The S&P 500 climbed to fresh record highs even as headlines remain dominated by geopolitical tension, surging oil prices, and broader macro uncertainty. For now, the market’s message is clear: AI-driven risk appetite is still leading the way — and the next question is whether crypto will follow the rally.
This content has been produced by Kvarn Investment Services Oy, a licensed investment firm supervised by the Finnish Financial Supervisory Authority. The content is intended for informational purposes only and should not be interpreted as investment advice or recommendation. All investing involves risks, and past performance is not a guarantee of future returns.
A week ago, the stock markets had just seen a sharp bounce upward, with investors quite joyfully receiving the news of a ceasefire in the Middle East.
We wrote at the time:
“The question on almost every investor's mind now is: is the crisis over?
Was the downtrend, which already started to resemble a bear market, ultimately just a deep correction, and is the direction upwards again?
Our view can be summarized briefly:
We would love to state that we are in a new uptrend, but we cannot quite yet trust that it has begun.
Yesterday's market rally was very impressive, but many of the criteria for final conviction were still narrowly missed, at least as of yesterday.”
A week later, there is little ambiguity left about the stock market's consensus.
Over the past week, the stock markets seem to have simply decided that the previous month's nervousness regarding the impacts of the Middle East conflict is no longer justified.
S&P 500 index rose to new record highs yesterday, simultaneously crossing the 7,000-point milestone.
If an investor were to solely read news headlines about ongoing military actions, oil prices at nearly $100, and a potential aviation fuel shortage threatening Europe, their first thought of the stock market's wouldn't necessarily be "S&P 500 at all-time record highs."
The current state is indeed a good example of a situation where the things that cross the news threshold are quite different from the things emphasized by a forward-looking stock market that tracks the state of the economy.
An investor might, perhaps justifiably, feel that the markets are wrong in their optimism. However, this kind of "the markets are wrong" mindset carries the risk of remaining completely on the wrong side of the markets for a long time.
We operate on the assumption that even though the markets are not always right, they collectively know more than we do. When the markets diverge from our own view, we consider it a fundamentally bad idea to assume that, between the two, our assessment is the right one. That is why we change our minds whenever the markets appear to change theirs, and right now, the markets are unequivocally of the opinion that the direction is upward.
When the market behaves in a way that strongly deviates from our own expectations, it is useful to take a closer look at what is driving this deviation. Which segments are driving the stock market upwards?
The clearest driver is the strength of the technology sector. If we plot the Nasdaq 100 index against the S&P 500 index, we can see that this ratio, which had been stumbling since late October, has taken a sharp upward turn over the last two weeks.
Within the technology sector, we can look at the largest technology companies, the so-called Magnificent Seven group. From the chart below, we can see that MAGS, which represents the Mag 7 companies, has clearly weakened against the rest of the Nasdaq 100 index during 2026, but over the past week, it has jumped upwards.
It therefore appears that a big driver of the price rally over the past two weeks has been the technology sector, and particularly the large tech companies.
This interpretation is supported by the fact that the equal-weight S&P 500 index (SPXEW), the equal-weight Nasdaq 100 index (NDXE), and the S&P 500 index excluding the technology sector (SPXT) are all still below their highs from before the start of the Middle East conflict.
At the moment, it therefore looks like the upward movement has been strongly tech-driven, with a some weighting toward the large technology companies.
Within the technology sector itself, we can see a clear divergence between the semiconductor sector (SMH), which is closely tied to the AI boom, and the software sector (IGV).
Based on these observations, we can summarize the situation with the following characterizations:
This interpretation may change, and likely will change over the coming weeks, but this is how the situation looks right now.
If this is the current nature of the bull market, where might the most interesting investment ideas of the moment be found?
Derived from this interpretation, the most obvious investment ideas seem quite clear.
It is generally a good idea to start with themes that are already strong, and progress to others as they begin to show growing relative strength.
The price of the VanEck Semiconductor ETF (VVSM), which invests in semiconductors, has already climbed to new all-time record highs.
The same goes for the Global X Data Center REITs & Digital Infrastructure ETF (V9N), which invests in the theme of AI-related data centers.
Another theme that looks strong is the Global X Autonomous & Electric Vehicles ETF (DR7E), which invests in autonomous and electric vehicles theme.
The investment markets returning to a "risk-on" mood should naturally also provide a positive environment for the cryptocurrency market, which has looked pretty sluggish for some time.
From the chart below, it can be seen that the price of the largest cryptocurrency, Bitcoin, appears to be climbing past its local March peak. At the same time, the price of MARA Holdings (MARA), one of the largest Bitcoin miners, has already surpassed its March peak.
What makes the cryptocurrency market interesting, above all, is its current low relative valuation. While the S&P 500 index has already surpassed its levels from last fall, the price of Bitcoin is still about 40 percent below its own all time highs.
If this gap in relative valuations were to start narrowing, it would mean quite substantial upside potential for Bitcoin.
We have presented a set of investment themes that we believe will perform well, IF the market's general upward trend and the growth in risk appetite continue.
Finally, however, we want to remind you that the market's positive general direction should not be taken completely for granted under these conditions. The Middle East conflict is still ongoing, and the price of oil is near $100. Two weeks ago, the markets decided to stop worrying about these factors, but with one headline they could change their minds again just as quickly.
As the situation evolves and the markets move, we will keep you up to date in the Kvarn Pulse newsletter, so stay tuned!
The information and sources presented are for illustrative purposes only. While obtained from sources deemed reliable, their accuracy cannot be guaranteed.
Markets are sending a clearer message now: equities appear to be sliding into a bear market, while gold and Bitcoin continue to show notable resilience in different ways. Against this backdrop, investors may need to rely less on broad index exposure and more on active positioning, selective buying, and disciplined risk management.
The escalation of the Middle East conflict has increased uncertainty across financial markets and pushed equity indices closer to technically critical levels. At the same time, the current environment continues to offer compelling opportunities in selected investment themes, while the crypto market has remained surprisingly resilient despite the broader risk-off sentiment.
Start investing today
Create account