While there is still uncertainty and saber rattling over the Iran conflict, markets are forward looking are currently looking past the conflict.

It’s possible that we see a continuation of negative headlines, ultimatums and deadlines for negotiations, but that doesn’t mean that stocks will react meaningfully to each one, since markets already priced-in the worst of the conflict during the lows made back in March.

The combination of improving Iran headlines, investor exhaustion over the volatility in March and a strong start to earnings season has helped to propel stocks to record highs. Once stocks reach new highs after a correction, like the one in March, the upward trend can last for some time, as corrections reset sentiment which allows stocks to climb higher.

While market sentiment is decisively positive right now, stocks still face some key tests in the coming weeks, including big tech earnings, which are critical from a market leadership perspective, and the next Federal Reserve meeting, when the Fed will likely react to this year’s inflation spike and bond yield surge.

We expect the Federal Reserve to stand down on any rate cuts this year given the oil price spike, the stabilizing job market, and uncertainty over the Chair leadership, although we do think that 1-2 rate cuts are warranted by year-end.

Kevin Warsh struck a pragmatic tone in his confirmation hearing, and reassured markets that the central bank’s independence would remain intact should be be confirmed, and this helps to remove uncertainty from markets over this upcoming Fed chair transition.

While it’s more challenging to put new money to work when stocks are at records, we still expect stocks to post low double-digit gains for the full year.

While investors who missed the opportunity to put money to work a few weeks ago when stocks were on sale may have a tougher time finding opportunities right now, it’s also risky to hold too much cash during a bull market.

Now that the stock market correction is likely over, it’s important to remember that the month of January, prior to the correction, was very strong, which historically sets the stage for a strong stock market for the full year.