Happy Easter - First Weekly Gain Since the War Started. Now What?

TL;DR

The S&P 500 posted its first weekly gain since the Iran conflict began, rallying roughly 3% on ceasefire optimism. But the real story happened before the rally: both THOR strategies executed a complete risk-off rotation last week, moving from nearly full equity exposure to maximum cash. Index Rotation went from 97% equities to 98% T-Bills. Low Volatility dropped from 7 active sectors to just 2 with nearly 60% in T-Bills. The system sold into strength before the headlines caught up.

Week in Review

Tuesday's session told the story. The S&P 500 jumped 0.72% to 6,575.32 and the Dow gained 0.48% to 46,565.74 after Trump announced U.S. forces would leave Iran within "two or three weeks." It was the best single day since May 2025 and set the tone for what became the first positive week for equities since the war began.

The rally had legs through midweek, with S&P 500 futures up over 3% from Monday's open by Thursday. Friday saw an early close for the holiday.

But the context matters. March ended with the S&P 500 down 5.1%, its worst month since May 2025. This week's bounce came off deeply oversold conditions, not a fundamental shift. The Strait of Hormuz remains effectively closed. Iran downed a U.S. F-15E Strike Eagle, attacked Prince Sultan Air Base in Saudi Arabia with missiles and drones (wounding over 300 U.S. service members), and only a third of Iran's missile arsenal has been confirmed destroyed. Russia is supplying upgraded drones to Tehran.

Meanwhile, Trump threatened strikes on Iranian bridges and power plants, then pivoted to signaling withdrawal even without reopening the Strait. NATO is fraying: Trump threatened to pull the U.S. out after European allies refused naval support, and Macron rejected the use of force to reopen Hormuz as "unrealistic."

Commodities and rates:

• Brent crude: $109/bbl (down from intraweek highs near $112)

• WTI: ~$112/bbl

• Gold: $4,617 (down sharply from all-time high of ~$5,600 in March, worst monthly drop since 2013)

• Bitcoin: consolidating below $76,000, range-bound

• 10-year Treasury yield: 4.3%+ (rising on oil-driven inflation fears)

• U.S. gas prices: above $4/gallon for the first time since 2022

March payrolls landed at +178,000 with unemployment steady at 4.3%. Not terrible, not strong. Good enough for the Fed to keep sitting on its hands.

Allocation Changes

This was one of the most significant positioning shifts in recent memory.

As of March 31, THOR Index Rotation was nearly fully invested: Dow at 49%, S&P 500 at 48%, with just 2% in cash. By April 1, the signal had flipped all three indexes to risk-off. The fund moved to 98% T-Bills. A complete exit from equities in a single rebalance.

THOR Low Volatility underwent a similar transformation. Seven of ten sectors were active: Energy, Materials, Industrials, Consumer Staples, Utilities, Consumer Discretionary, and Healthcare all reading risk-on with less than 2% in cash. By April 1, only Utilities (20.2%) and Energy (19.3%) remained, with nearly 60% of the fund in T-Bills. Five sectors went dark in one week.

The timing is worth noting. The system moved to maximum defensiveness after this week's relief rally completed Wedensday. It sold into strength while headlines were still optimistic. That's the design working as intended: signals don’t hope, chase, or have emotions.

The Bigger Picture

This week's rally was a textbook relief trade. The question is whether it marks a turn or a head fake.

The bull case: Trump is signaling withdrawal, Iran's president says he's ready to end the war if conditions are met, and equities are oversold after a brutal Q1. Morningstar pegs potential S&P 500 support at 6,000, suggesting a floor isn't far below.

The bear case: Macquarie analysts assign a 40% probability that this conflict drags into June with the Strait closed, and in that scenario, they see oil at $200. Even at current levels, $109 Brent is an economic tax. The record $16.70 backwardation in near-term oil prices signals supply stress that isn't going away just because futures traders got excited about a press conference.

The Fed is boxed. Oil-driven inflation makes cutting rates risky; war-driven growth deceleration makes holding rates risky. One possible cut in H2 2026 is the consensus. That's not exactly ammunition for a sustained equity rally.

Gold's March sell-off (down 10%+) looks counterintuitive during a war, but makes sense through the yield lens. With the 10-year above 4.3% and the dollar strengthening, the opportunity cost of holding a non-yielding asset is real. Goldman still has a $5,400 year-end target, but gold needs yields to come back down first.

The system is reading this environment correctly: protect capital, maintain energy exposure where the trend supports it, and wait. The next real catalyst isn't another press conference. It's whether the Strait actually reopens.

THOR Risk Gauge

Both THOR strategies executed a dramatic shift to maximum cash over the past week. Index Rotation moved from 97% equities to 98% T-Bills. Low Volatility dropped from seven active sectors to two. Capital preservation is the priority until the data shifts.

Signal Watch

THOR Index Rotation

As of 4/2/26

Previous week (3/27): Dow 49.0%, S&P 500 48.1%, QQQ 0.5%, Cash 2.4%

THOR Low Volatility

As of 4/2/26

Previous week (3/27): 7 sectors active, Energy 17.8%, Materials 14.8%, Industrials 13.8%, Consumer Staples 13.7%, Utilities 13.3%, Consumer Disc. 12.2%, Healthcare 12.2%, Cash 1.2%

Weekend Reading

Behind the Ticker Podcast - Rob Arnott, founder of Research Affiliates ($150B+ in assets), joins to break down why cap-weighted indexing is broken. He explains the hidden drag inside traditional indexes - stocks get added after they soar and deleted after they crash - and how fundamental indexing solves it. We dig into RAUS, the upcoming RAFI Growth index, NYXT (the deletions ETF), and why the Mag 7 resembles the dot-com bubble.

Listen on Spotify

Oil Could Surge to $200 if Conflict Continues - Energy ETFs in Focus - Zacks

Macquarie's scenario analysis on Strait of Hormuz closure timelines is the most rigorous modeling of oil tail risk published this week. The 40% probability assigned to a June continuation is worth sitting with.

Gold Behaving Like a Risk Asset in 2026 - Kitco

HSBC strategists Sels and Ku explain why gold is selling off during a war: yields, dollar strength, and positioning unwind. The de-dollarization thesis remains intact long-term, but the short-term mechanics are working against the metal.

The S&P 500 Could Hit Bottom by May - Morningstar / MarketWatch

Constructive framework placing 6,000 as the correction floor with a potential bottom by May. Useful for calibrating expectations if the relief rally fades.

Quote of the Week

"The stock market is a device for transferring money from the impatient to the patient."

• Warren Buffett

Brad Roth

CIO, THOR Financial Technologies

This content reflects the opinions, analyses, and research of THOR Financial Technologies as of the date published. It is provided for informational and educational purposes only and does not constitute investment advice and should not be relied upon as the basis for any investment decision. Past performance doesn't guarantee future results, and all investments involve risk. For more information, please go to: thorft.com