Here are the headline prints:

Year-over-Year:

✅ *US JUNE CPI RISES 3.5% Y/Y; EST. +3.8%
✅ *US JUNE CORE CPI RISES 2.6% Y/Y; EST. +2.8%

Month-over-Month:

✅ *US JUNE CPI FALLS -0.4% M/M; EST. -0.1%
✅ *US JUNE CORE CPI FALLS -0.0% M/M; EST. +0.2%

For a complete breakdown of last month’s CPI,
download our US Inflation Dashboard.

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June CPI — Year-over-Year

Let’s start with our chart that shows the weight of the three main CPI categories and their respective sub-groups on the left. On the right, you can see how each item contributes to the overall index.
(see May CPI)

Next up, we’ve got two charts breaking down Core CPI — one showing year-over-year (YoY) changes and the other highlighting month-over-month (MoM) shifts, focusing on items with the most disproportionate impact.

June Core CPI — Year-over-Year

(see May Core CPI YoY)

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Tomorrow’s June CPI report kicks things off, followed by the big banks officially opening Q2 earnings season.

If inflation comes in softer-than-expected, the market can finally shift its focus toward earnings and what corporate America has to say about the economy. But if inflation surprises to the upside, expect the market to stay on shaky ground — at least until the next FOMC meeting in two weeks.

For now though, the technical backdrop still remains constructive. The S&P 500 continues to consolidate above a key relative level against low-volatility stocks, suggesting the path of least resistance is still higher until proven otherwise.

Looking ahead to tomorrow’s CPI report, the Street expects headline inflation to fall -0.1% month-over-month — hardly surprising given the recent drop in energy prices. The more important number, though, is core CPI. Consensus is still looking for a relatively hot +0.2% monthly increase, meaning a softer-than-expected core print is what would really move the needle and reinforce the disinflation story.

That remains our base case. We continue to think inflation will keep surprising to the downside over the coming months, which should eventually force rate markets to unwind their expectations for further Fed hikes.

Our next chart highlights the disconnect. Truflation’s real-time inflation proxy rolled over almost exactly when markets started pricing in more hikes. And since mid-May, that has created a massive divergence between real-time inflation and rate expectations — one that’s unlikely to last.

To us, one of those has to give. And we continue to think it’ll be rate expectations — not inflation — because the market’s hawkish repricing never really lined up with what the real-time inflation data was already telling us.

Put differently, markets turned the most hawkish right as the latest inflation impulse was already rolling over.

It’s a setup that reminds us a lot of September 2024. Back then, the Fed shifted to its most dovish stance and began cutting rates even though real-time inflation had already started moving higher months earlier, as shown below.

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Overview of the S&P 500

You’ll find a complete breakdown of all sectors down at the bottom.👇🏼

What moved this week?

🇺🇸 The S&P 500 rose +1.23%

⚖️ The average stock returned -0.19%
💪🏼 145 stocks outperformed the index

📈 Best sector: Technology +3.4%
📉 Worst sector: Materials -2.2%

📈 Best stock: HPE +17.7%
📉 Worst stock: MRNA -14.4%

Sector Metrics in Focus

Earnings & Valuations

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The recent price action in Semiconductors continues to suggest distribution near the highs, while relative strength vs the broader market has begun to deteriorate. As a result, we are becoming more selective in our Technology exposure.

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When we kicked off 2026, we wrote that "anything from geopolitical surprises to shakeups at the Fed could throw curveballs our way." Looking back, that feels almost understated. We’ve had plenty of both. But if there’s one thing markets keep reminding us, it’s that every challenge tends to come with an opportunity.

During the first half of the year, that meant fading peak geopolitical uncertainty and peak inflation fears. We didn’t waste much time putting that view to work, expressing it through an overweight in Tech — which ended up working out very well.

Now, as we move into the second half of 2026, the backdrop is changing again. This time, we’re dealing with peak growth and peak hawkishness. We’ve already made it clear that we’re willing to fade the latter. The bigger question now is: what’s the best trade to express that view?

