Markets balance three forces: fragile ceasefire, PCE inflation data, and very strong earnings. Core PCE came in under expectations, but savings rate dropped. Earnings growth of 25% YoY in Q1 and over 20% for full year drive markets higher.

On the negative side, the fragile ceasefire is becoming increasingly fragile. If Strait of Hormuz doesn't reopen for a long time, that leads to higher oil prices becoming chronic and leading to higher structural inflation. History is on our side - June and July are typically strong months, and markets are starting to broaden beyond tech.

Ceasefire is becoming very fragile, but markets follow earnings growth. As long as AI and tech earnings remain strong, markets will look past the war. AI spending is still less than 1% of US GDP, so not in a bubble. Closely watching IPOs and valuations there.

If the economy remains strong and earnings remain resilient, markets can continue to hold these levels and hit new highs. We're seeing markets start to broaden beyond the tech trade.

It will be volatile due to Middle East, but optimistic if earnings growth holds. Came into year with S&P 500 target of 7,500 for end of 2025. Now crossed that mark, could go to at least 7,750. With 20%+ earnings growth, don't need multiple expansion to reach 7,700 or higher.

A lot of volatility expected, especially on days like today when ceasefire may not be holding.