Everyone loves a last-minute reprieve, and US investors finally got one they could trade on. President Donald Trump’s two-week ceasefire with Iran triggered the relief rally that traders had been waiting for. But every bounce has a catch, and this one is no different. It’s still a short-term pause, with 800 vessels still stranded in the Persian Gulf and a “safe passage” looking far from certain.

Don’t chase the rush: Goldman Sachs trader Rich Privorotsky is urging caution on the S&P 500 rally, arguing this is not a level to chase. Much of the conflict-driven drop has already been retraced, while fresh strikes across the Gulf highlight how unstable the ceasefire remains. He also flagged comments from Iran’s Foreign Minister Abbas Araghchi, indicating tanker traffic through the Strait of Hormuz could be controlled by the military and restricted by technical limits, raising the risk that a key global oil route starts operating more like a managed checkpoint than an open passage.

• Momentum-driven funds have offloaded ~$55B in US equities since early March, while asset managers cut another $51B from S&P 500 exposure, setting up forced buying as volatility fades.
• The index now sits just ~5% below its January record high, despite oil remaining well above pre-war levels at around $94, versus the low-$80s before hostilities.

The Crowded Trade Hangover

The “TACO” trade has become so consistent that nine of the S&P 500’s ten biggest single-day gains since he took office have followed relief around tariffs or Iran. The payoff has been massive, with returns hitting 52% if you only owned stocks on those days versus 12% for buy-and-hold. But that success may now be the problem, as traders are front-running reversals so aggressively that gains are fading faster.

• Positioning is shifting back toward Big Tech, with JPMorgan Chase strategist Mislav Matejka noting the Magnificent Seven are near relative lows after capital rotated into energy and defense.
• Shipping remains disrupted, with Maersk saying it still lacks the clarity needed to resume normal operations despite the ceasefire.

T&C applied: The market is leaning into relief, with Jim Reid noting investors are “breathing a big sigh of relief” while still looking for clear signs of de-escalation. Reports suggest the deal may allow Iran and Oman to charge transit fees through the Strait of Hormuz, keeping risks elevated. If the truce holds, easing tensions around the chokepoint could pull oil lower and shift markets back into risk-on, lifting airlines, travel, industrials, and equities while energy and defense give back gains. For now, optimism is back in control, but it’s walking on a thin layer of confidence.