Before we get there, though, let’s first take a step back and look at the bigger picture!

Like we’ve been saying for some time now, the backdrop for the US economy remains broadly supportive. That means a recession isn’t our base case for the remainder of 2026 — or as we head into next year. And that’s an important starting point. If the economy keeps holding up, there’s a good chance earnings estimates will too. Sure, analysts will tweak the numbers along the way, but the broader direction should continue to be higher.

That brings us to our first chart for today. It maps out where the S&P 500 could end up based on current earnings expectations across different valuation multiples.

To put some numbers on it, consensus currently expects 2027 EPS at around $400. If that number doesn’t really change by year-end and valuations stay around where they are today, that gets you comfortably to around 8000 on the S&P 500.

By December 31, 2026, the market will be pricing in 12-month forward EPS, reflecting full-year 2027 earnings.

Now, if we look at our next chart, you can clearly see the story in the data: 2027 earnings estimates have been grinding higher pretty much the whole year.

We started 2026 with consensus around $355 for 2027 EPS. Today, we’re already above $400, thanks to the strong earnings momentum we’ve been seeing.

So in that context, assuming $400 by year-end probably isn’t even an aggressive case at this point — if anything, it still looks fairly conservative, unless we get a meaningful macro shock.

So, with $400 maybe still a bit on the low side, we’ve put together a simple valuation and earnings matrix for the S&P 500 so you can mess around with different scenarios yourself. It basically shows where the market could land this year depending on forward P/Es and a range of 2027 EPS assumptions.

For example, if earnings drift another ~5% higher to around $420 by year-end, the S&P 500 still gets to 8000 as long as the forward multiple doesn’t fall below roughly 19x. So, no matter how you slice it, 8000 by year-end still looks like a pretty fair base case for us.

Now, as we mentioned at the start, we’re basically looking at peak growth here. Year-over-year earnings growth has hit a strong 32%, but as our chart below shows, that pace is expected to slow quite a bit over the next 18 months.

We’ve said this before, but it’s worth repeating: once EPS growth rolls over (even if it stays positive), price performance tends to lag earnings growth. And that’s pretty much what we’re already seeing again, with the multiple compression that’s been going on for a while now.

In other words, the big headwind from here — given we’re in a peak growth setup — is that it’s hard to see valuations really expanding much further. If anything, history says this kind of environment usually comes with multiple compression, not expansion. That’s why we think the S&P 500 is probably capped around ~21x forward earnings for the time being.

At the same time though, the market has already done a lot of the work. Over the past few weeks and months, we’ve already seen a solid re-rating, meaning a good chunk of this regime shift is likely already in the price.

As our chart below shows, valuations aren’t stretched by any means. We’re basically just ~1% above the 5-year average and only ~6% above the 10-year average forward P/E. So it’s hard to call this market expensive — especially when you factor in the much higher profitability we’re seeing today, which in theory typically demands a higher valuation premium, even if that premium is quite obviously non-existent at this point in time.

What this all comes down to is pretty simple: equities still look set to grind higher into year-end, mainly thanks to solid earnings growth projections. At the same time, the market has already done a lot of the work on the other side, re-rating lower to reflect a slower-growth setup.

Putting those two together, it still leaves us with 8000 on the S&P 500 as our base case for year-end, with room for further upside from there — barring any shocks.

This brings us to the second headwind the market is facing as we head into the second half of the year: peak hawkishness. Not only has this been a drag on valuations, but as we’ve said before, the Fed is still the biggest risk to this bull run — since tightening cycles are often what eventually end it.

Right now, this market is still priced for hikes. But we’re willing to fade that view for reasons we’ve laid out before.

