U.S. equities have surged to fresh highs even as the Iran‑Israel flare‑up and a global energy squeeze linger. The S&P 500 is up roughly 4 percent this year, erasing the modest March dip that followed the war’s outset. Jefferies’ David Zervos cheered the rally, dismissing bearish pundits as suffering from “Trump Derangement Syndrome.” The rally has lifted the market‑cap of the index beyond $40 trillion.

Behind the rally, fundamentals show strain. The price‑to‑earnings multiple has slipped about 10 percent since the end of 2023, indicating stocks are now riding earnings rather than optimism. Only 44 percent of S&P constituents sit at four‑week highs, with big‑tech and chips carrying the load; the Philadelphia Semiconductor index is up 30 percent in April alone. Investor sentiment remains tentative.

Investors confess they have neither an edge nor a hedge, leaving portfolios exposed. Bond yields and gold prices have failed to provide the usual cushion, so risk‑taking remains minimal. Amundi’s chief investment officer Vincent Mortier said clients “don’t dare” trim risk, while Société Générale’s Kit Juckes warned markets are “paralysed by binary possibilities.” The equity rally rests on a thin base. Liquidity constraints amplify the risk.