The Bull Market Doesn't Care What We Think

The following is an excerpt from our weekly market update published to private clients on 5/13/26. Since that time the market has ripped higher and we've locked in gains of 24%, 36%, 46%, 62% and more on common shares (no options or leverage). 

There are times when you need to dive deep into what is happening in the financial system/ economy and times when you need to keep things simple and focus on the trend. The markets are currently in the latter environment. Every major signal I track is in “risk on” mode and stocks are experiencing a near constant bid from buyers. Yes, there will be dips, but this is a bull market.

Now, I am not naïve. I am fully aware that there are numerous major issues in the financial system, specifically:

1. The War in Iran continues, resulting in higher energy prices.
2. Inflation is rebounding.
3. The economy, particularly the lower 80% of incomes, are struggling.

However, from a purely market dynamic perspective stocks currently do NOT care about any of that.

Let me explain.

How the Markets REALLY Work and Why Trading is So Difficult

You have no doubt read numerous gurus talking about what matters most to stocks. Some people believe it is Fed policy. Others think it’s the economy. Others think it’s valuations. Etc.

The reality is that all these answers are correct… but only at specific times.

The stock market is a dynamic entity consisting of the actions of millions of people acting on billions if not trillions of pieces of information. In this context, what drives the market is constantly changing depending on what major issues grab the attention of the investment “herd.”

Sometimes stocks care about the economy. Other times they don’t. Sometimes they care about exogenous events (e.g. the War in Iran during March 2026), other times the markets move “past” those issues. Sometime stocks care about inflationary pressures. Other times they don’t.

And so on and so forth.

The most crucial item to understand to be an active trader is that it’s not what you think, but what the markets thinks that matters. And today the market “thinks” that the War in Iran, a rebound in inflation, and the K-shaped economy are non-issues.

Let’s dive in.

Stocks Are Looking Past the War in Iran, Rebound in Inflation, and a Weaker Consumer

As I write this, oil is over $100 per barrel. It has been there for two months now. This presents a MAJOR issue for the global economy as I’ve outlined here:

https://grahamsummersmba.substack.com/p/the-s-and-p-500-is-3-from-its-high

…and here:

https://grahamsummersmba.substack.com/p/the-market-smells-a-deal-heres-what

However, stocks currently either A) do not care about this anymore or B) are rallying based on inflation expectations (stocks are an inflation hedge). Whichever explanation you choose to believe, the fact is that as far as stocks are concerned, the War in Iran is a non-issue (for now).

You can see this clearly in the chart below. The S&P 500 (black line) actually bottomed BEFORE oil (blue line) began to decline in price. And since bottoming, the S&P 500 has staged a monster V-shaped rally while oil has been consolidating over $90 per barrel.

Frankly, I’m not sure what to make of this. It is obvious that higher oil prices will translate to economic disruptions (high prices, fuel shortages, potentially even food crises in some countries), but the S&P 500 doesn’t appear to think any of those consequences are significant. Perhaps some time later this year higher energy prices will become a problem for stocks, but for now, they are not.

Which brings me to issue #2 that the markets are ignoring: the threat of another round of inflation.

The Fed has cut rates to 3.5%. The yield on the 2-Year Treasury bond (which the Fed tends to follow) is currently at 4%. This means that the Treasury market, which is one of the most liquid, sophisticated markets in the world, is signaling not only that the Fed WON’T be cutting rates anymore but that the Fed is likely to raise rates TWO TIMES in the next 24 months.

From a purely technical analysis perspective, this is a VERY bullish chart, signaling that higher bond yields are coming.  Treasury yields trade based on inflation (among other things), so the fact that the yield on the 2-Year Treasury is breaking out to the upside is a major warning that higher inflation is coming.

Here again, stocks couldn’t care less. You’ll note that in the last two weeks, stocks and bond yields have been rising simultaneously.

I’m not sure what to make of this. On the one hand, stocks are fundamentally an inflation hedge, so they tend to do well when inflation is rising (at least initially). However, higher inflation also means NO Fed rate cuts as well as higher operating costs, which would reduce corporate profits. And based on traditional macro theory, if Treasury yields rise, stocks should trade at a lower earnings multiple.

And yet… stocks continue to soar despite yields breaking out to the upside. Indeed, nothing indicates just how little stocks seem to care about inflation like what happened this morning, April’s Producer Price Index (PPI) which was released today at 8:30AM EST, came in EXTREMELY hot at 1.4%, up from 0.7% in March. Stocks opened only slightly down to immediately rally from the lows and go green on the day.

Which brings me to the 3^rd issue stocks are ignoring: the K-shaped economy and the fact that higher prices are hurting the lower 80% of incomes.

In the last week, multiple U.S. corporations have warned that households are depleting savings and accumulating debt to cover rising essential costs.  Kraft Heinz CEO Steve Cahillane explicitly stated that consumers are "literally running out of money at the end of the month," a sentiment echoed by executives from Whirlpool, McDonald’s, and Dine Brands.

Key indicators of this financial strain include:

• Record Debt: Household credit card balances hit a record $1.28 trillion, with delinquency rates reaching their highest level since 2017.
• Shrinking Savings: The U.S. personal savings rate fell to 3.6% in March 2026, the lowest level since 2022.
• Cost of Living Shock: Surging gasoline prices, averaging $4.56 per gallon, have disproportionately impacted lower-income consumers, forcing them to trade down on discretionary items like appliances and dining out.

Here again, stocks are ignoring this issue ripping to new all-time highs.

I realize this is hard to digest… but as I mentioned before, it’s not what we think, but what the markets think that matters. And the stock market is CLEARLY demonstrating today that it is NOT concerned about any of the above issues.

Of course, this can change… but as I stated at the beginning of this update, there are times when you need to dive deep into what is happening in the financial system/ economy and times when you need to keep things simple and focus on the trend. Today, the trend is up, and the best thing to do is keep things simple and just ride this move for as long as possible.

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Best Regards

Graham Summers, MBA

Chief Market Strategist

Phoenix Capital Research