Now, whenever you’re willing to fade consensus, the question is always the same: what’s the best trade to express that view. In this case, fading peak hawkishness can work through a couple of channels. Equities — especially the S&P 500 — should benefit if the Fed starts to dial things back. If that comes with a weaker US dollar, Gold is for example another straightforward way to express the same view.

On the equity side, we’re still overweight Tech. While that’s usually a good way to fade peak hawkishness, Tech is starting to show some internal stress, especially with Semis now such a big chunk of the sector. In the meantime, Software stocks and a few of the Mag7 names have actually held up with solid relative strength. So this is starting to look more like something where we need to be a bit more selective, rather than just owning the whole sector that’s nearly 50% Semis. That said, as long as Tech’s relative strength holds above last year’s high, we’re sticking with the overweight — for now.

For a cleaner, less equity-correlated way to fade peak hawkishness, we’re adding Gold here via GLD. As we mentioned before, the US dollar is still bid, especially after Warsh didn’t explicitly push back against the market’s hawkish repricing. And as our next chart shows, the Dollar Index and Gold are basically perfectly inversely correlated right now, with a rolling 50-day reading at -0.94 — an extremely strong inverse relationship. So if the dollar rolls over, Gold should be quick to catch a bid.

What’s also nice here is that Gold gives us a pretty clean risk level to work with. A weekly break below $360 would likely open the door for more downside. That said, as our next chart shows, Gold has already tested that level while traversing peak hawkishness in recent weeks.

If the Fed starts to soften from here, Gold should stay supported — mainly through a likely reversal in the dollar. For us, this is really just a tactical way to fade peak hawkishness, with a target range of $400–$420 over the summer — basically back to where Gold was trading before the hawkish repricing.

On the downside, a clean break of $360 takes us out. That keeps the risk on the trade at roughly ~5% of deployed capital.

So, where does that leave us?

Fading peak geopolitical uncertainty and peak inflation fears in the first half of 2026 ended up being a strong driver of performance for us. Now, heading into the second half of the year, the backdrop has shifted to peak growth and peak hawkishness.

Peak growth is more of a condition than a trade, but as we’ve already laid out, the market has largely re-rated to reflect it, especially with earnings growth set to slow meaningfully from here.

Peak hawkishness, on the other hand, is a much clearer consensus call — and one we’re actively fading. We’re doing that through continued exposure to risk assets, while also adding Gold, which should benefit if the US dollar starts to give back some of its recent strength that’s been weighing on precious metals.

If we’re right and the Fed starts shifting toward a more dovish stance over the coming weeks and months, we think the biggest tail risk for this bull market stays contained. In that scenario, this earnings-driven market should be able to comfortably lift the S&P 500 to at least 8000 by year-end, with room to push closer to 8500 if we simply hold today’s valuations and see 2027 EPS drift toward ~$420 by December.

And yes — just like we said six months ago, the “bubble” talk will likely only get louder as this bull market grinds higher. But in our view, this market is still fairly valued — not just today, but even looking out six months from now, potentially with another ~13% upside from here.

♟️ Duality Research — Market Playbook Status ♟️

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We hope your weekend’s off to an amazing start.

As always, just click on the report pictures to have a closer look. 🔍

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Overview of the S&P 500

You’ll find a complete breakdown of all sectors down at the bottom.👇🏼

What moved this week?

🇺🇸 The S&P 500 rose +1.76%

⚖️ The average stock returned +1.17%
💪🏼 214 stocks outperformed the index

📈 Best sector: Comms Services +4.9%
📉 Worst sector: Real Estate -1.5%

📈 Best stock: AXON +28.4%
📉 Worst stock: SNDK -16.5%

Sector Metrics in Focus

Earnings & Valuations

Technical Dashboard

• Top Left: The candlestick section shows a 52-week candle for each sector, including the standard open / high / low / close, plus the 1-year performance and the 50-day and 200-day moving averages. Right below that is the current RSI, along with the value from a week ago for context.

• Top Right: This section maps out the Bollinger Bands for each sector. You can kind of think of it like a Relative Rotation Graph – just a different way to look at sector movement. You saw it here first!

