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Introduction

The summer of 2026 is shaping up to be one of those rare moments where sports and markets seem to intersect. The World Cup has returned to North America, captivating audiences across the globe, while the New York Knicks have finally delivered a championship to a fan base that waited more than five decades for the moment. Having grown up just outside New York City and spent two decades living in Manhattan, we know firsthand what this title means to the city and its fans. As someone who played Division 1 soccer, the World Cup has always held a special place as well. Together, they serve as reminders that patience, persistence, and conviction can eventually pay off—even after years of disappointment.

That brings us to the title of this week's report: Do You Believe? Every team competing in the World Cup must believe it can lift the trophy. Knicks fans spent decades believing despite little reason to expect another championship. And despite a fresh geopolitical flare-up in the Middle East, markets continue to believe diplomacy will prevail and economic risks can be managed. Whether in sports, geopolitics, or investing, belief is often what carries participants through periods of uncertainty.

The market is embracing that optimism today. The Iran conflict appears to be moving toward a resolution, recession fears have faded, and investors continue to treat every pullback as an opportunity rather than a threat. Much like sports fans celebrating a long-awaited championship, market participants have become increasingly convinced that better days lie ahead. The question, as always, is whether that optimism is justified—or whether expectations have begun to outrun reality. We'll let the weight of the evidence guide us.

Last week delivered one of the most anticipated capital markets events in recent memory with the pricing of the SpaceX IPO. While many feared the offering would create a vacuum for liquidity and pressure risk assets, the opposite occurred. Stocks initially weakened as investors sold stocks to create room for the deal and geopolitical tensions escalated, but sentiment turned sharply when reports surfaced that an Iran resolution could be imminent.

The question, once again, is: Do You Believe?

In last week's reports, we argued that President Trump would prefer a favorable backdrop for Elon Musk's landmark IPO and that some form of market-friendly development was likely if risk assets came under pressure. By Wednesday, the market appeared to be staring over the edge, with the S&P 500 falling as much as 3.3% from Tuesday's high. Yet if investors have learned anything from Trump's negotiating style over the years, it is that major policy shifts, social media posts, and strategic leaks can quickly alter the market narrative. That's exactly what happened. Stocks reversed sharply and recovered most of the decline by week's end, reinforcing the market's willingness to believe that every setback remains temporary.

The resulting weekly market performance ultimately finished in the green. If reports of an Iran peace agreement hold through the weekend, we should expect a favorable reception as markets begin a new week. The timing is notable, as it sets the stage for an event-filled week highlighted by the FOMC meeting. Should the Strait of Hormuz remain open and oil prices continue to retreat, the disinflationary impulse could become difficult to ignore. That raises an interesting question: does a sustained decline in energy prices alter the policy discussion as Kevin Warsh presides over his first FOMC meeting? Interesting times indeed.

While we were expecting further market weakness following our June 10 report, we repeatedly highlighted that an Iran resolution represented the primary wildcard to that view. Last week's core inflation data already suggested inflation pressures were moderating. A meaningful decline in oil prices would only reinforce that trend, helping ease pressure on bond yields and potentially creating room for a less restrictive Fed stance.

You have to appreciate the timing. Warsh's first FOMC meeting arrives just as markets are contemplating the prospect of sustainably lower oil prices and easing inflation pressures. Is it all a coincidence? Perhaps. But in today's market, where policy, geopolitics, and asset prices appear increasingly intertwined, it is difficult to dismiss the possibility that these developments are connected.

Perhaps most interesting is that oil never fully embraced the geopolitical fear narrative. Despite repeated flare-ups involving Iran, crude largely failed to price in a sustained disruption scenario, almost as if the market anticipated that a more durable resolution would eventually emerge. Since the May gap lower, we have maintained a constructive view on lower oil prices and argued that a move back toward $80 was a reasonable outcome. We may be getting that outcome far sooner than many expected.

Never a dull moment when analyzing markets, and this week should prove equally interesting. Will investors sell the news of an Iran resolution, or will they continue to believe that the path of least resistance remains higher? With stocks sitting near record highs and the FOMC looming, conviction is about to be tested once again.

As we've discussed throughout this introduction, markets ultimately run on belief. This week, we'll find out whether investors still have enough of it to carry prices higher.

Let's check the charts.