A Market Signal in the Middle of a Geopolitical Shift

• The S&P 500 had a seven-day winning streak end last week.

• This has happened in 13 other years since 2000.

• Those years tend to produce above average index returns.

Markets tend to move long before the headlines catch up…

Over the past several weeks, one theme has kept resurfacing across our research: investors pessimism was reaching extreme levels. You could see it in the tone of institutional commentary, in the way retail sentiment gauges rolled over, and in the steady rise of cash levels across large asset managers. The backdrop wasn’t one of euphoria or complacency, it was one of caution and hesitation. And that disconnect between sentiment and data has been quietly shaping the opportunity set.

The clearest expression of that caution showed up in the positioning of systematic strategies. As we highlighted in recent notes, CTA short exposure in U.S. equities surged to extreme percentiles — 99th in the S&P 500, 97th in the Nasdaq, and 95th in the Russell 2000. These are levels that historically indicate not just elevated pessimism, but the near‑exhaustion of mechanical selling pressure. When positioning gets that stretched, the marginal seller disappears, and the market becomes increasingly sensitive to even modest improvements in news flow.

Retail investors weren’t far behind. Multiple gauges — from the CNN Fear & Greed Index to the American Association of Individual Investors sentiment survey — flashed readings consistent with deep risk aversion. Those levels were last seen in early 2025. Institutional managers were doing much the same. The National Association of Active Investment Managers Exposure Index showed a meaningful drop in equity allocations.

But that pessimism didn’t exist in a vacuum. It was unfolding at the same time the tone between the U.S. and Iran began to shift. Reports of back‑channel discussions, diplomatic feelers, and early attempts to find an off‑ramp suggested the possibility of de‑escalation. That combination of extreme investor caution and the first signs of geopolitical thawing were already laying the groundwork for a broader rally in the S&P 500 Index.

But don’t take my word for it, let’s look at what the data’s telling us…

Every so often, the market hands us a signal that’s easy to overlook in the day‑to‑day noise but meaningful when you zoom out. Last week delivered one of those moments. Between March 31 and April 9, the S&P 500 strung together seven consecutive positive closes. It was a quiet but notable show of momentum as investors recalibrated expectations around earnings, the path of monetary policy, and a potential end to the conflict in Iraq.

It’s not a common pattern. This type of seven‑day winning streak has appeared in 13 other years since 2000. It gives us enough history to evaluate how the market has tended to behave after similar bursts of strength. So, I pulled the data, and tracked the S&P’s performance on both a price‑return and total‑return basis for each of those years…

What stands out is the consistency of the results. In years when this pattern has occurred, the S&P 500 has typically delivered a strong, positive follow‑through. On a price‑return basis, the index has averaged an 18.2% gain with a 92% success rate, meaning the market finished the year higher in all but one case. When you shift to a total‑return lens (dividends reinvested), the results strengthen further, with an average 20.2% gain, and again with a 92% success rate.

No single indicator is ever a guarantee, and streaks don’t drive fundamentals. But when momentum, breadth, and historical precedent line up this cleanly, it’s worth paying attention. These stretches of persistent buying often show up in the early chapters of durable market advances — and they tend to reward investors who stay anchored to the bigger picture rather than the daily tape.

As we stated at the outset, when pessimism is elevated and positioning is stretched, the market often misprices the potential for a catalyst to shift the narrative. And right now, investors aren’t prepared for a constructive outcome. Positioning is still light, sentiment is still cautious, and investors have not priced in the possibility of a cessation of hostilities in the Middle East. A credible peace agreement would remove a major risk premium, ease pressure on oil, and reset expectations around global growth and inflation.

If that happens, the combination of washed‑out sentiment, extreme CTA positioning, and improving price action becomes a powerful tailwind. Markets often move long before the headlines catch up, and this is exactly the kind of setup where a steady, durable rally in the S&P 500 can take shape.

Five Stories Moving the Market:

The U.S. and Iran are in discussions about holding another round of face-to-face negotiations for a longer-term ceasefire, after talks in Islamabad led by Vice President JD Vance failed to produce a breakthrough – Bloomberg. (Why you should care – this follows through on comments from both sides that there was agreement on a number of issues over this past weekend)

The Federal Reserve said it will buy about $25 billion of Treasury bills each month, a greater wind down than anticipated of a program that was meant to ease short-term funding costs by rebuilding reserves in the financial system – Bloomberg. (Why you should care – the larger than expected contraction implies the Fed see the level of reserves in the banking system as more adequate)

Home sales declined 3.6% in March, getting the crucial spring selling season off to a poor start as the high cost of housing and economic uncertainty held buyers back – WSJ. (Why you should care – rising inventories are likely to keep a lid on prices and inflation growth)

Strategists at Morgan Stanley said accelerating earnings are protecting the S&P 500 from deeper losses and masking a broader pullback in U.S. equities; they continue to favor cyclicals — including financials, industrials and consumer discretionary — citing strong earnings and compressed valuations – Bloomberg. (Why you should care – they see opportunity in quality growth stocks such as AI cloud service providers, where sentiment and valuations have reset to more attractive levels)

The artificial intelligence gold rush is rapidly drying up the supply of the one resource that AI developers can’t do without: computing power; over the past few months, demand has exploded for “agentic” AI, autonomous tools that use the technology to independently perform tasks, from writing software code to scheduling house tours for real-estate brokers – WSJ. (Why you should care – the shift in usage, driven by agentic AI, should boost demand for data center capacity as well as the semiconductor and networking products that enable it)

Economic Calendar:

Spring Meetings of the World Bank and International Monetary Fund

Earnings: BLK, C, JNJ, JPM, SPWR, WFC

China – Exports, Imports for March

Japan – Industrial production for February

BoE’s Mann (Board Member) Speaks (4:50 a.m.)

U.S. – NFIB Small Business Optimism for March (6 a.m.)

U.S. – ADP Employment Change Weekly (8:15 a.m.)

U.S. – PPI for March (8:30 a.m.)

Treasury Auctions $70 Billion in 6-Week Bills (11:30 a.m.)

Treasury Auctions $50 Billion in 52-Week Bills (11:30 a.m.)

BoE’s Bailey (Governor) Speaks (12 p.m.)

Fed’s Goolsbee (Chicago, Non‑voter) Speaks (12:15 p.m.)

Fed’s Barr (Board Member, Voter) Speaks (12:45 p.m.)

Fed’s Collins (Boston, Non‑voter) Speaks (1 p.m.)

Fed’s Barkin (Richmond, Non‑voter) Speaks (1 p.m.)

U.S. - American Petroleum Institute Crude Oil Inventory Data (4:30 p.m.)

ECB’s Lagarde (President) Speaks (5 p.m.)