Yesterday, President Trump threatened to focus on Iran's oil infrastructure and potentially take over Kharg Island. This was followed by a memorandum of understanding being circulated among leadership and mediators, with positive commentary sparking a broad-based rally. The S&P 500 is positive on the week, the Nasdaq is positive, the Dow is flat, and the Russell 2000 is having a good week. The VIX hitting two-month highs has been left behind.

The rally is driven by speculation that a deal could be signed over the weekend, but given the back-and-forth rhetoric in the Iran conflict, this should be taken with a grain of salt.

It remains to be seen. However, asset classes are moving: risk-on back into equities is positive. The SMH (semiconductor ETF) is up nearly 2% this week, showing a rebound. Crude oil is at two-month lows, below $84 a barrel overnight, now around $85, which is positive for equities. The equity market is looking ahead with an optimistic tone.

The underlying aspects of the bull market run into late May/early June remain: earnings have been good, the jobs market is robust, and yields have stabilized over the past few sessions, lending support to equities. Everything hinges on rhetoric and talks with Iran and mediators.

Adobe's narrative over the last 6-7 quarters: EPS and revenue beat, solid growth, raised EPS and revenue guidance to $26.5-$26.6 billion, strong subscription revenue and annual recurring revenue. However, the CFO is leaving (moving to Marvell), and management is switching to an aggressive freemium AI strategy, which increases growth but at a cost to margins. Sell-side analysts have issued multiple downgrades and price target cuts, citing cracks in the growth strategy. The stock is under pressure again, trading well below its all-time high of nearly $700 a couple of years ago. Despite historically low valuations and earnings beats, this is a 'show me' story with leadership flux.

The departure of the CEO last quarter and now the CFO creates uncertainty. The market is focusing on the cost of the AI strategy rather than the growth.