• Bottom Left: Here’s your standard breadth data. Anything below 50 is in red, above 50 shows up green – quick and easy to scan.

• Bottom Right: This is where we show the new highs and new lows across several timeframes, giving you a sense of momentum and trend shifts.

For a complete breakdown of every sector,
download our S&P 500 Sector Dashboard.

Get the Report

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If you remember three weeks ago, we showed you two charts that painted a picture of an economy sitting firmly in a supportive sweet spot.

The first one showed the business cycle continuing to re-accelerate, pointing to rising investment activity. (see here)

The second showed leading labor market indicators turning higher, suggesting businesses are responding to stronger consumer demand. (see here)

For the record, both trends remain firmly intact.

Since then, oil prices have dropped 25% to below $70 a barrel, basically erasing the entire spike from what was supposedly "the biggest oil crisis in history." So if anything, today’s economic backdrop looks even better than it did three weeks ago.

Like we said back then, the economy isn’t the problem — and it still isn’t. The bigger risk has always been tighter financial conditions. But as we wrote last week, that’s not going to happen. The Fed will hold rates for a bit longer than it expected a few months ago, but it still ultimately sees the next meaningful move as lower, not higher.

Now, because Warsh didn’t explicitly push back against the market’s hawkish repricing, we’ve spent the past week working through what we believe was peak hawkishness. Fortunately, though, we think the worst of that repricing is now behind us.

If you look at our first chart for today, you can see that rate hike expectations over the next 12 months peaked just a couple of days after Warsh’s comments. Since then, they’ve rolled over, undoing almost all of the hawkish repricing that followed the FOMC meeting. As the chart shows, investors currently expect roughly 1.4 hikes over the next 12 months — but looking at the breakdown, all of those hikes are now expected to happen this year, with essentially no additional tightening expected during the first half of 2027.

The reason we see this remaining hike as highly unlikely is pretty simple: the Fed doesn’t usually wake up one morning and decide to deliver an isolated rate hike. Historically, hikes occur as part of a broader tightening cycle, while cuts come as part of an easing cycle. And based on the latest dot plot, the Fed still believes the next cycle is down — not up.

So, if the economy looks fine, oil prices are back to normal, and peak hawkishness is starting to turn into a tailwind, why the hell has the market been trading like a speculative stock over the past few sessions?

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We hope your weekend’s off to an amazing start.

As always, just click on the report pictures to have a closer look. 🔍

And don’t forget to follow us on X!

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Overview of the S&P 500

You’ll find a complete breakdown of all sectors down at the bottom.👇🏼

What moved this week?

🇺🇸 The S&P 500 fell -1.95%

⚖️ The average stock returned +1.67%
💪🏼 384 stocks outperformed the index

📈 Best sector: Health Care +7.9%
📉 Worst sector: Comms Services -6.2%

📈 Best stock: TECH +22.5%
📉 Worst stock: ON -25.5%

Sector Metrics in Focus

Earnings & Valuations

Read more

What we’re noticing once again is that the old habit of hanging on every word is alive and well — even with a new Fed chair. It honestly reminds us of a 16-year-old getting a text from their crush and overanalyzing every single word, only to arrive at an interpretation that has almost nothing to do with what was actually meant.

Yes, Warsh didn’t push back against the hawkish repricing like we’d expected. But at the same time, it’s equally important to acknowledge that he didn’t embrace those hawkish expectations either.

Looking back at last week’s meeting, we walked away with two key takeaways.

First, Warsh’s priority right now is delivering on price stability. By itself, that’s neither hawkish nor dovish in our view — it all depends on the context. And today’s context is actually pretty straightforward. If higher oil prices were the main catalyst behind the market’s hawkish repricing, then lower oil prices should unwind those expectations again. In other words, if the inflation impulse fades on its own, the Fed doesn’t need to hike to achieve price stability.

