Published April 3, 2026
Delta Research makes the case below for a sharp rally once the War with Iran ends. Complicating their case is the market’s shift to a flat interest rate environment as hopes for Federal Reserve rate cuts have largely vanished with the war.
Here’s Delta’s analysis:
“President Trump addressed the nation on Wednesday night regarding the conflict in Iran. The stock market initially reacted negatively to what he did not say: he did not provide clarity on the progress of peace/ceasefire negotiations or on opening of the Strait of Hormuz. He did, however, reference “finishing the job” over the next two to three weeks.
This week’s trading suggests that if news flow out of Iran improves, the market is ripe for a powerful rebound. As the JPMorgan’s institutional trading desk says, “The market’s proximity to the weighted average shows a curvilinear relationship, wherein the convexity really starts to pick up as the price moves through that average.”
In plain English, if the S&P 500 breaks above the 200-day moving average (roughly 6644) and holds that level for a few days, the odds increase that the stock market can push toward new highs. While trading above the 200-day may sound remote, this week showed how quickly conditions can change. The Dow Jones Industrial Average traded above its 200-day moving average intra-day Wednesday.
In other news, the underlying economic fundamentals remain constructive. Retail sales in February rose 0.6% month-over-month, indicating solid spending across most categories. The ISM Manufacturing Index was 52.7% for March (consensus expectation: 52.3%), up from 52.4% in February. Initial jobless claims declined by 9,000 for the week ending March 28 showing a low-firing environment.
For Q1 2026, the estimated (year-over-year) earnings growth rate for the S&P 500 is 13.0%. If 13.0% is the actual growth rate for the quarter, it will mark the sixth-straight quarter of double-digit (year-over-year) earnings growth reported by the index. Over the past sixteen quarters, actual earnings have been better-than-expected fifteen times. Meanwhile, the S&P 500’s P/E multiple has contracted from 23.1x to 19x and technology stocks are trading at their most attractive relative valuations to the S&P 500 multiple since 2018.
We should expect seesaw price action until there is more clarity on a ceasefire in Iran. When the conflict does end, the underlying fundamentals suggest the market might behave like a coiled spring.”
Market Update
Stocks continued their losing streak in Monday trade with the broad market indexes down -0.5%. Losses among technology and industrial companies continued to pressure the broad market while oil prices rose another +5% on war-related damage. Words from Iran’s President suggesting a possible near-term end to the war sent stocks flying Tuesday. Indexes broke sharply higher with +3-4% gains from a deeply oversold market condition. The sharp rise helped ease the pain from a terrible month of March for investors with the Iran War sending oil prices up +50% in one month. The enormous price increase rippled through to higher interest rates and plunging stock markets. April kicked off Wednesday with a continuation of Tuesday’s gains. Indexes rose +0.8% with gains in technology continuing to lead the way. An evening speech by President Trump was hoped to further add to optimism about a near-term end to the hostilities. But the speech did not accomplish that. Instead, oil prices shot higher after the President’s speech when it provided little new information about a possible war end. Oil prices notched another leap higher over night leading to a notable drop in stocks at the market open. However, this time, the dip was bought leading stock indexes to close flat on the day, a surprisingly positive development in the face of another significant rise in oil prices and ahead of a long holiday weekend.
After a five week swoon, stocks finally got oversold enough to deliver a bounce this week. The S&P 500 (SPY) recouped +3.43%. The Nasdaq 100 (QQQ) recovered +3.98%. Both still remain below their long-term 200-day moving average. However, small cap stocks (IWM) bounced back above their 200-day moving average with a +3.37% weekly gain.
Warm wishes and until next week.