Things in the Middle East are slowly starting to improve. A classic TACO move. Trump, under pressure, needed some kind of argument to get himself out of a situation he created. Then came news of a potential ceasefire deal on Tuesday evening, and markets didn’t wait around. This triggered a market-wide rally across all major indices. A broad-based rally across sectors, market caps, and geographies is exactly what you want to see after a real de-escalation in geopolitical risk.

Something like this was always possible. Even though there were a few early signs which I highlighted in an individual post, it’s impossible to know when and how it would actually play out. It could have gone either way. That’s why preparation is so important. You don’t prepare for one perfect outcome. You prepare for a range of outcomes, so you know exactly what to do no matter what happens.

But what now? Is this enough to finally put geopolitics aside and focus on fundamentals? Let’s explore.

The market is pricing in no further escalation. And as long as that remains the base case, the bottom is likely in. That’s why the S&P 500 has been up for 7 consecutive days, gaining more than 7% over that period. Historically, this has been a strong setup for the market going forward.

Semiconductors continue to be the most important sector in this AI-powered bull market. They are at the center of everything, from data centers to AI models to the entire infrastructure buildout. As long as this group keeps performing well, it’s a strong signal that the broader trend is still intact and that this rally has room to run. It’s hard to be bearish when they’re pushing to new all-time highs.

The Mag 7 have been out of favor for a while now. Even though they are still very strong businesses, sentiment around them has been the worst it’s been in years. That said, it looks like this could be starting to turn around. If the Mag 7 could once again start to lead, it would be another strong tailwind for the broader market.

And a big reason for that is valuation. While earnings continue to improve, valuations have come down quite a bit. In many cases, they’re now trading close to the levels we saw during the lows of the tariff-driven selloff last April.

Back then, that turned out to be a very good entry point. And while the setup is never exactly the same, it does suggest that a lot of the excess has already been worked off. You now have strong businesses, with improving earnings, trading at much more reasonable prices. And it could be a good spot to be adding to them for your long-term portfolio.

And the good news for the bulls is that US corporate profit margins are at all-time highs. In simple terms, companies are still keeping a larger share of every dollar they make as profit, even with all the uncertainty in the world and in the markets right now. At the same time, the economy is holding up reasonably well. It’s not booming, but it’s also not falling apart.

Most of those record-high profit margins are not coming from the whole economy. They are mainly driven by tech, and increasingly by AI. If you strip that out, the rest of the market looks much more normal, even a bit flat. AI is pushing this trend further. It helps companies automate tasks, cut costs, and run more efficiently. So you get higher productivity and lower expenses at the same time. That’s a very powerful combination, and it shows up directly in higher profit margins.

And earnings season is kicking off this week, which means we finally get to see the fundamentals that actually matter. Make sure to keep an eye on the companies in your portfolio and their earnings dates.

I’m also working on a new tool to highlight the most interesting earnings on the platform. More updates on that later this week.

The bottom is likely in. Of course, things can change quickly in this market, but that should be the default view right now. That means it’s time to start looking for opportunities and gradually increase exposure.

The key is to scale in, not go all in at once. Start by adding around 20% now, then build over time as the setup continues to improve. Focus on the strongest names. The stocks that are holding up best or bouncing first. That’s usually where the next leaders come from.

Photonics is a great example. The whole theme barely corrected, and once the market turned, they took off quickly. Many of those stocks are already at new all-time highs. And it’s not just photonics, most of the AI infrastructure names are doing incredibly well too. That’s exactly the kind of strength you want to see and why it’s so important to track during correction.

And lastly, add to winners, not losers. If a position is working, build on it. If it doesn’t, remove it. This is the winning formula.