25.05.202610:28 Forex-elemzések és áttekintések: Market to get its favorite toy back

The S&P 500 notched an eighth consecutive weekly close in the green, marking the longest winning streak since December 2023. The Dow Jones closed at a record for the second trading day in a row. The main drivers behind the rally are strong corporate profits and hopes for a peaceful resolution to the Middle East conflict. According to US President Donald Trump, a draft agreement is close to the finish line, and its terms are broadly agreed.

This rally looks unusual. Typically, a strong economy and solid consumer spending provide the foundation. This time, the University of Michigan reported that consumer sentiment fell to its lowest level in the 70 years of record-keeping. The previous low was in June 2022 when inflation hit multi?decade highs.

Price-to-earnings ratio dynamics

Surprisingly, the S&P 500 is rising despite stretched fundamental valuations. The cyclically adjusted forward P/E stands at 40.8. In 145 years, that metric has been above 40 only once — during the dot-com bubble.

The divergence between the S&P 500 and consumer sentiment, together with elevated valuations, has not stopped the broad index from setting records. One reason is outstanding corporate earnings: around 95% of companies have reported Q1 results, and based on actual results and guidance from the remaining 5%, earnings are up about 28%.

Investors genuinely expect the Strait of Hormuz to reopen. Mediators say that Iran demands the unfreezing of roughly $100bn in assets and the lifting of oil-sale sanctions. Tehran says it would agree to limit its nuclear programme for a term shorter than the under-20-year period the US seeks. The US administration signals that the deal would lift the blockade of the world's key oil artery.

Fed-rate expectations dynamics

The White House argues that ending the conflict would sharply lower Brent and WTI, making the recent inflation spike transitory. Under that scenario, interest rate hikes would not be necessary. The Fed should be patient and then shift to monetary expansion.

The S&P 500 welcomed the return of the Fed rate-cut theme to the market. In late 2025, that narrative acted as a kind of safety net for the broad index, preventing large sell-offs even on bad US economic news. If conditions revert to that pattern, equities could continue to rally.

Technically, bulls attempted to reassert the uptrend on the daily chart. However, reversal patterns such as a 1-2-3 or a double top could still form. The index's fate depends on who holds the pivot level at 7,460 — bulls or bears. Consolidation above it would open the door for further buying.