around $80.12). This surge in the price of gold is the first of its kind in months and was driven by a combination of high inflation, a weaker dollar, and expectations of a US interest rate cut in 2026 (expectations of a rate cut later rose to 34% before the end of the year). The recent increase is particularly attributed to news of progress in negotiations to end the Iran-US war, which has eased concerns about further escalation in energy prices.

Despite this, gold is experiencing wide volatility: after reaching nearly $4,850 in mid-April (previously hitting a high of $4,820 in March), some investors began taking profits as war tensions eased and bond yields rose (increasing the opportunity cost of holding the non-interest-bearing metal). Silver, on the other hand, rose (by nearly 7%) due to a combination of its precious metals appeal and its sensitivity to rising energy costs; silver is more sensitive to industrial demand (which is energy-intensive) than to demand as a safe-haven asset. The market is expected to remain volatile: with the easing of acute risks, gold may temporarily decline, but any sudden deterioration in inflation or in negotiations (a collapse of the truce) could push it above $5,000 an ounce and silver back towards $80.

Oil prices and the reasons for relative stability
Brent crude recently dipped to around $95 a barrel, but failed to climb back above the $100 mark seen at its March peak. This relative decline reflects market hopes for a lasting truce in the Middle East, which would allow for the reopening of the Strait of Hormuz and the free flow of oil. In mid-April, Brent crude fell 4.6% (to $94.79) and WTI 7.9% (to $91.20) in a single session, fueled by rumors of renewed US-Iranian negotiations and the lifting of sanctions on Iranian ports. The prevailing analysis at the time was that markets had already “priced in most of the potential disruption,” as analysts at PVM commented (they anticipated that any potential resumption of oil flows through the Gulf would alleviate price pressures).

However, the situation remains fragile: the repercussions on Saudi production (attacks on oil facilities) and the continued disruption to tanker traffic (less than 10% of normal transit through the Strait of Hormuz) increase the likelihood of a renewed price surge if any long-term truce fails. Indeed, the International Energy Agency has already pointed to the largest supply shock in history (a loss of 10.1 million barrels per day in March due to the supply disruption). Yet, global economic forecasts have recently been revised downward by about one million barrels per day for 2026 (thus narrowing the gap between supply and demand). Consequently, oil prices may experience sharp short-term fluctuations depending on developments in the conflict, but the broader picture suggests that the shock will be absorbed, with the potential for relative stability above $90 per barrel as long as some alternative supply continues to flow from outside the Gulf.

Macroeconomic context: inflation, growth, and the labor market
The US inflation report for March highlighted the shock: the Consumer Price Index (CPI) rose 0.9% month-on-month, reaching 3.3% year-on-year (the highest rate since May 2024). Nearly 75% of the monthly increase was attributed to an unprecedented surge in gasoline prices (a 21.2% jump in a single month) as a result of the global energy crisis. Such rapid inflation poses a challenge to containing consumer prices, as it could intensify inflation expectations and pressure the Federal Reserve to reverse its interest rate-cutting plans. While core inflation (excluding energy and food) saw moderate growth (+2.6% year-on-year), analysts warned that the energy shock could spill over into broader price levels if it persists.

In contrast, the US economy continues to show signs of strength: the labor market exceeded March expectations by creating 178,000 new jobs (the unemployment rate fell to 4.3%). This data reinforced expectations that the Federal Reserve might remain neutral at its upcoming meetings, despite warnings from some members about the risks of high inflation due to the war. Overall economic growth is proceeding at a moderate pace (around 2% annualized for the first quarter), supported by consumer spending and continued corporate investment in artificial intelligence technology, despite the risk of a decline in output if energy disruptions persist. In general, current figures point to a market caught between fundamental strength (a stable labor market and high earnings) on one hand, and accelerating inflation and potential monetary tightening on the other.

Monetary and fiscal policy
At its March meeting, the Federal Reserve maintained the interest rate in the 3.50-3.75% range, reaffirming its openness to future rate cuts after having initiated a rate-reduction cycle in 2024. However, the minutes of the March meeting revealed growing concerns about inflation: several committee members indicated their willingness to reconsider raising rates if inflation levels prove to be high, particularly if current energy pressures persist. Despite this, most current forecasts point to interest rates remaining unchanged until at least the end of 2026, with a low probability of an emergency rate hike in 2026 (according to CME tools, the probability of a single 25 basis point cut by the end of the year currently exceeds 30%).

