"Animal spirits" have returned in a more aggressive stance: retail investors are ignoring the Middle East's gunpowder and are sweeping the US stock market with their strongest offensive of 2020.

The conflict in Iran once caused oil prices to soar to record highs and triggered intense fluctuations in global financial assets. However, for investors, all of this seems like a distant memory - even though the conflict has not completely resolved. Now, major global stock indices are back at historical highs, with tech giants once again controlling market direction. A company once known for its sneakers saw its stock price skyrocket 582% in a single day due to its involvement in artificial intelligence (AI). More crucially, retail investors are returning to the market in large numbers. Stocks favored by individual investors, compared to institutions' preferred assets, are experiencing their strongest month of performance since November 2020. Dave Mazza, CEO of Roundhill Investments, commented, "The animal spirits have not only returned, but they have returned in even more ferocious fashion." During the early stages of the conflict, the surge in oil prices temporarily disrupted the instinctive "buying on dips" behavior of retail investors, exacerbating the market sell-off. Mazza noted, "Once a ceasefire agreement was reached, the focus quickly shifted back to the core narrative of AI and tech innovation, and the stocks favored by retail investors, especially those with high volatility, began leading a market rebound from the bottom." On Wednesday, the S&P 500 index broke through the 7000-point mark, reaching its first historic high since the end of January. Since March 30, the index has risen by 11%, successfully reversing its previous trend towards a technical correction. Beneath the surface, individual investors are showing signs of enthusiasm once again. A basket index tracking the most popular stocks among retail investors according to Goldman Sachs Group, Inc. has risen by 22% since the end of March. Quantum computing concept stocks, known for their parabolic fluctuations, such as IonQ Inc. (IONQ.US), D-Wave Quantum Inc. (QBTS.US), and Rigetti Computing Inc. (RGTI.US) have all recorded gains of over 40% this month. The Roundhill Meme Stock ETF (MEME.US), traded under the code "MEME," has soared by 51% since March 31. The shift in market sentiment coincides with the US and Iran considering extending the ceasefire agreement by two weeks, as investors' expectations for the conflict's resolution continue to rise. Despite the heavy damage to energy infrastructure in the Persian Gulf and the closure of the strategic waterway of the Strait of Hormuz, major stock exchanges around the world have largely erased the losses since the outbreak of the conflict. However, the aftermath of this conflict remains uncertain, with the tension between escalating optimism and unresolved macroeconomic risks still present. For example, oil prices remain high above $90 per barrel, putting pressure on inflation expectations and monetary policy prospects - especially in light of the latest monthly consumer price index recording the largest increase since 2022. Matt Maley, Chief Market Strategist at Miller Tabak + Co., said, "The various problems facing the Middle East region, as well as risks in areas like the private credit market, have not disappeared. Therefore, the current market trend is indeed worrying." But at least for now, the market's positive sentiment remains dominant. There is strong demand for options contracts betting on short-term stock market gains. Retail buyers, a key support for the stock market, are expected to be even more significant after the tax filing deadline on April 15 - investors anticipate that this year's tax refunds will be higher than usual due to the Trump administration's tax plan. Alexander Altmann, Director of Global Stock Strategy at Barclays, pointed out that the bank's Retail Money Flow Excess Monitor has rebounded significantly since hitting a low point earlier this month, providing daily fund flows with support since April 8. In a report to clients on Thursday, he wrote, "You can call it the return of 'animal spirits' - or, given the backdrop of the conflict in Iran, you may not view it that way. But regardless, retail fund flows are undoubtedly an important component of the broader dynamics in the US stock market that cannot be ignored."