U.S. Futures & World Markets

Happy Soul Train Friday! https://mcore.hopp.to/youtube364
And RIP Bonnie Tyler: https://mcore.hopp.to/youtube365

Stocks are mostly flat as we head into a quiet summer Friday. Today's main event is the highly anticipated trading debut of SK Hynix. The company raised a whopping $26.5 billion by selling 177.9 million shares at $149 per share. We're seeing some profit-taking in memory names (MU, SNDK) as traders free up cash for the shiny new toy.

One thing that hasn't gotten enough attention is how well-diversified portfolios have performed this year. AI has dominated the headlines, but you didn't have to own every semiconductor stock to make money. Here are some YTD performance figures: SPY +10.23%, IWM (small caps) +21.13%, QUAL (quality) +10%, RSP (S&P equal-weight) +11.45%, VEA (international developed) +13.22%, IBIT (Bitcoin) -27.88%, IGV (software) -11.17%, KWEB (China Internet) -22.23%. Diversification may not be exciting, but it beats letting it all ride on a Polymarket bet.

With the World Cup in full swing, BofA Global Research: "Only three rules to win the World Cup. Take your chances, don't make mistakes, and you need seven out of eleven players that refuse to lose. Bit like trading." I'd add one more: don't chase yesterday's winner.

S&P Futures vs. Fair Value: -9.00  |  10-Year Yield: 4.54%

CORE Headlines

Charts & Data

Of the 20 top S&P 500 performing stocks in H1 (nearly all tech), only two are up so far in Q3, and the average QTD decline is 17%. Bespoke Investment Research: the violent rotation out of last quarter's winners is in full force.

Only 135 of the S&P 500 constituents from 1996 are still in the index today. Peter Mallouk: "Capitalism moves fast." A reminder that the composition of the index you're investing in today will look very different in 30 years.

After 15 years, the relative price of S&P 500 "Old Era" stocks has finally broken above its downward trendline. Jim Paulsen via Daily Chartbook: "Does this breakout signal a change in leadership from New Era to Old Era stocks?" Worth watching as earnings season unfolds.

Non-residential investment, overwhelmingly driven by AI spending, is rising even as residential investment growth contracts. Bloomberg via Daily Chartbook: "If you think we're in a paradigm shift for semis demand, that divergence can continue. But if not, chip stocks are in for a rude awakening."

Over 63 trading days, crude oil plunged 38.5% — matched only eight prior times — yet 2- and 10-year Treasury yields posted their largest increases on record. @tpmrsignals via Daily Chartbook: "What is the bond market trying to tell us?"

Retail are selling almost as aggressively as they're buying, leaving aggregate net buying at its weakest level since 2020. Vanda Research via Daily Chartbook: a meaningful change in the retail bid that has been so dominant this year.

Goldman's hedge fund clients have sharply reduced Magnificent Seven gross and net exposures to three-year lows. Goldman Sachs via Daily Chartbook: the rotation out of the Lag7 shows up clearly in prime brokerage data.

Systematic L/S managers down 3.6% since June 22nd — worst drawdown since August 2025, driven by violent rotations and the unwinding of the momentum trade. Goldman Sachs via Daily Chartbook: quant pain is a feature of these rotation episodes.

Options traders hit peak fear this week. When the put-call ratio reached this extreme, S&P was higher 10 of 11 times 5 days later, with a median gain of 1.2%. @bluekurtic via Daily Chartbook: "Today, bulls are taking control back."

By Datatrek's sector correlation measure, bullishness is extremely high — history shows we shouldn't expect much near-term, and should be wary of any emerging macro shock. Datatrek Research: "The current level is comparable only to mid-2024 before the Nikkei correction."

The 20% move lower in momentum coincides exactly with where prior momentum sell-offs have gone. Goldman Sachs via Daily Chartbook: "The market is just getting to these levels more quickly than prior cycles."

There have already been 51 sessions this year in which SMH was either besting or trailing IGV by 10%+ over 10 sessions. From inception through start of this year, there were only 46 such prior instances. Sherwood via Daily Chartbook: the violence of these rotations is historically unprecedented.

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This content does not constitute legal, tax, accounting, or other professional expert advice. Everything published is believed to be reliable, but its accuracy or completeness is not assured. Past performance does not indicate future results. The opinions expressed herein are subject to change without notice and are solely those of the author as of the date indicated.