This brings us to our second takeaway from last week’s meeting.

The updated Summary of Economic Projections (SEP) showed fewer rate cuts going forward. And honestly, we don’t blame them. More uncertainty naturally means less conviction in any particular direction.

What many seem to be overlooking, though, is that we didn’t see rate hikes getting penciled in either. The median dot for December 2026 edged up to 3.75%, while the current target range remained unchanged at 3.50–3.75%.

Our next chart shows the Fed’s expected policy path based on the median dot plot. And what it continues to tell us is fairly straightforward: the Fed is willing to hold rates at current levels for a bit longer than it expected a few months ago, but it still ultimately sees the next meaningful move as lower — not higher.

In other words, the message wasn’t “higher for longer forever.” It was “higher for a little longer, then lower.”

So, if anything, our next chart — which shows the Fed Funds path implied by the futures market — should look exactly the opposite. Instead, we’re still looking at peak hawkishness with the market still pricing in less than a 1% chance of a Fed rate cut over the next 12 months.

At this point, we can’t help but be reminded of the old saying, when everyone ends up on the same side of the boat, it doesn’t take much to tip it.

And let’s not forget, the market’s job is to surprise the largest number of people, not the smallest.

So no, this Fed is not going to hike rates once over the remaining six months of this year, only to cut next year. Warsh is focused on price stability, but he also knows that the recent collapse in oil prices is already undoing part of the inflationary pressure we saw earlier.

Now, while that’s our view, we can’t ignore that the market reaction has looked undeniably hawkish, as reflected in the rise in US 2-year yields. The way we were taught to think about this is simple: you play the hand you’re dealt, not the hand you wish you had.

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As always, just click on the report pictures to have a closer look. 🔍

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Enjoy!

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Overview of the S&P 500

You’ll find a complete breakdown of all sectors down at the bottom.👇🏼

As a new addition, we’ll be including a Nasdaq 100 Index dashboard overview in our S&P 500 Sector Dashboard report.
You’ll find it at the bottom of the report.

What moved this week?

🇺🇸 The S&P 500 jumped +0.93%

⚖️ The average stock returned -1.18%
💪🏼 138 stocks outperformed the index

📈 Best sector: Technology +3.1%
📉 Worst sector: Energy -6.6%

📈 Best stock: WDC +32.6%
📉 Worst stock: ACN -24.8%

Sector Metrics in Focus

Earnings & Valuations

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Having said that, the focus now shifts to Wednesday’s FOMC meeting, where Kevin Warsh will hold his first press conference. While it should be fairly clear that the Fed will keep rates on hold, this meeting is less about the decision itself and more about whether Warsh pushes back against the significant hawkish repricing that has taken place in Fed Funds futures.

If you look at our first chart for today, you can see the clear upward bias in the rate path that markets have priced in. From December onward, hikes become the base case, and looking further ahead, April next year is the first month where the probability of two or more hikes reach 30%.

Indeed, some investors will see last week’s ECB rate hike — the first by a major central bank in response to the recent energy shock — as adding pressure on the Fed to follow suit. But we think the bar for the Fed to do the same is considerably higher. The key difference is that the ECB started from a much more neutral policy stance, while the Fed is still holding rates at clearly restrictive levels.

And while last week’s inflation report came in elevated again, our main takeaway was that the spillover from higher energy prices into broader inflation remains relatively muted. As long as oil prices continue trending lower — even if they remain elevated in absolute terms — we’re increasingly comfortable saying that this inflation shock is likely behind us. AAA’s national average gas prices are a good example. After surging 36% in March and another 8% in April, prices fell 1.6% in May and are already down more than 6% so far in June.

For us, the takeaway is that while risks remain, the underlying inflation backdrop doesn’t appear to be deteriorating. If anything, it’s moving in the opposite direction. The obvious bear case is that businesses have so far absorbed higher energy costs and simply haven’t passed them on to consumers yet. Our counterargument is straightforward: if they haven’t done so by now, they probably won’t so as long as energy prices continue moving in their favor.

