Morning Call Sheet: Markets rally as AI and inflation collide

• Hopes for a US-Iran peace deal are seen as a potential source of relief for global inflation, particularly at the pump, though supply chain normalization is expected to take time.
• The options market shows 'overwhelmingly exuberant' sentiment with historical levels of call buying and little downside hedging, indicating a 'fear of missing out' (FOMO) on further upside.
• The market rally is broad-based, with the S&P 500 Equal-Weight and Dow Industrials hitting all-time highs, not just tech. Cyclical sectors like industrials and financials are expected to perform well in the second half.
• Inflation remains a concern, with sticky services inflation and commodity prices expected to maintain a bid, complicating the Fed's efforts and keeping long-term interest rates elevated. Consumer stress is evident from retail earnings comments.

The discussion covers hopes for a US-Iran peace deal and its potential impact on oil prices, alongside the broader market rally driven by AI momentum. While some express caution regarding inflation and consumer stress, the overall sentiment is bullish, with markets showing broad-based gains and options traders exhibiting exuberance.