U.S. Futures & World Markets

Stocks are flat premarket, even with oil above $80 per barrel. Investors have been conditioned to buy the dip in stocks during these oil spikes, which is helping tech stocks hang in there for now. Consumer stocks are under pressure as higher energy prices raise concerns about the US consumer. Toss in CPI data and Warsh's testimony today, and we have a lot to chew on.

The market continues to price in that current hostilities won't linger long-term. President Trump's speech Thursday will go a long way toward reinforcing — or completely changing — that view. It's difficult to predict the next geopolitical headline, especially when dealing with irrational actors.

There's a good chart below highlighting volatility in semiconductor stocks. What's interesting is that the VIX sits well below its long-run average (at 17.52, +2%, as I'm typing this), yet we're seeing massive moves beneath the surface. Consumer Discretionary, energy, and biotech have also had wild swings. On the surface, it looks like the S&P 500 is calmly grinding higher. Underneath, there's a lot more turbulence than the headline indexes suggest — and these sector rotations often tell you more about where the market is headed than the S&P itself.

S&P Futures vs. Fair Value: -6.00  |  10-Year Yield: 4.62%

CORE Headlines

Charts & Data

126 years of market history: stocks and earnings move together with a 98% correlation. Peter Mallouk: "The short run is all about noise. The long run is all about profits." The most durable investment framework there is.

Allocations vs. sentiment — investors are basically all-in while saying they're only mildly bullish. Callum Thomas: "Actions speak louder than words here. Portfolio allocations to stocks are hovering around record highs while surveyed sentiment is only mildly bullish."

Consolidated equity positioning at 53rd percentile — modestly overweight, with crowding limited and upside still intact. Deutsche Bank via Daily Chartbook: the increase is coming primarily from systematic strategies (71st percentile) while discretionary investors remain at the 42nd percentile.

Semis have averaged a daily change of +/-3.36% over the last 50 trading days. Bespoke Investment Research: "The only other times we've seen this much daily vol was in the lead up to the Dot Com peak, the Financial Crisis in late 2008, and in early 2020 during the COVID Crash." Historically extreme volatility.

Software stocks have massively underperformed semiconductor names this year. Torsten Slok, Apollo: the divergence is stark and historically unusual — setting up a potential catch-up trade.

Q2 was the first time since at least 1990 that only one of the major S&P 500 sectors outperformed the index. It was Tech. Bespoke via Daily Chartbook: the most extreme concentration of performance on record.

Tech is cheap, Nvidia is cheap, and tech insiders are buying aggressively. Ryan Detrick: a three-part thesis for why the current pullback may be an opportunity rather than a warning sign.

S&P 400 MidCap and S&P 600 SmallCap forward earnings climbing to new record highs alongside S&P 500. Yardeni Research via Daily Chartbook: the earnings expansion isn't just a large-cap story — mid and small caps are participating.

Leveraged ETF long vs. short ratio now in warning territory. Callum Thomas: worth monitoring as a sentiment indicator — extreme leverage in a direction tends to precede sharp reversals.

Retail investors' net single-stock buying has fallen to a new post-COVID low. Vanda Research via Daily Chartbook: the most aggressive retail buyers are stepping back — a notable shift.

Markets turned the most hawkish right as the latest inflation impulse was already rolling over. Duality Research via Daily Chartbook: a classic example of the market pricing peak fear precisely when the underlying data is turning favorable.

US M2 just saw its largest 1-month jump since the COVID QE surge — roughly +$248B. HBM Strategies via Daily Chartbook: "Historically, these liquidity spikes have been supportive for the S&P 500."

Interesting Reads

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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.