S&P 500 and Nasdaq close at record highs as oil prices drop

• AI-related earnings are a crucial buffer for S&P 500 EPS, driving market strength despite less rosy conditions in other sectors.
• Current market cap-weighted P/E (around 25x) is below last year's highs (28x), indicating room for further valuation expansion.
• Defensive sectors like consumer discretionary and utilities face challenges or expensive valuations, while energy and materials have seen uplift since the 'war' began.
• Investors are 'cranky' due to fatigue and conflicting messages from geopolitical concerns versus company optimism, but recession worries are not widespread.
• RBC's 12-month S&P 500 price target is 7,750, with 2026 earnings looking okay but 2027 potentially facing downward adjustments.

The market is reaching record highs, primarily driven by strong AI-related earnings, which are providing a significant buffer against broader economic and geopolitical concerns. While investor sentiment is described as 'cranky' due to various worries, valuations are not yet considered overheated, suggesting further upside potential for the S&P 500, with a 12-month target of 7,750.