That brings us to our next chart. We came into the year expecting at least two rate cuts over the following 18 months, bringing Fed Funds futures closer to what markets consider the neutral rate. Fast forward six months, and that view has completely flipped. Markets are now pricing in more than one rate hike through June next year, leaving rate expectations roughly 80 basis points above neutral.

In our view, this is another example of the pendulum swinging too far in one direction — a repricing that has clearly started weighing on risk assets. We expect Warsh to push back against that narrative, leading markets to dial back some of their hawkish pricing and, in turn, providing a tailwind for risk assets.

That said, even if peak hawkishness ultimately turns into a tailwind for risk assets, the momentum unwind we’ve seen over the past few trading sessions has likely changed this market for the weeks/months ahead.

Our broader view hasn’t changed — but our roadmap for getting there has. So let’s take a look at what that means for the coming weeks.

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We hope your weekend’s off to an amazing start.

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Overview of the S&P 500

You’ll find a complete breakdown of all sectors down at the bottom.👇🏼

What moved this week?

🇺🇸 The S&P 500 rose +0.65%

⚖️ The average stock returned +1.61%
💪🏼 299 stocks outperformed the index

📈 Best sector: Materials +3.0%
📉 Worst sector: Comms Services -1.9%

📈 Best stock: KLAC +31.9%
📉 Worst stock: SMCI -26.8%

Sector Metrics in Focus

Earnings & Valuations

Read more

Here are the headline prints:

Year-over-Year:

✅ *US MAY CPI RISES 4.2% Y/Y; EST. +4.2%
✅ *US MAY CORE CPI RISES 2.9% Y/Y; EST. +2.9%

Month-over-Month:

✅ *US MAY CPI RISES 0.5% M/M; EST. +0.5%
✅ *US MAY CORE CPI RISES 0.2% M/M; EST. +0.3%

For a complete breakdown of last month’s CPI,
download our US Inflation Dashboard.

Get the Report

May CPI — Year-over-Year

Let’s start with our chart that shows the weight of the three main CPI categories and their respective sub-groups on the left. On the right, you can see how each item contributes to the overall index.
(see March CPI)

Next up, we’ve got two charts breaking down Core CPI — one showing year-over-year (YoY) changes and the other highlighting month-over-month (MoM) shifts, focusing on items with the most disproportionate impact.

May Core CPI — Year-over-Year

(see March Core CPI YoY)

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The fact that last Friday’s Semis-driven wipeout immediately unleashed a bearish armada determined to microwave our brains with bubble and top-calling tells you a lot about where we actually are in the cycle. At major tops, investors aren’t looking for reasons to be bearish — they’re looking for reasons to dismiss risk altogether.

So far, though, we haven’t really seen the sort of climactic price action that tends to accompany the final stages of a bull run. In fact, it doesn’t feel like we’ve even reached the point where investors have stopped worrying about valuations altogether. If anything, we’re still in the part of the bull market where people are searching for reasons not to be long enough, despite good news showing up left and right.

For now, last Friday’s selloff might have ended a 9-week win streak. But rather than signaling weakness, it highlights just how strong the underlying bid still is. Some things are meant to break — a steep trendline, a too-perfect streak — it’s how bull markets digest overbought conditions and establish higher lows. The end of a streak by itself doesn’t say much — and we think that’s the case here too.

The pullback we’re seeing was overdue, so instead of worrying, investors should seize the opportunity — especially if we dip 4-5% over the coming few days or weeks!

If we take a step back, an important thing to understand is that the business cycle isn’t rolling over. If you look at our first chart for today, you can clearly see how the ISM Manufacturing PMI has just recently moved back above 50 — back into expansion territory. That alone tells you we’re not dealing with an economy that’s losing momentum.