From a fiscal perspective (spending and taxes), the US fiscal deficit remains high (over 6% of GDP) due to recent stimulus policies and expanded defense spending. This deficit supports current growth but increases inflationary pressures in the medium term and limits the government’s ability to provide further support should conditions deteriorate. Furthermore, the trend toward rising interest rates globally (such as by the European Central Bank and the Bank of Japan) increases the cost of government borrowing and constrains future expansionary fiscal policy.

Current geopolitical developments
Geopolitical risks are currently centered around the US-Iranian conflict in the Middle East (which began in late February 2016), with the potential for entanglement with the Israel-Hamas crisis in Gaza. The US and Israel launched airstrikes against Iran, prompting the Iranian government to close the Strait of Hormuz, causing significant disruption in global oil markets. China and Pakistan are mediating efforts to de-escalate the conflict, hosting rounds of talks between the warring parties. A Pakistani military commander visited Tehran in an attempt to solidify a ceasefire, while the US president hinted at an imminent end to the conflict and the possibility of an agreement, amid fears of renewed clashes.

In addition to the Middle East, the Russian-Ukrainian conflict (which began in 2022) remains a significant threat to markets, particularly if military operations resume on a larger scale or relations between Russia and the West deteriorate further. Tensions in the South China Sea and near Taiwan, as well as the war in Yemen (specifically Houthi attacks on ships in the Red Sea), also remain risks affecting global energy supplies and trade. Any sudden escalation of these conflicts could trigger a rapid market downturn, given the heightened state of investor vigilance.

Technical indicators and evaluation values
Technically, both the S&P and Nasdaq indices have broken through a significant resistance level. Since September 2025, the S&P had been trading within a narrow range (around 6,600–7,000), and with the recent break above 7,000, buying interest is increasing, leading to new breakouts. At current price levels, the market is not overbought (the RSI remains moderate compared to previous peaks). However, the historical price-to-earnings ratio is high (as mentioned, 21.6x projected earnings), indicating that the market values high-growth prospects.

Not far from this, the volume trend suggests that the recent rally was fueled by high trading volumes after previous sell orders were exhausted. Reports from hedge funds indicate that algorithmic trading strategies (CTAs) injected significant liquidity into S&P 500 stocks during April. The Fear and Greed Index (VIX) is also experiencing a moderate decline, reflecting a general sense of easing panic, although many large investors remain cautious (having placed stop-loss orders). Overall, the technical picture suggests that the market is inevitably reacting to emerging events (particularly war) but is not overextending itself after a new high, implying that the current momentum could continue in the absence of a new shock.

Investor sentiment and market flows
In recent weeks, market-maker sentiment has shifted toward optimism. Notes from Goldman Sachs indicate that hedge funds have increased their long positions (bullish) in US stocks ahead of the Washington-Tehran talks scheduled for mid-April, while significantly reducing their short positions. Even automated feeds are projected to buy around $40 billion worth of S&P 500 stock this month. Another Goldman report shows that hedge funds posted their best monthly performance since 2016 (recovering March’s losses with a 7.7% year-to-date gain in April) and experienced their largest positive cash inflows since 2022. This suggests that institutional investors are increasingly confident in the market’s recovery and are viewing the March dip as a buying opportunity.

On the other hand, consumer confidence remained extremely low: the University of Michigan’s consumer sentiment index hit an all-time low in early April, with gloomy expectations of worsening inflation as a result of the war. Money market funds continued to see increased holdings, reflecting the cautious approach of retail investors and retirement portfolios. As for bonds, debt funds saw increased buying as inflation expectations eased (due to sharp price increases) and the likelihood of a future interest rate cut increased. Overall, the market appeared divided: professional investors were looking to buy early (buying opportunities), while a more cautious public awaited further indicators . Inflows into US equity funds increased in the first quarter (despite the volatility of March), while gold and bond funds diverged: gold reached a high trading level, but physically held funds saw significant withdrawals (particularly from North America) to compensate for February.