Is the path clear for new highs?

The S&P 500 has staged a V-shaped recovery, but the piece warns the rally may be fragile. Geopolitical risks—notably renewed disruptions in the Strait of Hormuz and the potential for wider Middle East escalation (including threats to Bab el‑Mandeb)—could disrupt energy supplies and lift inflation, undermining the rally. March PPI eased to 4.0% y/y (vs 4.6% expected), yet worsening energy dynamics could keep inflation elevated and jeopardize Fed rate‑cut expectations. U.S. federal debt topped $39 trillion in March, raising long‑term sustainability and downgrade risks that could spook Treasuries and markets. Overall, markets appear overly optimistic (FOMO), leaving equities exposed if geopolitical, inflation, or fiscal stresses reassert themselves.