The U.S and Iran reached a peace deal.

Things change quickly in this environment. Every week it’s something new. Tariffs, Iran, inflation, the Fed, recession odds, take your pick.

But the de-escalation in the Middle East removes one of the bigger tail risks investors have been pricing in.

The market also absorbed the SpaceX IPO much better than many expected. There was a lot of talk that a $75B raise would suck liquidity out of the market, but that clearly did not happen.

The last 2 weeks were volatile, but when you zoom out, the bigger picture has not changed. Nothing broke structurally. The bull market is still intact.

While the S&P 500 was heading for its second weekly decline in a row, the market looked better under the surface. More stocks moved back above their 20-day and 50-day moving averages over the past 2 weeks. At the same time, NYSE new lows kept falling.

It means fewer stocks were breaking down, even though the index looked weak. Money was not leaving the market. It was simply moving into areas that had been lagging. Rotation is what keeps the bull market alive and is often what you want to see during a normal pullback in an uptrend.

Coming into this week, speculative short ETF volume reached 42% of total short volume. That is a very high level. A lot of investors were betting on more downside. Typically, this is where pullbacks start to stabilize, as long as there is no major negative catalyst.

This is what probably matters most for where stocks go over the next 1 to 2 years.

The market ultimately follows earnings. In the short term, stocks can move on news, rates, and sentiment. But over longer periods, earnings drive stock prices. And earnings are heavily influenced by margins.

So, earnings are not just good. They are historically strong.

S&P 500 profit margins hit 15.6% in Q1 2026 and expected to reach 16.7% in 2027. That is an all-time record.

For every dollar of revenue the S&P 500 companies bring in, they are keeping more of it than at almost any point in modern history. More than during the dot-com boom. More than before the financial crisis. More than most periods over the past 20 years.

AI is now accelerating that trend. It’s not only helping the Mag 7. It’s spreading across every sector and industry. The other 493 companies are no longer just along for the ride. In fact, he rest of the S&P 500 is now projected to grow earnings by 18% in 2026.

Elon Musk became the world's first trillionaire on Friday, following the record-breaking stock market debut of SpaceX $SPCX.

What’s truly insane is how fast that happened.

In January 2020, Musk was only the 35th richest person in the world, with a fortune of around $28B. 6 years later, he crossed $1T.

But it’s a good reminder of the power of entrepreneurship and compounding.

Musk did not get there by owning a slightly better version of an old business. He got there by building companies around the biggest markets of the next century: electric vehicles, rockets, satellites, energy storage, robotics, AI, and space infrastructure.

The biggest fortunes are created through ownership and compounding.

The only major worry right now is inflation. It is moving in the wrong direction again.

4.2% CPI is far above the Fed’s 2% target, and it is the highest reading since April 2023. It also jumped from 2.4% in February to 3.3% in March, 3.8% in April, and 4.2% in May. It has been accelerating for several months.

Higher rates make future earnings worth less today. The Fed has less room to cut rates. Input costs are rising and households have less money to spend.

For now that is no reason to panic but it will be important to monitor going forward.

As mentioned a few days ago there is no reason to believe that this bull market is over.

The market simply reminded everyone this week that stocks do not go straight up forever. And honestly that reset was needed. Pullbacks are difficult to manage in real time, but they are often where the best opportunities lie. Staying involved and managing volatility when things start to feel uncomfortable is one of the hardest things to do. That is the process I tried to lay out in the last Market Update here and why preparation is important. Pretty much all of the names in focus have moved sharply higher.

So, the bigger picture still looks constructive. Hence, I’m still focused on tech because that remains where the strongest earnings growth, margin expansion, and leadership are showing up. Until that changes, I do not see a reason to overcomplicate it.

One important to event to watch this week is Keven Warsh’s first FOMC meeting as Fed Chair. So, that will be important and set the tone for the next few months, especially around inflation, rates, and forward guidance.

The market will be watching the decision, but even more importantly, it will be watching the language. Does the Fed sound more hawkish? Does it leave the door open for cuts? Does it push back against inflation expectations?