In fact, today’s economic activity continues to surprise to the upside. In other words, expectations have been set too low, and the economy keeps coming in better than feared.

While recent economic data have been surprising investors, they certainly haven’t been surprising readers of Duality Research. After all, we’ve been calling for an economic re-acceleration for close to a year now.

Over that time, we’ve stayed focused on a handful of indicators that tend to lead the labor market and offer a good read on where the broader economy is headed. That includes things like Overtime Hours, Temporary Help Services, as well as the ASA Staffing Index, which tracks weekly changes in temporary and contract work.

The reason we watch these data points is because they often move early in the cycle. When business picks up, companies usually test the waters by adding hours and temp workers before making the bigger commitment of hiring full-time employees.

Importantly, each of these indicators continues to move in the right direction. As our chart below shows, all three remain firmly in an improving trend, reinforcing our view that the recent re-acceleration in the ISM still has further room to run.

Taken together, these two charts paint a picture of an economy that remains firmly in a supportive sweet spot. The ongoing re-acceleration in the business cycle points to rising investment activity, while the improvement in these leading labor market indicators suggests businesses are responding to stronger demand.

This is also exactly the kind of backdrop that is keeping credit spreads pinned near historically low levels. And that’s important, because tight spreads have been one of the clearest confirmations of the broader risk-on tone we’ve been seeing in equities.

Our next chart captures this in traffic-light form, and the rule of thumb is simple: nothing really bad happens when investment grade spreads are below 100. Right now, credit markets are sending a clear signal that confidence in the US growth story remains intact — a view that recent earnings reports have done little to challenge.

Admittedly, after a growth-driven selloff of the magnitude we saw last Friday, nobody really cares about fundamentals in the heat of the moment. The only question that matters is whether this is the beginning of the end.

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We hope your weekend’s off to an amazing start.

As always, just click on the report pictures to have a closer look. 🔍

And don’t forget to follow us on X!

Enjoy!

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Overview of the S&P 500

You’ll find a complete breakdown of all sectors down at the bottom.👇🏼

What moved this week?

🇺🇸 The S&P 500 tumbled -2.59%

⚖️ The average stock returned -0.27%
💪🏼 368 stocks outperformed the index

📈 Best sector: Energy +2.5%
📉 Worst sector: Discretionary -6.2%

📈 Best stock: HUM +14.6%
📉 Worst stock: COIN -19.4%

Sector Metrics in Focus

Earnings & Valuations

Read more

Now, sentiment has flipped the other way — animal spirits are back, call activity is getting frothy, and things are starting to feel stretched. That alone is enough to at least question our bullishness over the coming weeks — or even months.

At the same time, it’s easy to just say the market is crowded. While it’s true that a lot of the support from systematic flows has already run its course, there’s still plenty of dry powder sitting with discretionary investors. As geopolitical sentiment continues to improve, we think that’s likely where the next wave of buying comes from — unless momentum drags them in earlier.

Heading into June, we still think the pain trade is higher — even if it’s starting to seriously test risk tolerance. At this point, though, most of that tolerance might actually be needed on the upside. Things are heating up, and if anything, the easier move here may end up being to sell too early rather than sit through a rally where the payoff could start looking a lot more asymmetric again.

That said, our call for the S&P 500 to hit 8,000 by month-end is still very much in play. As our first chart shows, much of this move has been fundamentally driven since we made that call seven weeks ago. The S&P 500 is up 6.4% over that period, while its forward P/E has mostly held steady around 21x — meaning earnings have been doing the heavy lifting.

To get to 8,000 by June 30, we said pretty clearly back then that beyond the market shifting back to earnings (which we got ✅), we’d also need some multiple expansion (still missing ❎) to get this rally going this far, this fast.

As our chart just showed, that hasn’t really happened over the past seven weeks. And this is where June comes in — where we think valuations can start to expand now that the earnings season is behind us, especially with the market starting to look hot again, driven by flows, positioning, and speculative activity.

