In a striking development in the U.S. stock market, the tech-heavy Nasdaq Composite has surged following a ceasefire agreement between the United States and Iran. This surge, however, may be precarious according to Marko Kolanovic, the former quantitative research chief at JPMorgan, who suggests that the rally could soon reverse.
On Thursday, Invesco’s momentum technology ETF reached an all-time high, propelled by investor optimism after President Trump announced a two-week ceasefire. Kolanovic cast doubt on the sustainability of these gains, commenting, “The biggest gain ever on nothing (fake deal, Hormuz closed). So likely the biggest fade too…” His remarks were made in response to a chart that showcased the uptick in momentum tech stocks.
Despite the rally, underlying tensions remain. Iranian parliament speaker Mohammad Bagher Ghalibaf indicated that the ceasefire might be compromised due to Israel’s ongoing military actions in Lebanon. Furthermore, President Trump warned that Iran should refrain from imposing fees on tankers navigating the critically important Strait of Hormuz. In a forthcoming diplomatic effort, U.S. negotiators, led by Vice President JD Vance, are scheduled to meet in person with Iranian representatives on Saturday.
Kolanovic expressed concerns about the momentum tech stocks, suggesting they could decline sharply if negotiations do not yield results. He noted that the Iranian parliament’s stance—requiring a ceasefire in Lebanon and the release of frozen Iranian assets before talks can progress—creates an environment of uncertainty. “Who, apart from markets, still thinks negotiations are viable with this condition?” he questioned, underscoring the disconnect between market enthusiasm and geopolitical realities.
On the markets, the Nasdaq Composite outperformed other indices, rising by nearly 5%. In comparison, the S&P 500 and the Dow Jones Industrial Average increased by 3.8% and 3.4%, respectively. Interestingly, the Nasdaq has returned to pre-conflict levels, while the S&P remains less than 1% away from its previous peak.
Kolanovic brought attention to specific sectors within the tech market, particularly memory chip stocks, which play a significant role in momentum tech ETFs. Companies like Sandisk, which has surged by 45% in the past month, caught his eye as potential targets for short selling. Meanwhile, Western Digital and Seagate Technology also saw impressive gains, climbing over 30% during the same period.
As the markets remain in a state of flux, the implications of the ceasefire agreement and its precarious nature could have lasting effects on stock performance, particularly within the tech sector that has enjoyed a recent upswing. Investors are advised to tread carefully, as the landscape remains riddled with uncertainty.
