Stocks Rallied After the US–Iran Ceasefire. Is Your Portfolio Positioned for the Volatility?

Key Takeaways

• A barbell-shaped portfolio that’s balanced between high-quality, wide-moat value stocks and growth stocks tied to technology and artificial intelligence may help investors benefit from periods of high volatility.
• Growth stocks are expected to outperform to the upside during rapid rallies, whereas value will benefit during swift downturns.
• Large-cap stocks are expected to rally first, with small caps following.
• The technology, communications, and consumer cyclical sectors are expected to outperform, while consumer defensive, healthcare, and utilities may lag.
• Watch front-month oil futures as markets assess whether the US–Iran truce holds.
• More volatility is yet to come with risks to production, shipping, inflation, consumer behavior, and 2026 growth.

During a webinar earlier today, Morningstar Chief US Market Strategist Dave Sekera commented on the US-Iran ceasefire and his expectations for the market.

Stocks Rally After US-Iran Ceasefire

Susan Dziubinski: Dave, I want to ask you a few questions after the US and Iran ceasefire that was announced last night. At the start of 2026, in this webinar, you suggested that investors maintain a barbell portfolio to take advantage of volatility in 2026, balancing on one end those high-quality value stocks, including energy stocks, with high-growth tech and AI stocks on the other side. And then during the past couple of weeks on our weekly podcast, The Morning Filter, you’ve been suggesting that investors take some profits in value and energy stocks and invest those proceeds in undervalued tech and AI stocks. So, Dave, given that as of right now, which is noon on April 8, US stocks are rallying and oil prices are falling. How are you thinking about that barbell structure today?

Let the Barbell-Shaped Portfolio Work

Dave Sekera: I think right now is an excellent time to do nothing. Right now is a great time to let that barbell strategy work for you. As you mentioned the past couple of weeks, we were recommending taking profits, not necessarily to sell your entire position, but at least lock in some of those gains on value stocks and specifically energy stocks. As you noted, we had been recommending energy stocks throughout all of 2025. They were one of the most undervalued sectors last year, paid very good dividend yields. And we also noted several times that they actually would provide a good natural hedge in your portfolio, just in case inflation were to return or for any other geopolitical issues. Now, I certainly didn’t have on my radar the Iran conflict this year when I was thinking about that, but there were certainly enough other hot spots in the world to warrant that caution.

As much as oil has fallen, hopefully you’ve taken those profits and put them into some of those other undervalued sectors, specifically growth stocks, which have really taken the brunt of the selloff thus far this year, and even more specifically into technology stocks, and more specifically than that, a lot of those AI stocks, which have really gotten hit hard. That’s where I see the most upside here today in growth, specifically the technology sector and a lot of those AI stocks. So, let that barbell-shaped portfolio work for you. I think you’re going to see the upside there. And for the downside, you’re going to see value lag, probably not necessarily sell off, but certainly lag to the upside. And I think energy will continue to sell off as long as oil prices continue to keep falling from here.

Large Caps to Rally First, Followed by Small Caps

Thinking about it by capitalization, small caps, when I last checked, were slightly outperforming large caps, and small caps will be the most undervalued part of the marketplace, but I think the large caps probably rally the most over the next couple of weeks. And then I think you’ll see the small caps follow up thereafter.

Sector Outlook 2026

Looking at our sector outlooks, the ones that have been hit the hardest are also the ones that we think are the most undervalued today, specifically the technology sector, the communications sector, and the consumer cyclical sector. Those are outperforming this morning. We still think that each of those has much further to run to the upside. And then you’re going to see those less economically sensitive sectors, the defensive sectors—consumer defensive, healthcare, and utilities—will lag the upside in some cases, like consumer defensive and utilities, based on their valuations. I actually wouldn’t be surprised to see those fall here in the short term.

Ain’t Over Till It’s Over

Now, what should we be thinking about next? Well, like anything else, it ain’t over until it’s over. The questions for investors right now are, will this two-week truth hold, and could we see any kind of reignition in the conflict over the course of these next two weeks? Are we going to get to any kind of negotiated agreement by that deadline two weeks from now? Hopefully, we will get to some sort of permanent resolution either in these next two weeks or some sort of agreement that can get us there for the long term.

Watch Front-Month Oil Futures

We’ve talked about this on The Morning Filter a number of times over the past month, just how much I’m keeping a close eye on the oil futures contracts, specifically the entire strip, looking at the front month, the second month, but even looking at some of those longer prices as well. The May 2026 contract is $96 and change. The last trade date for that contract is April 19. So, that’s going to be inside the two-week true state, which I believe will be April 21. But at $96, as much as that’s fallen today, that’s still up 47% from where oil was trading in that contract before the conflict.

Taking a look at the second-month contract, the June 2026, the last trade date there is May 19, so that’s a week before the Memorial Day weekend, which of course is a big driving weekend here in the US. That contract, last I saw, was about $88. That’s still up about 32% from where it was preconflict. And then lastly, looking further out, the oil’s future strip, the December 2026 contract, last I saw it was about $72 and a half. That’s still up 15% from where it was preconflict. So, I still think a lot of that still has yet to roll through.

More Volatility Yet to Come

I still think that there’s going to be a lot of volatility over the course of this year, not only the next couple of weeks and months, but really throughout the year. And we’ll talk about what some of those key risks are going to be. But for now, I expect over the months ahead, maybe even the next quarter ahead, there’s a lot of production and shipping disruptions that are going to work through the global economy and the US economy. There have been some of the commodities-oriented chemical companies in Asia, specifically, that have shut down production. A lot of those chemicals go into plastics and a lot of other products out there.

So I think those disruptions will end up having some issues before they get back online to where they need to be. No matter how you measure inflation, I expect that inflation metrics are going to be going up in the short term as those high oil prices work through the system. And not just in the gasoline and diesel and the cost of shipping, but we’ve also seen an increase in soybeans, wheat, corn, a lot of those agricultural products that require large amounts of fertilizer, which comes mostly from natural gas. Natural gas has also been shut off to some degree. I know fertilizer prices have been going up as well. We’ll see how much consumer retrenchment there is. I know when I talked to Erin [Lash], she’s the sector director for our consumer team, she didn’t really think there would be too much change in consumer habits unless oil prices remain high through the Memorial Day weekend and into the summer. So, hopefully, we won’t see too much pullback in the consumer sector over the second half of the year. And, of course, we still have all of the risks that we talked about at the beginning of 2026 that I still think could work their way through the system over the course of this year.

Keep up with the latest research from co-hosts Susan Dziubinski and David Sekera on Morningstar.com.