That said, let’s move to the next chart, where we show the S&P 500 vs its valuation bands. As you can see, based on forward estimates, we’d be around 8,000 by the end of June if the market just re-rates to a 22x forward multiple. As of today, the market sits at 21x forward earnings.

With rates drifting lower, combined with some of the strongest earnings growth in history and record-high profit margins, there’s still a clear tailwind for multiple expansion from here.

Like we mentioned before, discretionary investors have been the most sidelined group in this rally. And with geopolitical sentiment improving, we think they’ll finally start stepping up and adding exposure to equities.

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We hope your weekend’s off to an amazing start.

As always, just click on the report pictures to have a closer look. 🔍

And don’t forget to follow us on X!

Enjoy!

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Overview of the S&P 500

You’ll find a complete breakdown of all sectors down at the bottom.👇🏼

What moved this week?

🇺🇸 The S&P 500 jumped +1.43%

⚖️ The average stock returned +0.76%
💪🏼 158 stocks outperformed the index

📈 Best sector: Technology +4.6%
📉 Worst sector: Energy -5.4%

📈 Best stock: DELL +42.6%
📉 Worst stock: BSX -16.4%

Sector Metrics in Focus

Earnings & Valuations

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Since our last note two weeks ago, markets have drifted higher, but that quick 2% dip in between actually told us a lot about how sentiment is behaving under the surface. Even with a few bumps along the way, the market has stayed pretty resilient overall. That’s why we’re still leaning constructive here and continuing to look for opportunities on the long side.

There’s a lot to unpack today — so let’s dive right in.

First off, a quick look at our Cheat Sheet shows our main stress indicators are still behaving fine, even with oil recently chopping around $100. And with this week’s sharp move lower on potential deal headlines, that backdrop looks even more contained.

Outside of the Dollar Index catching a bid lately — which can happen for a bunch of reasons that aren’t necessarily risk-off — both high-yield credit spreads and the VIX continue to reflect bull market conditions.

Now, a lot of investors have been struggling with the idea that credit spreads can keep tightening and stocks can keep grinding higher even with crude oil elevated. But a better way to look at it is to focus less on headline futures and more on spot prices — the actual physical price of oil that reflects real barrels in the system.

That’s where Dated Brent comes in. And what stands out in the chart below is pretty simple: prices have been making lower highs since peaking back in early April around $145. That matters, because a lot of the upside in oil was driven by supply disruption, meaning the chart below is essentially nothing else than a gauge on real oil-market tightness.

So right now, the message is pretty straightforward: oil conditions have been loosening for nearly two months now. And that goes a long way in explaining why markets have mostly shrugged off recent war headlines.

That obviously can’t really be said about Treasuries, which were at the center of the latest fear episode after yields spiked — with the 30-year getting most of the attention as it pushed back above 5% and briefly hit levels last seen in 2007.

But here’s the key point we keep coming back to:

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We hope your weekend’s off to an amazing start.

As always, just click on the report pictures to have a closer look. 🔍

And don’t forget to follow us on X!

Enjoy!

Share

Overview of the S&P 500

You’ll find a complete breakdown of all sectors down at the bottom.👇🏼

What moved this week?

🇺🇸 The S&P 500 rose +0.88%

⚖️ The average stock returned +2.52%
💪🏼 337 stocks outperformed the index

📈 Best sector: Health Care +3.3%
📉 Worst sector: Communication Services -1.9%

📈 Best stock: DELL +22.0%
📉 Worst stock: INTU -18.6%

Sector Metrics in Focus

Earnings & Valuations

Read more

We hope your weekend’s off to an amazing start.

As always, just click on the report pictures to have a closer look. 🔍

And don’t forget to follow us on X!

Enjoy!

Share

Overview of the S&P 500

You’ll find a complete breakdown of all sectors down at the bottom.👇🏼

What moved this week?

Sector Metrics in Focus

Earnings & Valuations

Read more