Don’t Fight the Stock Market

The market’s resilience suggests the dominant marginal buyer is still underwriting a 6-12 month earnings path, not today’s headline risk. That matters because when fundamentals outrun geopolitics, the first-order shock gets absorbed by multiple compression rather than a full de-risking event; in practice, that favors index-level stability but increases the odds of sector dispersion. The immediate beneficiaries are firms with pricing power, AI-linked capex exposure, and lower direct energy intensity; the losers are the parts of the market where margins are most sensitive to input-cost pass-through and where earnings revisions lag the tape.

The second-order risk is that the market is implicitly assuming the conflict remains a supply shock, not a demand shock. If energy stays elevated for long enough, the next leg is not just higher gasoline—it is slower consumer discretionary turnover, weaker small-business confidence, and a delayed margin hit in transport, chemicals, and select industrials. That kind of deterioration usually shows up with a lag of 1-2 quarters, so the current calm can persist longer than macro bears expect, but the reversal can also be abrupt once estimates start to come down.

The contrarian read is that consensus is over-anchoring on headline geopolitics while underpricing earnings breadth. In other words, the bullish case is not simply that “AI beats war,” but that the breadth of estimate revisions is still positive enough to offset macro noise. If revisions flatten or the market stops rewarding upward estimate momentum, the valuation cushion disappears quickly and the same complacency that supported the rally becomes the vulnerability.

From a positioning standpoint, this is a pro-trend environment until earnings revisions roll over. The best risk/reward is to stay long the names and sectors with visible forward estimate acceleration, but hedge with exposures that benefit from a late-cycle margin squeeze if energy remains sticky. The key trigger to watch is not the news flow itself, but whether forward EPS revisions stop making new highs over the next reporting cycle.