The Israel-Iran conflict is the latest geopolitical event attempting to scare us out of this bull market.

There were plenty of headlines heading into the last full trading week of June, including retaliatory measures from Iran that suggested a potential closing of the Strait of Hormuz.

Providing the sole passage from the Persian Gulf to the open ocean – and one of the globe’s most strategically important choke points – a closure to the strait would represent a significant strain on oil supplies. But Iran would be committing self-harm, as a complete closure would severely impact their own oil exports and economy.

Markets appear to have sorted things out as they often do. Iran launched missiles at a US air base in Qatar yesterday, which apparently were “telegraphed” that gave the US sufficient notice. Stocks responded well to what was considered limited retaliation.

And while a potential truce between Iran and Israel has been tested in the past 24 hours, we need to keep things in perspective.

Turn Off the News and Ignore the Naysayers

The stock market is an enigma. It wants to humiliate me, you, and as many people as possible for as much money as possible, and as long as possible. Our goal is to engage the market while not letting it humiliate us, and to generate an acceptable rate of return in relation to a given level of risk.

Today, the market’s best tactic is to scare us from the coming rebound. Investors nearly always doubt new bull markets, often for years after they begin. They frequently wonder – how we can possibly be in a bullish period when everything is so bad out there?

And often times things are bad. But stocks don’t necessarily move higher because things are improving (in some cases they do). Rather, they climb because everyone expects the worst.

These types of foreign conflicts are always tragic. We certainly don’t want to minimize them in any way, shape or form. But from an investment standpoint, it’s important to keep in mind that markets have a way of moving past geopolitical events fairly quickly.

The Israel-Iran conflict is just the latest example. It’s yet another reminder (among countless historical cases) to trade the market’s reaction, not the news headlines. Should it really escalate to the point where it truly affects stocks, then we can regroup and adjust our outlook. For the time being, the trend remains up, and we need to be aligned with it.

The S&P 500 (SPY Quick QuoteSPY - Free Report) is now less than 2% away from its prior all-time high. It pays to listen to the market instead of trying to predict what will happen.

Image Source: StockCharts

Powell Set to Deliver Testimony

Yesterday, Fed Governor Michelle Bowman expressed support for a rate cut “as soon as” July. Her comments seemed to supplement those from fellow Fed Governor Christopher Waller, who late last week suggested that the central bank could begin cutting rates more quickly than expected.

Waller also stated that he did not believe current trade policy would produce a sustained, long-term rise in inflation. When pressed about interest rates, Waller expressed that “we’ve got room to bring them down.”

Mixed opinions within the FOMC resulted in another noneventful policy meeting last week, with the committee opting to leave rates unchanged. Fed Chair Jerome Powell reiterated that the central bank was not in a hurry to cut rates, acknowledging the difficulties associated with accurately measuring the impact of Trump’s policies.

“Everyone that I know is forecasting a meaningful increase in inflation in the coming months from tariffs,” Powell claimed.

The Chairman is appearing before the House Committee on Financial Services this morning, where he is widely expected to deliver a similar message. Markets are eagerly awaiting more inflation data in the form of May’s Personal Consumption Expenditures (PCE) index, due to be released Friday morning.

Final Thoughts

It’s never easy dealing with uncertainty. There’s always volatility along the way, even in the strongest bull markets. It’s important to not get stuck on a story (like a geopolitical event). We can’t allow fear of a deeper correction to harm our long-term returns.

While we saw a knee-jerk reaction to tariffs earlier in the year, markets have shown a return to stability. Still, high levels of skepticism remain – something can help lift stocks and kickstart the next leg of this bull market.

Signs of forward momentum – including tech sector outperformance along with innovative AI breakthroughs – are bullish themes that point to more strength ahead.

And with the help of our team here at Zacks, you’ll be ready to capitalize on this opportunity and make the most of it.