Markets rose ahead of a planned meeting between Donald Trump and Xi Jinping, with traders watching business leaders linked to the trip. NVIDIA shares climbed after chief executive Jensen Huang joined Trump’s delegation, while Micron, Qualcomm, Tesla and Boeing also gained.
The S&P 500 and Nasdaq reached new record highs despite hotter data and tighter financial conditions. Producer prices rose more than expected, bond yields increased, the dollar strengthened, and oil remained volatile.
Moves were concentrated in a narrow group of large AI and tech-linked shares as other areas lagged. Real economy stocks and cyclicals fell, while gold and bitcoin dropped as liquidity shifted towards equities.
Options activity continued to amplify momentum through heavy call buying and dealer hedging that can push prices higher. Expectations implied only modest market movement around the Trump–Xi meeting.
Attention remained on US export limits affecting NVIDIA’s Blackwell chips, with H200 sales reopening earlier this year. Trade talks were expected to cover tariffs, technology controls, critical minerals, aerospace trade, agriculture, and the Iran conflict.
Oil eased slightly before the summit after several strong sessions, alongside focus on a global diesel shortage and its effects on freight, manufacturing, food distribution and inflation. China’s economic ties with Iran and its interest in stable trade routes and energy flows were presented as factors shaping outcomes.
We remember looking back at the market of late 2025, when the AI rally shrugged off every macro warning sign ahead of the Trump-Xi summit. Today, in May 2026, the market’s psychology feels eerily similar, with the VIX hovering near a historically low 13, suggesting extreme complacency. This makes buying protective put options on major indices like the SPX or NDX relatively inexpensive, serving as a cheap insurance policy against a sudden shock.
The market’s leadership has become even narrower than it was back then, when we watched names like NVIDIA and Qualcomm lead the charge. The top five companies in the Nasdaq 100 now make up over 40% of the index’s total weight, creating a highly concentrated risk profile. Traders should consider using call spreads on these AI leaders to profit from further upside while defining their maximum risk if the narrow leadership suddenly falters.
Inflationary pressures, which the market ignored in 2025, have not disappeared but have become a persistent, low-grade fever for the economy. With the latest CPI figures still stubbornly above 3%, the “hotter under the collar” economic backdrop we saw then remains a serious threat to valuations. This suggests that any sign of economic slowing could hit cyclical stocks hard, making long-dated puts on industrial or transport ETFs a potential hedge against the AI narrative finally cracking.
The image of Jensen Huang joining the presidential delegation to China in 2025 taught us that geopolitical symbolism can matter more than economic data. That meeting ultimately led to a temporary thaw in AI chip exports, causing a massive rally, and we must watch for similar policy signals today. Any upcoming trade talk or technology policy announcement represents a volatility event that can be played with straddles or strangles on key semiconductor ETFs like the SOXX.
The options market continues to act as a powerful engine for momentum, just as it did with the gamma squeezes we observed in 2025. Massive call buying activity forces dealers to buy the underlying stocks to hedge, creating a self-reinforcing loop that pushes prices higher. While this makes short-dated call options on popular tech names attractive for riding momentum, it also creates the risk of a violent unwind if sentiment shifts.
We saw crude oil swing wildly in late 2025, driven by fears of shortages and geopolitical friction. With WTI crude now trading in a tight range around $78 a barrel, the energy market seems quiet, but the underlying supply constraints and geopolitical tensions in the Middle East have not been resolved. Using options on energy stocks or oil ETFs like USO can provide a valuable hedge against a sudden flare-up that would catch the complacent equity market off guard.
Ultimately, the market is still trading the idea of resilience, believing the AI supercycle can absorb any shock, just as it did in 2025. The dominant strategy has been to stay with the trend, using options to participate in the upside of the AI story. However, with the market structure so dependent on a few names and a calm macro environment, traders should be actively hedging the “hairline fractures” that are forming just beneath the surface.
