Things are lining up in favor of the market bulls. How to proceed from here

Stock market bulls are well fed to start a new trading week. Oil fell on Monday on news of a memorandum of understanding that would end the US-Iran war and reopen the vital Strait of Hormuz. This improves the inflation outlook and causes bond yields to fall; It coincides with Federal Reserve Governor Kevin Warsh's first policy meeting leading the central bank this week. Additionally, SpaceX's massive initial public offering went well, calming concerns that the new stock offering would crash the entire market. Provided that Hormuz is officially reopened to oil exports and remains open, the ripple effects could set us up for a very good period in the back half of the year. The overall stock rally, led by the Nasdaq with a 3% gain on Monday, is being driven by optimism that it will come true. We'll have to see the sequel eventually. For now, this view on Monday is exactly why we argue that exiting the market is too risky, despite all the doom and gloom we hear on a daily basis. If the US and Iran sign a permanent peace agreement, it's hard not to be optimistic about the stock market. Of course, valuation is a bit high, with the S&P 500 trading at around 21 times forward earnings, but crude oil prices are expected to fall if oil exports via the Strait of Hormuz are about to resume. Of course, they won't immediately return to where they were before the Feb. 28 conflict began (mid-to-upper $60 a barrel for WTI crude) because it takes some time to restart a critical global oil supply line. But for a market that is more concerned about the direction of commodity prices, the update is certainly positive, given that it touches on the future course of inflation and therefore interest rates. @CL.1 YTD mountain WTI crude oil year-to-date performance. Warsh's job this week will certainly get a little easier, as he hosts his first Federal Open Markets Committee meeting press conference on Wednesday afternoon. Falling oil prices due to easing geopolitical tensions should ensure there is no need for him to sound hawkish. Instead, he is in a position to emphasize that the Fed's policy stance is appropriate for now and argue that lower inflation is on the way. CME FedWatch Tool is still pricing in at least one rate hike in 2026. But these odds will follow oil and bond yields, both of which are set in favor of the bulls. Of course, if bond yields fall and stay low — especially at the long end of the curve (think 10-year or longer-maturity Treasuries) — then that could help catalyze demand in the housing market. Interest rates are an important factor in the home-buying process because of their impact on monthly mortgage payments, as Lennar CEO emphasized on the homebuilder's earnings call on Friday. But the price of gas at the pump and the cost of electricity needed to heat or cool the home also weigh on consumers' minds when making major purchasing decisions. Housing tends to gain weight economically, so any increase here certainly bodes well for a bull market. That's why club name Home Depot rebounded on Monday. Considering the potential benefits, one could argue that the stock's advance above 1.5% looks relatively muted. The upside is that we've been fooled before about a potential rebound in the housing market, so it's understandable that Home Depot buyers aren't out in full force until we see a real shift in rate expectations. SpaceX's successful launch on Friday is at its peak. Much of the selling pressure to raise funds for SpaceX positions is likely behind us at this point — and while we've had a few rough days in the market over the past week and a half, especially for some hot AI trade names, the bull market hasn't collapsed. We're not completely out of control with market risks, so we can't throw all caution to the wind and buy everything. On the geopolitical side, the United States and Iran agreed to extend the ceasefire for only 60 days while they work on a formal peace agreement. Tricky issues regarding Hormuz traffic and Iran's nuclear ambitions need to be resolved. Even if oil starts flowing through Hormuz again, we should expect a risk premium to build up in the waterway. Moreover, peace in the Middle East depends on what happens between Israel and Hezbollah in Lebanon; So in reality, the end of the war may depend on much more than Washington and Tehran. A much larger supply of stock may also come to the market. For starters, Alphabet's lucrative equity offering won't launch until the third quarter, and another megacap tech company could follow its lead and sell equity to fund more AI capital spending. And of course, we're still waiting to see when Anthropic and OpenAI plan to launch their IPO roadshows. Both AI startups secretly filed IPO documents with US regulators. However, given how well the market performed in its first real test of a major new stock offering — likely the second test, given the initial phase of the Alphabet stock sale — investors should feel a little better about the market's ability to absorb the supply, especially if the geopolitical environment remains calm and corporate fundamentals remain resilient. There is a new system of attracting capital to the market. Not only have some segments of the AI trade recently experienced a rapid and healthy correction, but the continued decline in bond yields will increase investors' appetite for the worse-off parts of the market. Beyond housing, this also includes financials tied to a healthy consumer, like Capital One, the Club name we bought more of on Monday morning, and cyclicals like the aforementioned Home Depot, and names like Boeing, DuPont and Honeywell, which are more correlated with GDP growth. Emerging markets with broad-based participation tend to be viewed as more resilient, meaning there are more legs to stand on, and therefore more attractive to investors. Another thing that increases confidence on Wall Street is the making of big deals. On Monday, we have Fox Corp. acquiring Roku. In Summary For now, we have received a new commitment from the United States and Iran to work towards peace, and investors have reason to celebrate. The odds that the bull market will continue have certainly strengthened, especially considering that tensions in the Middle East worsened a week ago. This provides investors with an excellent opportunity to review their holdings with a clear head. If there's an opportunity to add to a beaten-up name that seems to have hit rock bottom, take it. That's what we did at Capital One. Don't forget to also consider which names could disrupt Monday's optimism and present an opportunity to capture some gains. Many things are going well in the market, but no one is harmed by making a profit. (Jim Cramer's Charitable Trust is long COF, HD, DD, HON, BA. See here for a full list of stocks.) When you subscribe to the CNBC Investment Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trading alert before buying or selling a stock in his charitable foundation's portfolio. If Jim talked about a stock on CNBC TV, he waits 72 hours after issuing the trading alert before executing the trade. THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, TOGETHER WITH THE DISCLAIMERS. NO CIVIL OBLIGATIONS OR DUTIES EXIST OR SHALL BE RESULTING FROM YOUR RECEIVING ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. NO SPECIFIC RESULT OR PROFIT CAN BE GUARANTEED.