Most important take away

Despite what would traditionally be a black swan event (Strait of Hormuz closure, Iran conflict), the stock market barely flinched, declining only about 9% before a sharp elevator-style rebound. Post-COVID investor conditioning — where every dip has been a buying opportunity — combined with FOMO from both retail and institutional investors has fundamentally changed how markets price geopolitical risk. The more consequential story may be the historic divergence between semiconductor stocks (near all-time highs) and software stocks (in freefall), driven by AI disruption fears.

Summary

Geopolitical Risk is Being Repriced by the Market. Oil rose ~47% from late February, yields climbed ~35 basis points, and rate cut expectations evaporated — yet stocks were down only ~1% over the same period. Steve Sosnick, who spent decades modeling black swan events as the largest options market-making firm on the street, noted this outcome was far milder than traditional models would predict for a Strait of Hormuz scenario (which would historically imply oil at $150-200, a 10% S&P correction, and VIX at 45-50). The market took the stairs down and the elevator back up, the opposite of the usual pattern.

Stocks and Investments Mentioned:

• VLO (Vanguard S&P 500 ETF): The most-bought stock at Interactive Brokers in recent days, signaling buy-and-hold investors stepping in during the dip. Steve called this “very critical” — VLO buyers are long-term investors, not traders.
• SPY: Most active options at Interactive Brokers by far, indicating heavy hedging and speculative activity.
• Micron (MU): Most actively bought individual stock on the way down at IBKR. Profitable if bought in the last week, but earlier dip-buyers were underwater for a period.
• NVIDIA / Semiconductor stocks (SMH): Near all-time highs. GPU availability for B200s has collapsed to zero, H100s close behind. Warren Pies noted: “Whatever happens with this war, the AI complex is likely to lead any true sustainable market.”
• Software stocks (IGV): In a historic bloodbath. The three-month correlation between semis and software collapsed to its lowest level in a decade. IGV had a day where S&P was up 1% and software was down — something that had literally never happened before. Two-day change: S&P up 3.1%, IGV down 5.2%. Specific names crushed: CrowdStrike (-8%), Palo Alto (-5%), ServiceNow (-8%). Earnings estimates remain at all-time highs, but the market is pricing in terminal value destruction from AI disruption.
• Microsoft (MSFT): Back to March 2020 levels on a relative basis despite record business results. The open AI narrative has become tarnished relative to Anthropic, and the shift from a cash-generating model to one requiring heavy borrowing for AI infrastructure has changed the investment thesis.
• Meta (META): Up on news of committing $21 billion to AI infrastructure — a rare positive reaction to AI spending, suggesting some thawing of the anti-spending sentiment. A year ago, this announcement would have sent the stock up 19%; it managed 3.5%.
• Tesla (TSLA): Continued retail dip-buying despite selloffs.
• S&P 500 hardware stocks (Dell, HP, NetApp, Super Micro, Sandisk, Western Digital): Going “absolutely vertical” — the picks-and-shovels trade of the AI era, benefiting from hyperscaler spending.
• Oracle (ORCL): Trading at new lows; nobody wants to own it.
• RAAX (VanEck Real Assets ETF): Sponsor mention — an actively managed ETF providing exposure to gold, commodities, natural resource equities, and infrastructure.
• Emerging Markets (IEMG): Consensus estimates show 35% year-over-year earnings growth, the massive outlier. 21% of the portfolio is semiconductors (TSMC at 11%, Samsung 5%, SK Hynix 3%). 32% is tech overall. International stocks outperformed the S&P last year by the widest margin in a long time. Countries like China, Korea, and Japan are pushing reforms focused on enhancing shareholder value and earnings growth.

