The S&P 500 is trading roughly 2% below its all-time high even as oil has climbed above $100 a barrel, borrowing costs have returned to 2002 levels and inflation is running at nearly twice the Federal Reserve’s 2% target. That is the central question raised in a note from The Kobeissi Letter, cited in an Odaily report.
Kobeissi’s answer is blunt: the index may be close to a record and still be sitting near a kind of bottom. The firm describes the setup as a historic market paradox, a state where bull and bear conditions exist at the same time.
229 days after the Iran war began, the index remains near its peak
According to the report, this is day 229 of the Iran war. Since Feb. 28, the S&P 500 has added 900 points. Since its March 30 low, it has climbed nearly 1,500 points, increasing market capitalization by $14 trillion.
Kobeissi says the world looks dramatically different from 229 days ago. Inflation has nearly doubled, the Fed is hiking rates, the global economy is in what the note calls the worst energy crisis in history, and at the same time the world is moving through the largest technology revolution in history. Even so, the report says most investors would still argue that market fundamentals are worse now than they were eight months ago.
Rate expectations flipped from cuts to hikes
At the start of 2026, markets expected the Fed to cut rates at least three times this year, for a total of 75 basis points. Kobeissi says that outlook was a key part of the bullish case for stocks because investors expected lower capital costs, stronger investment activity and record capital spending from technology companies.
Instead, the Fed has already delivered one rate hike this year, and markets expect three more hikes by June 2027. Including the September move, the total increase would reach 100 basis points. Kobeissi says that amounts to a 175-basis-point shift in rate expectations, yet the S&P 500 remains near its highs.
The note links that swing to the surge in energy prices. Diesel prices are up more than 80% from their January 2026 low, while Brent crude has reached $106 a barrel. Inflation has doubled, the Fed keeps tightening and the U.S. fiscal deficit is nearing $2 trillion. Borrowing costs have moved sharply higher as a result.
Most S&P 500 stocks are still far from their own highs
Kobeissi says the answer lies in the index’s internal structure. While the headline benchmark is near a record, the vast majority of its constituents are nowhere close to their individual peaks.
The report says 84% of S&P 500 stocks are currently down at least 10% from all-time highs. Real estate leads that list, with 97% of stocks in the sector down at least 10%. Materials follow at 96%, utilities at 94% and consumer discretionary at 92%.
It also says 59% of S&P 500 components are down at least 20% from their highs, 41% are down more than 30%, and 17% have fallen more than 50%.
Ten stocks drove 70% of the rally from the March 30 low
From March 30, the S&P 500 has gained 23%. Kobeissi says 70% of that advance came from just 10 stocks, which together contributed 16 percentage points. The other 490 names contributed only 30% of the rise, or 7 percentage points.
NVIDIA (NVDA) made the largest contribution, accounting for 13% of the benchmark’s gain, equal to 3 percentage points. Micron Technology (MU), Apple (AAPL) and Microsoft (MSFT) each contributed 9%, or 2 percentage points apiece. Advanced Micro Devices (AMD) and Alphabet (GOOGL) contributed 8% and 7%, respectively.
That concentration leads Kobeissi to a broader point: most stocks inside the S&P 500 are effectively still in a bear market, and the firm does not see that as a problem for the index at this stage.
Kobeissi says the index could have been above 9,000 without the war
The note argues that the S&P 500 might already be above 9,000 if not for the Iran war. Its reasoning is that the index has stayed within about 2% of a record high even with inflation near 4%, rising gasoline prices and a tightening Fed.
Kobeissi then frames the counterfactual directly: if the war ends, oil falls and the Fed returns to rate cuts, the upside could be much larger than current levels imply.
Earnings and valuation are central to the bullish case
The report says earnings growth during the past seven months of war has been extraordinary. In the second quarter of 2026, blended earnings growth for the S&P 500 reached 52%, the strongest reading since the second quarter of 2021, when the global economy was reopening from historic lockdowns and the U.S. government had rolled out $4 trillion in stimulus.
Kobeissi argues that this matters because earnings growth under an energy crisis and Fed tightening has matched the kind of pace previously seen during a reopening boom backed by trillions of dollars in stimulus. In its view, the AI outlook is stronger than many appreciate, and earnings growth is enough to support that outlook even after inflation has stayed above 2% for 67 straight months.
NVIDIA is one of the examples highlighted in the report. Over the last 12 months, its stock price rose 21%, but its price-to-earnings ratio fell 46%. Its forward P/E is now about 24x, versus 22x for the S&P 500. Kobeissi notes that NVIDIA shares are up 900% over the last five years.
The note says many large-cap technology names show the same pattern, and those names are the ones holding up the broader market. It also says the forward P/E ratios of the S&P 500 and the S&P 500 information technology sector are now nearly identical, even though tech has historically traded at a premium to the broader index.
From Kobeissi’s perspective, that means the mega-cap tech stocks driving the market higher are trading with a meaningful discount embedded in their valuations, even if their share prices are at or near records. Without the macro pressure of the past seven months, the firm says, those stocks would likely be trading higher.
A small improvement in breadth could add buying pressure
Kobeissi says the case becomes stronger when more than 80% of the index is already down over 10% from all-time highs. Even a modest improvement in market breadth, meaning a larger number of stocks joining the advance, could quickly increase buying pressure. Even without that shift, the large-cap technology stocks that have driven most of the move still look relatively cheap compared with the broader S&P 500, according to the note.
That is why the firm argues that concentration is a positive for the index right now rather than a structural flaw.
March 30 was described as a buying opportunity
The note also looks back at the March 30 low. When the S&P 500 fell below 6,400, Kobeissi says it issued a strong buy signal on the index and on equities more broadly. In an earlier article, it argued that the bond market was one of the core reasons behind its bullish view, and that the selloff in technology shares dragging the market lower looked irrational.
The market then staged what the report calls a V-shaped rebound. Kobeissi raised its S&P 500 target to 7,800 and said the Trump administration would intervene in the bond market. The note now says the administration is indeed trying to intervene, though the effort has not worked yet, and that further intervention is unavoidable.
Persistent inflation is pushing investors toward assets
Beyond the discount inside equities, Kobeissi says long-running inflation is increasing demand for asset ownership. U.S. CPI inflation has remained above the Fed’s 2% target for 67 consecutive months. The last time it was below 2% was January 2021, when the global economy was still under lockdown conditions.
During that period, the purchasing power of the U.S. dollar fell by 22.5%. Put differently, goods and services that cost $100 in 2021 now cost $129, according to the report. Kobeissi says that dynamic gives investors a longer-term reason to raise, not reduce, exposure to stocks and real assets.
If the Iran conflict ends and the global energy crisis eases, the note says a chain reaction could follow: lower energy prices, softer inflation expectations, a more dovish Fed stance, the removal of the discount in technology shares and broader participation in the rally. At the same time, Kobeissi says the AI revolution is still accelerating, and many large tech stocks have become more attractive on forward earnings metrics even after their share prices rose.
Its conclusion: a bear market inside a bull market
Kobeissi’s final view is that the S&P 500 is in what it calls a bear market inside a bull market.
The note says the index is now in the fifth year of its bull market, yet significant discounting still exists beneath the surface. Kobeissi describes that as an invisible bear market that is suppressing valuations for some of the world’s largest and fastest-growing companies. If conditions turn, it says, the S&P 500 could see a sharp move higher, with 2027 shaping up as a year full of major variables.