Summary

• The S&P 500 has rallied 13% since March 30, reaching all-time highs, but it faces growing downside risk until a durable resolution to the Iran war is reached.
• I downgrade SPY to 'hold' as risk-reward is now unattractive, with only 1.5-2% upside versus potential 15-20% downside.
• Market breadth is narrow, with gains concentrated in tech, consumer discretionary, and small caps, while bond and crypto markets remain cautious on uncertain liquidity outlook.
• While earnings estimates remain robust, next week will retest the AI story as all four hyperscalers report. Plus, a new Fed chair will likely induce more volatility in the summer.
• I've raised cash to over 30%, trimming positions in stretched names, to prepare for expected summer and fall volatility.
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Introduction and Investment Thesis

The S&P 500 (SPY) has staged an impressive rally since it hit a low of 6316 on March 30, gaining close to 13% since then and erasing all of its losses as

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Analyst’s Disclosure: I/we have a beneficial long position in the shares of MRVL, ALAB, ANET, AMD, MSFT, NOW either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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