What’s fueling Wall Street’s optimism?
Why it matters: While geopolitical tensions between the US and Iran are dominating headlines, US stocks recently hit an all-time high. The global oil shock is just one major disruption to rattle investors before receding this year. The enthusiasm for the artificial intelligence boom also waned in early 2026. So, what should investors make of the market’s fluctuating mood?
Tom Lauricella is the global markets editor for Morningstar Inc. and the editor of Smart Investor newsletter.
10 Questions on How Investors Are Reacting to Disruptions in 2026
- The war with Iran is nearing two months. It remains unclear what the next steps between the US and Iran will be. What have been some of the key takeaways from how the markets responded to the war?
- The S&P 500 recently hit a record high despite the conflict in the Middle East. Why has the stock market been able to move higher despite the oil shock from the war?
- Are investors shrugging off uncertainty or situations that could trigger volatility?
- Your markets team is tracking the news coming out of earnings season. How much weight are company results carrying to keep investors’ hopes high?
- Big Tech is scheduled to report earnings next week. Your team recently published an article highlighting two opposing trends for tech stocks this quarter. What are the crosswinds?
- Let’s talk about the bond market. How has it performed during geopolitical tensions while stocks hit fresh highs?
- Another concern that has been building in the markets involves the private credit markets. What’s the story there and how does it tie back to what we’ve been seeing in the stock market?
- Inflation has spiked largely because of higher energy prices. The March Consumer Price Index report shows inflation sitting at 3.3%. That’s above the Federal Reserve’s two-percent target. Does this situation put pressure on the Fed to pivot when it comes to interest rates?
- Jerome Powell’s term as Fed Chair is set to end in May. President Trump has nominated former Fed governor Kevin Warsh. Has Warsh signaled how he would lead the committee as they focus on balancing inflation and the job market?
- What’s the takeaway for investors watching big disruptions in 2026?
Key Quote on Hopes and Expectations for Earnings Season
Will companies provide the forward guidance, in particular, that will leave investors still confident about the pace of earnings growth? Analysts are generally expecting pretty decent numbers for Q1, double-digit earnings growth. The question is, can that be sustained? How much will the consumers take a hit from higher energy prices? And then of course, the tech sector, there’s a lot of questions about the impact of AI, particularly around software companies. People will be looking for guidance on that. But for now, if we were to get a disappointing earnings season, that could be a real problem for the stock market, but that doesn’t seem to be on many people’s radar.
Tom Lauricella, global markets editor, Morningstar Inc
The Takeaway: Geopolitics is throwing curveballs at investors. The heightened tensions increase the importance of checking portfolio allocations and paying attention to valuations, says Lauricella. Geopolitical disruptions can have real economic fundamental impacts, such as the supply chain shock triggered by the Ukraine invasion. According to Morningstar’s global markets editor, investors should track geopolitical developments. And here’s why: These events could result in higher inflation and have a real impact on the markets and people’s cash flows for their everyday needs.
More From Morningstar on the Markets’ Reaction to the Iran War
The bond market has delivered a slightly different response during this period of uncertainty. It’s typically seen as a safe haven. However, instead of bond yields going down, they’ve gone up. Lauricella points to the oil price shock. Investors were already concerned about inflation appearing stuck above the Federal Reserve’s 2% target. Data from the March Consumer Price Index showed that higher energy prices pushed inflation up. The question remains: How long will that last? Lauricella says it makes sense that bond yields rose, as other issues also weigh on investors’ minds, such as the ballooning US government deficit.
Morningstar’s Leslie Norton highlights five trends to watch in a post-Iran war landscape, including whether gold could bounce back. Check out a bonus episode of The Morning Filter that explains why a stock barbell strategy is now ideal. And sign up for Lauricella’s Smart Investor newsletter to stay up-to-date on market insights and investing ideas from Morningstar.
