It has been almost exactly a month since we pointed out that the inner strength of the US stock market no longer looks quite so fresh. In our Thoughts on January 21, 2026, we speculated whether rising interest rates in Japan could be the domino that would fall – or whether SCOTUS might rule US import tariffs illegal. In the end, the trigger for a correction is actually secondary. The key thing is whether you are prepared when the first domino falls.
And let’s be honest: if Pretiorates was already hearing voices on January 21 suggesting that SCOTUS might rule against import tariffs, then the US government knew too. Accordingly, the first reaction was prompt: Trump activated the base tariff in accordance with Section 122 of the Trade Act of 1974. The illegal import tariffs are thus replaced, but without congressional approval, only for 150 days. Politically, this may have been a clever move, but it was not a big hit with the financial markets. This is because they had long since come to terms with the – now illegal – import tariffs. They reduced the trade deficit, dampened the rise in debt and thus also limited the supply of US Treasuries. For the markets, this was a convenient arrangement.
Last Friday, the stock market reacted with surprising calm to the SCOTUS ruling. It was probably banking on a more sophisticated response from Washington over the weekend. That response failed to materialize – and with it, the calm disappeared.
There is no doubt that the US stock market has performed impressively over the past three years. But beneath the shiny surface, things have been simmering for some time. For years, there has been an increased willingness to take short positions in S&P 500 futures, which has recently intensified again. This does not necessarily have to be bearish; many of these positions simply serve to hedge existing exposures. But it shows that investors are no longer sleeping as soundly as they used to.
In fact, so-called smart investors have not really taken a negative position so far. In recent weeks and months, there has been no significant distribution in the broad S&P 500.
A clearer picture is provided by After Open Action (AoA), which reflects the actual activity of traders. And here, the Nasdaq Index in particular is showing a significantly weaker picture. Since the fall, positions have been reduced in the background – quietly but steadily.
First, it hit the Magnificent Seven, the former darlings of every presentation. Then came the software stocks. Our own index of US software stocks has already lost over 30% since the end of 2025. And as we noted in one of our recent issues of Thoughts: It is still too early for bottom fishing. The waters are not calm enough yet.
Even if the broad S&P 500 appears stable at first glance, this stability is deceptive. Since November 2025, it has significantly underperformed the global stock index. Little remains of the locomotive of all financial centers. It is more like a wagon that can be pulled along.
Even its own trend strength has weakened. This may not be immediately apparent in terms of points, but it is clear in structural terms. It’s like an apple that is rotting from the inside: it still shines on the outside, but inside it looks different.
A market can remain at a high level for a long time as long as positive sentiment carries it. Negative news is relativized, classified, or simply ignored. But it is precisely this sentiment that is beginning to shift. Since the end of the year, it has been neutral at best – now it seems to be noticeably clouding over. And that is the moment when investors suddenly become willing to part with positions they had just defended.
There is no longer any tailwind from the economic side either. The latest data does not provide oxygen for the bulls – on the contrary, it takes it away. And without oxygen, even the strongest market becomes short of breath.
The SCOTUS ruling may not come as a surprise, but it does increase uncertainty. However, we believe the geopolitical factor of Iran is even more significant. Last year, the nuclear issue seemed to have been settled with the US attack. But the recent build-up of US military forces in the region tells a different story. Iran should not be underestimated – Russia and China are in the background. They have supersonic missiles against which, to our knowledge, there is still no defense. This makes it all the more surprising that the oil market has not yet priced in any significant political risk premium.
Around 20% of global oil production passes through the Strait of Hormuz. A complete blockade by the Iranian army does not appear to be imminent. China also obtains a large part of its oil requirements – from Iran – through this strait. Countries such as Kuwait, Saudi Arabia, Iraq, and the United Arab Emirates also export their oil via this route. Hormuz is not a bottleneck for one individual, but for many.
Around 20% of the global LNG gas market also passes through the same passage. And here, too, there is (still) a sense of calm – perhaps too much of it. Precious metals are already responding with higher market prices. However, neither the stock market nor the oil market has reacted significantly so far. In the event of a military escalation, hardly any shipowner would be willing to send their ships through this strait – even if it officially remains open. Therefore, the roof and beams are creaking quite loudly. Do we want to watch the building from outside? Even if it is (hopefully) only for a few weeks?