The S&P 500 has now strung together 12 consecutive days of gains. The 11% surge off its March 30 low lands in the 99th percentile for 12-day returns — a statistical rarity that demands explanation, not celebration. Louis-Vincent Gave, CEO of Gavekal Research, isn't celebrating. He's asking a harder question: What, exactly, does the market think it knows?
The backdrop is jarring. The Iran war began February 27. Since that date, 30-year Treasury yields have climbed 25 basis points, WTI crude has risen roughly US$25 a barrel, gasoline prices have jumped $1 a gallon, and crack spreads have soared. The Strait of Hormuz has been closed for six weeks. And yet the S&P 500 sits above its pre-war level — while ExxonMobil, the largest U.S. oil company, is down by roughly the same percentage the index is up. Gave doesn't sugarcoat the dissonance: "We are very much scratching our heads as to why equity markets seem so sanguine in the face of what appear to be meaningful supply chain dislocations across key inputs, whether oil, natural gas, fertilizer, sulfuric acid or urea."
He offers five possible explanations — and a conclusion that should keep advisors alert.
Option 1: Bear Market Physics
The most unsettling possibility is also the simplest. Gave notes that "the strongest equity market rebounds tend to occur in bear markets." He walks through the 2007 precedent: Bear Stearns bailouts in June, credit markets freezing in August, the S&P shedding 10%... then recovering to new highs. The mortgage crisis was already visible and worsening — yet the market bounced repeatedly, right up until the wheels came completely off in 2008. "Embracing option 1 essentially involves saying that recent market signals should be ignored. To be clear, sometimes that is the right thing to do. But it is seldom comfortable."
Option 2: The AI Override
The rally has been dominated by semiconductors. Since the March 30 low, the PHLX Semiconductor Index is up 25%. Taiwan Semiconductor, Samsung, and SK Hynix have surged to the point where Taiwan's market capitalization now exceeds the UK's. Semiconductor stocks now represent 16% of the S&P 500 — compared to 3.4% for energy. Gave draws a pointed historical parallel: "Between 2006 and 2008, energy's share of the S&P 500 rose from 10% to 16%... Between 2024 and 2026, semiconductor stocks have moved from 10% to 16% of the S&P 500. That is a very sharp increase over a short period of time, and the energy precedent is not particularly encouraging."
The internal divergence is stark. Software stocks are down 21.5% year-to-date while semiconductors are up 31%. If Microsoft and Oracle roll over, will the hyperscaler capex that funds chip demand follow? And with planned Middle East data centers — built around cheap electricity — now geopolitically impossible, where does that infrastructure investment go?
Option 3: China as Oil Market Moderator
Gave argues that China's position in global energy markets has inverted dramatically from 2008, when the Gansu-Sichuan earthquake disrupted coal shipments ahead of the Beijing Olympics, forcing factories onto diesel generators and helping propel oil to $150/bbl. Today, "rather than being a forced buyer of energy, China is sitting on record inventories and benefits from a much more advanced electricity grid." The theory: markets are assuming China won't bid oil to economy-wrecking levels, and that alternative supply routes — Russia ramping production, Saudi Arabia diverting through the Red Sea, Iraq through Turkey — can absorb a prolonged Hormuz closure.
But Gave flags a critical test approaching. Ships that departed the Gulf before February 27 have now been unloaded. New supply gaps will become visible within weeks. "The coming weeks will therefore be the real test of whether financial markets have been too complacent about supply chain dislocations."
Option 4: The Energy Policy Reset
The Ukraine and Iran wars together have forced a rethink of energy security globally. Gave draws an analogy to France's post-1973 embrace of nuclear power — and suggests markets may be looking past near-term pain toward a future of smarter, more diversified energy infrastructure. The political consequence: relaxed tariffs on Chinese solar, EVs, batteries, and turbines. "Lower tariffs on Chinese goods would be a positive deflationary shock, while inventory rebuilding would represent a negative inflationary shock." Markets may be discounting a painful transition but pricing in the destination.
Option 5: The Dollar's Eroding Foundation
Foreign investors hold roughly US$9.5 trillion in U.S. Treasuries and US$3.5 trillion in U.S. corporate debt. Gave questions whether the premise underpinning that allocation — U.S. naval supremacy as the ultimate backstop — still holds in a world of asymmetric warfare and Chinese drone economics. "Rather than accumulating US dollars, does it now make more sense to stockpile commodities?" If so, the equity rally may simply reflect capital rotating out of U.S. fixed income into real assets. The counterargument: gold and ExxonMobil should be leading. They're not. AI names are.
The Conclusion
Gave is unambiguous about where he stands. "The other, of which we are fully paid-up members, holds that rising energy costs will at some point puncture the AI narrative, just as they did during the 2008 equity market bubble." His bearish conviction rests on the assumption that supply chain dislocations are real, consequential, and about to become undeniable in the data. If he's wrong — if the wall of worry gets climbed successfully — he acknowledges it. But the five-option framework itself is the point: the market is giving one answer, and Gave isn't sure it's asking the right question.
Key Takeaways for Advisors
- The AI concentration risk in equity benchmarks is now structural, not incidental — semiconductors at 16% of the S&P 500 echo energy's 2008 peak, with consequences worth stress-testing in client portfolios.
- The real supply chain test is imminent. Pre-war Gulf shipments have cleared. The next few weeks will reveal whether the market's complacency was prescient or premature.
- Energy policy recalibration globally is a multi-year tailwind for infrastructure-adjacent strategies — but the short-term transition costs are inflationary and should be reflected in fixed income positioning.
- The U.S. dollar's reserve currency premium faces structural headwinds. Clients overweight U.S. fixed income may need a framework for thinking about real asset rebalancing.
- Gave's core warning is historical pattern recognition: the most violent bear market rallies occur inside bear markets. Climbing the wall of worry and being in a relief rally look identical until they don't.
Footnotes:
1 "What is the Market Thinking?" Evergreen Gavekal, 23 April, 2026
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