Just noticed something interesting unfolding in the markets this past week. As Middle East tensions started cooling down and Iran opened up the Strait of Hormuz, we saw a pretty sharp stocks rebound across the board. But here's what's got me thinking—Goldman Sachs is making a bold call that this rally can't actually sustain itself without the Fed changing course on rates.

Christian Mueller-Glissmann over at Goldman describes what we're seeing as a "fast and fierce recovery phase." Part of it is legit technical factors—hedge funds that had bailed out are now scrambling to rebuild positions. The S&P 500 is tracking toward a third straight week of 3% plus gains, which sounds great on paper. But Mueller-Glissmann's basically saying the stocks rebound we're watching right now is running on fumes without Fed support. He's pretty direct about it: the Fed needs to shift back toward cutting rates for this thing to keep going.

Here's where it gets complicated though. The Fed is genuinely stuck between a rock and a hard place. New York Fed President Williams just came out saying the Middle East conflict is actually starting to bite the U.S. economy—we're seeing price pressures creeping up and growth momentum slowing. Meanwhile, inflation's still being stubborn. Even Milan, who's usually the dove pushing for more cuts, has pumped the brakes. He went from expecting four cuts this year to now thinking three is more realistic because inflation's proving tougher to crack than expected.

So the Fed's caught between two fears: inflation staying elevated or the labor market cracking if this conflict drags on. The market's currently pricing in something like a 63% chance rates stay flat through 2026. The April 29 decision will be huge—most people expect no change, but any shift in Powell's language at the press conference could really move things.

Now here's the thing that's actually supporting the stocks rebound we're seeing right now—corporate earnings are holding up surprisingly well. JPMorgan and other big players are pointing out that even with all this geopolitical noise, companies are still delivering. Tom Lee from Fundstrat is basically saying we're entering a new bull phase led by tech and AI infrastructure plays. Citi just upgraded to overweight on U.S. stocks and is targeting 7,700 on the S&P 500 by year-end. BlackRock's also back to overweight, specifically highlighting how strong earnings are sustaining this move.

The narrative seems to be crystallizing around three things: corporate earnings staying resilient, a fresh wave of risk appetite flowing into tech and AI, and the market's belief that the Middle East situation won't turn into another 2022-style inflation spiral. If those pillars hold and tensions keep easing, the stocks rebound could have real legs. But it all hinges on whether the Fed eventually gives investors what Mueller-Glissmann says they need—some relief on rates. That April 29 meeting is going to be the real test.