Global equities rally amid AI and geopolitical truce

Global equities rally amid AI and geopolitical truce

Wall Street leads gains: Nasdaq hits new highs on earnings, AI, and easing Middle East tensions

Weekly performance: return of “risk-on”

The week closes with a decidedly positive tone for major global equity markets. In the United States, the move has been particularly strong:

• Nasdaq Composite: +5.2% weekly, new all-time highs
• S&P 500: +3.3%, also at record levels
• Dow Jones: +1.4%, more moderate but still positive

The rally has been accompanied by a significant technical pattern: the Nasdaq has posted 12 consecutive sessions of gains, the longest streak since 2009. The global MSCI index and European equities have also benefited from the improved sentiment, with the STOXX 600 heading toward its fourth consecutive weekly gain.

However, Europe continues to underperform the United States, weighed down by energy exposure and a still-elevated inflation backdrop.

Nasdaq at highs: technical and fundamental drivers

The Nasdaq’s new record is not an isolated event, but the result of multiple structural factors converging:

1. Recovery in tech earnings and upward revisions
Expectations for technology sector earnings have been significantly revised upward (over +46% expected), with a strong focus on AI and semiconductors.

2. Compression of geopolitical risk premium
The truce between Israel and Lebanon, along with signs of dialogue with Iran, has reduced the risk premium, supporting growth assets.

3. Technical dynamics: breakout and momentum
Following the drawdown linked to the Iran crisis, the Nasdaq has reclaimed key pre-conflict levels, triggering systematic buying and momentum strategies. As noted by several strategists, the market was “extremely compressed to the downside” and reacted with a sharp rebound.

4. Rotation toward technology and AI
Renewed inflows into AI-related stocks (chipmakers and big tech) have restored leadership to the growth segment after weeks of underperformance.

Investor perspective: Dalio and Marks

Insights from leading investors help frame the rally:

• Ray Dalio continues to highlight the risks tied to debt cycles and persistent inflation, noting how energy and geopolitical shocks can reignite price pressures. In this context, the equity rally reflects liquidity and expectations more than structural stabilization.
• Howard Marks, in his recent notes, emphasized that markets are entering a phase of “selective risk-on,” where capital concentrates in a few growth narratives (AI, tech), while the broader market remains more fragile. He urges caution on elevated valuations, particularly in the tech sector.

In summary: the Nasdaq is rising because it concentrates global growth expectations—and because it is the primary beneficiary of the AI narrative and abundant liquidity.

Geopolitics: the truce as catalyst

Geopolitics remains the key short-term driver:

• The ceasefire between Israel and Lebanon has improved global sentiment, though it remains fragile
• Negotiations between the United States and Iran are fueling expectations of de-escalation
• However, energy risk remains high: the Strait of Hormuz continues to be a critical chokepoint for global supply

This combination has created a market paradox:

optimism on risk assets
still elevated energy prices

Conclusion: solid or fragile rally?

The week confirms a clear dynamic:

• US leadership, driven by tech
• Return of risk appetite, but tied to exogenous factors
• Polarized market, with a few dominant sectors

The Nasdaq is hitting new highs because it represents the convergence of three dominant narratives today: AI, earnings growth, and reduced perceived geopolitical risk.

But, as Dalio and Marks suggest, the overall picture remains delicate:
the rally is powerful, yet built on foundations still exposed to shocks—especially energy and geopolitical ones.