VRA Investment Letter: Generational Bull Market; Just Getting Started. Iran War Tensions Setting Up Q2 Smart-Money Front-Running.
/Good Friday morning. Before we get to today’s Letter, there is one important point to remember: we are still extraordinarily early in this bull market. The permabears that like to fear monger us into being tempted to remove money from the markets should be actively ignored and avoided. Over my 4 decades in the markets I’ve watched many of these same charlatans make a living off of selling fear and if we had listened to them we would have been bankrupted many times over. How they get out of bed in the morning I honestly have no idea.
Even as the MOU may be falling apart with Iran, Wednesday featured a 500 point recovery move higher in Nasdaq, which was followed a solid day across the board yesterday, with excellent internals and continued broadening action that represents full-on textbook bull market action.
The reality with Iran is that the US controls the Strait…to at least some very large degree…and the Strait barely matters today compared to the war’s start. The markets have moved on...another reason why US markets will keep climbing.
At the wars outset, fears of a full closure threatening 20% of global/LNG flows dominated headlines and spiked oil prices. Those days are over. US crude production sits at record levels near 13.6 million barrels per day, providing a powerful buffer for the US economy. 30-40% of the oil flows through the Strait have been replaced though other shipping and pipeline channels throughout the Gulf States. Irans ability to surge oil prices and hit the US economy directly have been significantly downgraded (which is why oil trades at just $73/B this morning). The war with Iran, for all intents and purposes, is over.
Dips created by fresh conflict should be seen as a buying opportunity.
The real drivers of this generational bull market; the Trump Economic Miracle, an Innovation Revolution and absolute ocean of liquidity, will continue to power the economy and markets sharply higher into the 2030’s. We’re likely still in just the first inning of an era of technological and innovation magic. Wealth creation from this explosive AI buildout, CAPEX surge, and rarely seen corporate earnings growth will remain firmly in place.
VRA Bottom Line: Geopolitical sideshows can no longer override structural tailwinds. The path of least resistance for stocks will remain (much) higher.
What Matters Most; Corporate Earnings and Economic Growth.
We repeat; front-running of Q2 earnings is now underway. Next Tuesday is big; that’s when big banks kick off Q2 earnings, led by JP Morgan, Bank of America, Citigroup, Wells Fargo, and Goldman Sachs…each reports Tuesday morning before the market opens. The smart money is positioning now for what will be another stellar quarter of earnings. In addition…and this is most important…we continue to forecast that we are entering “the turn”; a powerful rotation back into interest rate sensitive holdings. We look for the rest of 2026 to be very kind to our VRA Portfolio holdings.
Heads up: Nvidia (NVDA) is now trading at its cheapest valuation in more than 7 years, with a P/E multiple below 20. NVDA has become a value stock.
In addition, Mag 7 stocks are now trading at their cheapest valuation relative to the S&P 500 in more than a decade. They’re all value stocks now. We now look for a powerful rotation back into these stocks to begin.
Even as the markets “generals” have dropped by double digits, the market didn't collapse…it continued higher instead. That’s a very big and bullish tell. Leadership is rotating, not dying. We expect a rotation back into Mag 7, mega cap tech and software stocks of significance into year end.
For market leading tech stocks (Nasdaq 100), we just saw the worst 4-day start to July since 2009 and the 4th worst on record. With 60% of QQQ in a bear market (-20% +), the pain is becoming widespread. However, market breadth has continued to improve, with nearly two-thirds of stocks now above their 20, 50 and 200-day moving averages, signaling broadening participation beneath the surface. Highly bullish.
Despite roughly 60% of Nasdaq in bear market territory, the broader market has refused a major selloff. Why? This is classic sector rotation and broadening action. Money has rotated out of crowded AI leaders into cyclicals and value: small caps (still leading), industrials, financials, healthcare, and materials are hitting ATH’s. The S&P 500 equal-weight and mid-caps each just hit fresh ATH’s as well. The other “493 stocks” beyond the Mag 7 are driving gains.
Again, textbook bull market action. No single sector collapse can tank the indexes. It’s the hallmark of a strong bull market, not a bubble bursting.
Final note on tech stocks
Below we see that tech insiders are aggressively buying the shares of their own companies and doing so at the highest levels on record. Highly bullish. Remember, the semis lead tech and tech leads the broad market. This VRA investing theme from the birth of the bull market remains firmly intact.
VRA Bottom Line: everyone expected July to be bullish and now the bears think they have the upper hand. We’re looking for exactly the opposite, with a strong finish to the month and into the midterms. Tyler made this point on his podcast this week and I think he’s spot on; with earnings season about to begin, the share buyback blackout window is in place until after each company reports earnings. This has removed one of the largest buyers of stocks from the market. This sets the markets up for a strong rest of July, as earnings reports kick in and share buybacks resume. We look for smart money to soon begin front-running Q2 earnings.
Until next time, thanks again for reading.
Have a good weekend all.
Kip
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