When headlines scream war, most investors expect panic.
Instead?
By lunchtime today, the S&P 500 was down just 0.3% - well off the early morning lows.
Let that sink in.
We just witnessed a direct military attack on Iran. The Strait of Hormuz - a critical artery for global oil supply - is essentially shut down. Bombing continues. The geopolitical temperature is rising fast.
And yet… stocks aren’t collapsing.
The Real Story Is in the Reaction
Oil initially did what you’d expect. Crude spiked nearly 10% in the overnight session. As of midday, it’s still up about 7% - a significant move, but notably off the highs.
Gold? Same script.
A sharp pop on the news, now up just about 1%.
That’s not panic. That’s repositioning.
Markets tend to overshoot on the first headline and then reassess. And what they’re reassessing right now is simple:
Supply disruptions, while serious, aren’t yet systemic.
The U.S. economy isn’t falling apart.
The length and magnitude of the war is unknown – but it is now WWIII
If this were 2008-style Great Financial Crisis stress, you’d see far more disorder. Instead, we’re seeing rotation.
What’s Actually Working Today
Energy is leading - no surprise.
The Energy Select Sector SPDR Fund (XLE) is up about 1.6%, reflecting higher crude prices and improved cash flow expectations for producers.
But it’s not just oil.
Industrials are firm. Regional banks are catching bids. That’s not defensive positioning - that’s capital leaning into domestic growth.
The U.S. dollar is up more than 1%, a classic flight-to-safety trade. At the same time, the 10-year Treasury yield has gapped back above 4%.
That’s important.
If investors truly believed recession was imminent, yields would be collapsing. Instead, rates are rising. That suggests the bond market sees growth resilience and potentially sticky inflation - not economic implosion.
And then there’s defense-tech.
The REX Drone ETF (DRNZ) is up roughly 8% today as investors price in increased defense spending and next-gen warfare technologies.
We’re seeing capital move toward areas tied to national security, energy independence, and industrial strength.
One more standout: Breakwave Tanker Shipping ETF (BWET) is up 31% today. I talked about this ETF on the February 11 podcast - and it’s nearly doubled since then.
When shipping lanes get disrupted, tanker rates explode. That’s not speculation. That’s math.
The Bigger Picture: Earnings Win
Here’s the part most investors are missing.
Despite geopolitical chaos, despite tariff noise, despite constant macro fear - S&P 500 profit margins are at the highest levels are surging.
Corporate America is lean. It’s efficient. And it’s still generating cash at historic levels.
Earnings drive stocks over time. Not headlines. Not tweets. Not cable news panic.
Markets are forward-looking machines. And right now, they’re telling you something important:
Yes, geopolitical risk is real. Yes, volatility is back.
But this is not 1973. It’s not 2008. And it’s not March 2020.
The foundation underneath this market - earnings, balance sheets, margins - remains strong.
If anything, today’s action reinforces what I’ve been saying:
We are in a rotation-driven bull market, not a collapse.
Volatility creates opportunity. It flushes out weak hands. It resets positioning.
And when fear fades - as it always does - strong companies with record profitability tend to lead the next move higher.
Stay disciplined. Stay selective. And don’t let headlines shake you out of a structurally strong market.
See you soon,
Matt McCall
Founder, NXT Wave Research
