Stocks fell for the second day in a row today as investors responded to news that there would be no negotiations to end the war in Iran as had been planned.
All three major indexes finished down 0.6% as earlier momentum toward unwinding the war, including Iran's reclosing of the Strait of Hormuz, has faded.
After hours, however, markets got a shot in the arm after President Trump said he would extend the ceasefire. In a social media post, Trump said he would extend the pause in fighting to give Iran a chance to come up with a unified proposal, saying the ceasefire would continue until "such time as their proposal is submitted and discussions are concluded."
The Prime Minister of Pakistan, Shehbaz Sharif, thanked Trump for accepting Pakistan's request to extend the ceasefire.
In response to that announcement, stocks moved higher in after-hours trading with Vanguard S&P 500 ETF (VOO +0.76%) and the Invesco QQQ Trust (QQQ +1.70%) up 0.4% on the news.
Image source: Getty Images.
Is this the off-ramp investors have been waiting for?
Stocks tumbled through most of March as oil prices spiked from the war, and investors feared that it could lead to a global recession or at least slower economic growth.
However, in the three weeks since then, stocks have soared as investors have reacted to signs that the war could be wrapped up soon, including the ceasefire, public opinion turning against the war, and Trump's own comments that seem to recognize that it's in his interest to end the war sooner, rather than later.
It's also notable that this ceasefire announcement has no clear deadline, though it's ostensibly to give Iran enough time to arrange its negotiating positions; the ceasefire could carry on indefinitely.
As it drags out, investors are likely to turn their attention elsewhere, and they already seem to be doing that.
The AI trade, for example, has come roaring back. The State Street Technology Select Sector SPDR ETF (XLK +2.40%) just closed higher for the 15th session in a row, and the iShares Semiconductor ETF (SOXX +4.01%) did the same.
While tech stocks are generally cyclical and sensitive to global economic headwinds, they also have less direct exposure to oil prices than industries like industrials, consumer goods, transportation, and energy, as software is a service, and hardware, such as chips and devices, tend to be high-value and require relatively little energy to produce and transport. Data centers are an exception and rely on large amounts of energy.
NASDAQ: SOXX
Key Data Points
Focus on the long term
For investors, the last two months are a reminder of why it's best to focus on the long term. There's been a ton of volatility during that period, but stocks are not far from where they were before the war started, showing that the market tends to rebound from short-term shocks.
Long-term investing isn't just a proven way to earn returns; it's also much easier psychologically than managing your portfolio with every change in the news. As it often is in history, holding through the turmoil has paid off.