Actionable Insights:

1. Don’t fight the FOMO trade, but understand it has limits. The post-COVID dip-buying mentality is deeply embedded. Options skew data showed markets were pricing in a bullish outcome even before the Wednesday rally, with maximum probability pointing to SPX 6750. However, this FOMO-driven resilience exists without the massive fiscal stimulus or rate cuts that powered the COVID recovery.
2. Watch the supply-demand dynamic for stocks. SpaceX’s upcoming IPO (potentially the largest ever, with 30% going to retail requiring ~$25 billion) plus potential Anthropic and OpenAI IPOs could strain the favorable supply-demand balance that has supported equity valuations for years. Index funds will be forced sellers of existing holdings to accommodate these new additions.
3. The semis vs. software divergence is the trade to watch. If you believe AI disruption of software is overstated (earnings are still at record highs), software may present a contrarian opportunity — but Sam Ro suggested needing “at least a couple more quarters” of record earnings before fears subside. If you believe the disruption narrative, the hardware/picks-and-shovels trade remains strong.
4. International diversification now has fundamental backing. The rotation from growth to value, plus international investors keeping more money at home rather than buying US stocks, provides structural support. Emerging markets have reinvented themselves from a resources/energy proxy to a tech-heavy allocation.
5. GDP revised down to 0.5% with PCE up 0.4% — “stagflation very light.” Net incomes are starting to fall while spending remains stable, a gap that cannot persist indefinitely. Do not root for rate cuts driven by economic weakness; the Fed is usually late and a weaker economy hurts everyone.
6. Disney layoffs (1,000 jobs) are noise, not signal. Disney employs 150,000-200,000 people, has 1,300 open roles on LinkedIn, and announced no hiring freeze. In a healthy economy, US employers lay off 1-1.5 million people per month (~1% of workforce). Be wary of extracting macro narratives from individual layoff headlines.

Chapter Summaries

Opening / Introduction: Casual banter about movie reboots and Steve Sosnick’s 30-year career at Interactive Brokers. Background on Thomas Peterffy and IBKR’s evolution from market-making to a customer-facing brokerage serving sophisticated individual investors.

Market Reaction to Geopolitical Crisis: Deep discussion of why the Strait of Hormuz closure and Iran conflict did not produce the expected black swan market reaction. Oil up 47%, yields up 35bps, yet stocks barely down. The FOMO dynamic from both retail and institutional investors, combined with post-COVID conditioning that every dip gets bought, has fundamentally altered how markets process geopolitical shocks.

Technical Charts and Breadth Signals: New four-week highs surge to highest since July 2025. Nasdaq 100 gap-up of 3% has historically been 100% bullish 12 out of 12 times since 2011 on a three-month forward basis. Sentiment Trader data shows 80% win rate over one year when Nasdaq 100 components above 10-day moving average rockets from under 10% to over 70% in five days.

Semis vs. Software Divergence: The bloodbath in software stocks (IGV) alongside near-all-time-high semiconductor stocks (SMH) represents an unprecedented divergence. The Anthropic “Mythos” software bug-finding tool adds to AI disruption fears. Private credit exposure in the software sector adds another risk layer. Hardware names (Dell, HP, Super Micro, etc.) going vertical as the picks-and-shovels beneficiaries.

Microsoft and Mag 7 Dynamics: Microsoft at relative lows despite record business performance. Meta gets a rare positive reaction to $21B AI spending commitment. Discussion of how valuations are shrinking on Mag 7 names not because of current earnings but because of future depreciation concerns from massive capex.

SpaceX IPO and Market Supply Risks: The upcoming SpaceX IPO, potentially the largest ever, poses a real risk to market supply-demand dynamics. Combined with potential Anthropic and OpenAI IPOs, index funds will need to sell existing holdings to make room, potentially straining the favorable supply-demand balance that has supported markets.

Emerging Markets and International Stocks: EM consensus earnings estimates show 35% YoY growth, driven by semiconductor exposure (TSMC, Samsung, SK Hynix). International stocks outperforming by widest margin in years. Shareholder value reform policies in China, Korea, and Japan provide structural support. Growth-to-value rotation and “keep money at home” trends benefit international markets.

Options Skew and Bullish Positioning: Steve Sosnick explains how SPX options skew was pricing in bullish outcomes before the Wednesday rally, with maximum probability pointing to 6750. The unusual positive skew indicated FOMO-driven demand for upside exposure, providing foresight into the market’s direction.

Disney Layoffs and Economic Outlook: Disney’s 1,000-job layoff is statistically insignificant relative to 150K-200K total employees and 1,300 open roles. GDP revised to 0.5% with PCE up 0.4% suggests “stagflation very light.” Net incomes falling while spending holds steady is unsustainable. The labor market is in a “no hire, no fire” holding pattern.