The Week Ahead: 4 Key Themes Driving Markets 📈

The Week Ahead

Here’s what I’m watching.

The market has been in a strange place the past few weeks. Stocks seem to rise or fall rapidly depending on posts about negotiations with Iran, a fight that didn’t need to happen and has had little impact on the global economy, despite fears to the contrary. AI spending keeps rising, despite companies saying they aren’t seeing an ROI.

And with all of my skepticism about certain segments of the market, earnings have been solid.

So, here’s what I’m watching this week:

• Iran Peace

• Rate Cut Hope

• AI in Politics

• Valuations

More on that in a moment.

What I’m Watching

It’s a light earnings week, so here’s what I’m watching most closely.

Iran Peace Deal

Markets are surging this morning after President Trump announced a deal with Iran that would open the Straight of Hormuz.

The market reacted in a positive direction (again), despite few confirmed details. As those details have emerged, they seem to reveal what’s more like a ceasefire conditioned on releasing billions in frozen Iranian funds, and negotiations don’t include Israel.

You don’t come here for political or military analysis, but this has become a very real economic story. The market goes up or down every day, depending on social media posts, but we still haven’t seen any real economic impact from the conflict.

Yes, crude oil prices are up (Brent more than WTI because it’s the global benchmark), but prices are only what they were 18 months ago.

The longer the conflict goes on, the more supply shortages will lead to real economic impacts in the supply chain, as they did during the pandemic. But those shortages don’t show up in weeks; it takes many months.

I’m watching announcements this week because this seems to be the closest we’ve been to opening the Straight of Hormuz and potentially seeing oil prices come down in a more sustainable way, rather than the speculation we’ve seen the last few months. And that has implications in other areas of the market.

Rate Cut Hopes

Coming into 2026, investors thought there would be multiple rate cuts this year, and now there’s a possibility of rate increases from the Fed, despite a new Fed Chair. Oil prices are one of the major factors the Fed is thinking about because higher oil prices are driving inflation higher this year.

This isn’t just about oil. In the most recent reading, electricity prices are up 5.9%, and apparel is up 4.8% from a year ago.

Inflation can be a reinforcing cycle, and the Fed’s only tool to curb inflation is to raise rates.

In theory, higher rates mean lower valuations for stocks, so a rising rate narrative flipping to a lower rate narrative if the Iran conflict is resolved could be good for the market.

AI in Politics

You may not be paying attention to what’s happening with AI in politics, but it could be a big deal. The U.S. government shut down Anthropic’s latest model over the weekend on national security concerns, raising the stakes for AI in the political arena.

The US government, citing national security authorities, has issued an export control directive to suspend all access to Fable 5 and Mythos 5 by any foreign national, whether inside or outside the United States, including foreign national Anthropic employees. The net effect of this order is that we must abruptly disable Fable 5 and Mythos 5 for all our customers to ensure compliance. Access to all other Anthropic models will not be affected.

We received the directive from the government today at 5:21pm (ET). The letter did not provide specific details of its national security concern. Our understanding is that the government believes it has become aware of a method of bypassing, or “jailbreaking” Fable 5. We reviewed a demonstration of this specific technique being used to identify a small number of previously known, minor vulnerabilities. These vulnerabilities all appear relatively simple, and we have found that other publicly-available models are able to discover them as well without requiring a bypass.

Anthropic

This specific move is an escalation after Anthropic said it wouldn’t allow the government to use models for certain military applications. Obviously, the government wasn’t happy about that, and here we are.

The reason this has my attention is that this could push users and enterprises away from the leading model to less capable, cheaper models. And that means open source or Chinese models may become more popular. If that happens, the U.S. lead in AI could quickly be commoditized, impacting model maker valuations, chip companies, memory, and so much more.

The market is counting on AI advancing rapidly and the buildout continuing with U.S. companies leading the way. If politics gets in the way, it could be a wrench in those plans.

Valuations

It’s hard to look at the current market and not be a little concerned about valuations. I’m covering why I like the valuations of my individual stocks in the State of the Portfolio series, but as a whole, the market has only been this expensive during the dot-com bubble, financial crisis, and COVID.

This, combined with the potential temporary nature of some of the revenue growth and earnings in AI, has my attention.

Anything that rocks the boat (like an escalation in Iran or Anthropic’s growth slowing) could have a big impact on markets.

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