What Changed Overnight

The 60-day ceasefire memorandum of understanding between the U.S. and Iran is intact — but that's about all you can say for it.

Both sides launched fresh strikes after the MOU was signed, according to CNBC. President Trump told reporters he's "not in a hurry" to close a deal and reiterated Iran must agree to never have a nuclear weapon. He also demanded the Strait of Hormuz be "immediately open."

Those aren't the words of a deal on the verge of announcement.

Oil Bounced Hard

Brent crude climbed 1.5% to $92.52 a barrel on Monday. West Texas Intermediate rose 1.8% to $88.83. Both reversed Friday's post-MOU dip, according to CNBC.

WTI just posted its steepest monthly decline since April 2025, dropping nearly 17% in May. If talks collapse entirely, that floor will face real pressure.

Adam Crisafulli, founder of Vital Knowledge, said it plainly in a client note: "Trump clearly doesn't want to escalate and is looking for an off-ramp. Some type of a pact is very likely." He also flagged that an actual announcement will "probably trigger a 'sell the news' reaction" for the S&P 500.

John Bolton, quoted by Bloomberg, was blunter: "We'll be right back where we started."

Stocks Don't Care — Yet

S&P 500 futures rose 0.3% to open June. Nasdaq 100 futures were up 0.57%. Dow futures added 58 points. According to Bloomberg, this extends a run of 11 record closes for the S&P 500 in May alone.

May final numbers, per CNBC: Nasdaq Composite +8% for the month. S&P 500 +5%. Dow +3%.

One thing is turbocharged this rally: AI.

Hedge Funds Are ALL IN

Goldman Sachs' prime brokerage desk reported Monday that hedge funds purchased U.S. equities at the fastest pace in six months last week, according to Bloomberg's Jan-Patrick Barnert. The buying was a combination of long buys and short covering across index and ETF products. Short positions in U.S.-listed ETFs dropped for a second consecutive week, falling 0.6%.

This is institutional money betting heavily that the AI trade has legs.

SoftBank Group surged 14% in Tokyo on Monday after announcing plans to invest 45 billion euros ($53 billion) over the next five years to build AI infrastructure in France, according to CNBC. That's a massive capital commitment — and it moved SoftBank past Toyota as Japan's most valuable company in a single session.

In South Korea, Samsung Electronics soared more than 10% to an all-time high, helping push the Kospi to a record closing high of +3.68%, per CNBC.

The AI trade is global now. Not just Silicon Valley.

The Story Mainstream Coverage Is Missing

April PCE inflation came in at 3.8% year-over-year — the highest since May 2023, up from 3.5% in March, according to T. Rowe Price citing Bureau of Economic Analysis data. Core PCE hit 3.3% annually, its hottest reading since November 2023.

The Fed's target is 2%.

Fed Governor Lisa Cook said she was prepared to raise rates if inflation keeps moving the wrong direction. Vice Chair Philip Jefferson said inflation risks remain "tilted to the upside."

Meanwhile, first-quarter GDP was revised down to 1.6% annualized from an initial estimate of 2.0%, per the BEA. Consumer spending and investment were both revised lower.

The economy is slowing while inflation reaccelerates. Wall Street is partying like it's 1999.

Fed Chair Jerome Powell added a different dimension Monday, warning that political pressure — a clear reference to Trump's ongoing attacks on Fed independence — will "harm public trust" in the central bank, according to CNBC. An independent Fed under pressure from the White House, fighting inflation it can't seem to tame, is not the backdrop you want when stocks are at all-time highs.

What This Actually Means

The market is betting four things happen simultaneously: the Iran deal gets done, oil stays low, AI keeps growing, and the Fed holds off.

If the Iran talks collapse, oil spikes. If the Fed has to hike because PCE keeps running hot, valuations get crushed. If AI spending doesn't translate into real earnings growth — and fast — the hedge funds buying at six-month highs are going to have a very bad autumn.

Crisafulli's "sell the news" warning on the Iran deal is a reminder that markets have already priced in outcomes that haven't happened yet.

Regular people with 401(k)s should enjoy the May gains. But 3.8% inflation eating into every paycheck while the Fed debates whether to raise rates again is the actual story — and it's getting almost no attention next to the AI euphoria.

The market is invulnerable — until it isn't.