Could We Be Near a Top for 2026?
The SpaceX IPO and an Iran deal could be ‘buy the rumor, sell the news’ events that mark the top of the market for the year.
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The markets continue to anticipate that the ceasefire between the U.S. and Iran will soon be extended. With the number of false starts on the front, it is starting to feel a bit like “Waiting for Godot” at this point. The oil markets are already pricing in the Strait of Hormuz somewhat as a fait accompli, with Brent now down more than 20% from its highs earlier this month. This is even as JP Morgan, the leaders of ExxonMobil (XOM), Chevron (CVX) and others warning recently that is getting critical that this global chokepoint opens for traffic soon.
Investors seem much too blasé about the growing threat to the global economy from this continued closure. Not only have fuel and fertilizer prices soared but this transit point is also critical for global supplies of aluminum, sulfur and helium. The latter, helium, is used in semiconductor manufacturing. Higher mortgage rates have sapped whatever hopes there may have been for a solid spring selling season. April new home sales fell 6% on a monthly basis earlier this week, missing projections. The housing market seems destined to remain moribund for the fourth straight year.
In addition, even after traffic starts flowing through the Strait of Hormuz, the impact on global inflation will still be substantial. Oil and other inventories have been drawn down drastically across the globe and will need to be rebuilt. This means oil and other commodities are very unlikely to head back to the levels they traded at before this conflict began. At least not in 2026.
Higher gasoline prices are already influencing consumer behavior. Higher oil prices and chemical prices will also have impacts on a broad swath of consumer goods. The combination is toxic to mass market retailers as we have seen this week as the stocks of AutoZone (AZO) and American Eagle Outfitters (AEO) have gotten hit after these companies posted first-quarter results.
None of these stresses in the broader economy have mattered to the market indexes. They remain enamored by the huge surge of tech spending driven by the hyperscalers’ massive capital expenditure budgets. This is driving big earnings beats throughout Big Tech. We have seen this again this week with the big rallies in Snowflake (SNOW) and Dell Technologies (DELL) following their first-quarter numbers and guidance. Anthropic disclosed it had recently raised capital at a valuation of $965 billion. Roughly three times its valuation a few months ago.
One has to question how long this can continue. As Doug Kass noted on his Daily Diary on Thursday, the Financial Times just did an analysis that showed in its “best case” scenario, only Amazon (AMZN) will achieve a slightly positive return on investment among the hyperscalers on its huge investments building out AI infrastructure. ROI is estimated to be deeply negative at Meta Platforms (META) and Oracle (ORCL). This explains the large-scale layoffs recently announced at those tech companies, even as both companies are increasingly relying on debt issuance to fund the AI data center buildouts.
Meanwhile, SpaceX is looking to go public in June at a valuation of $1.8 trillion to $2 trillion. This IPO potentially will raise tens of billions of capital, possibly make Elon Musk the world’s first trillionaire, and values the company at 100 times last year’s revenues.
Given the huge divergence between consumer sentiment at all-time lows while the equity indexes at all-time highs, something eventually has to give. My view is the SpaceX IPO or the formal agreement that opens the Strait of Hormuz or both will be classic “buy the rumor, sell the news” events and could easily mark the top of the market for 2026.
At the time of publication, Jensen had no positions in any security mentioned.
