U.S. Futures & World Markets

After a two-week reset for stocks, investors are coming into the new week in a much better mood. Futures are higher on reports that the US and Iran have agreed to a deal in principle to end the war. While some of the more delicate issues still need to be ironed out, the market is hopeful this leads to oil flowing more freely through the Strait of Hormuz in the near future.

The VIX is trading below its long-run average of 19.50 — the options market isn't overly stressed despite all the geopolitical noise. Interest rates ticked lower last week, with the 10-year at 4.51% today after hitting a high of 4.66% last week. Between lower volatility and easing yields, the bond market seems relatively comfortable with how things are rolling.

There are a couple of interesting charts below on cratering consumer sentiment. This is notable as stocks sit near all-time highs and consumers continue to spend, even with higher gasoline prices. It's worth repeating: pay more attention to what consumers do than what they say. The wallet never lies.

S&P Futures vs. Fair Value: +52.00  |  10-Year Yield: 4.51%

CORE Headlines

Charts & Data

Three forces pushing rates higher across the entire curve. Torsten Slok, Apollo: "Front-end rates are under upward pressure because inflation is higher for longer. The belly of the curve is seeing upward pressure because of hyperscaler bond issuance. And long-end rates are moving higher because of more Treasury supply and less Fed demand. Three distinct forces are pushing rates higher across the curve — investors should position for a persistently higher rate environment."

US household equity wealth at a record $57.7 trillion. The Kobeissi Letter: "The value of equities held by US households is up to a record $57.7 trillion, up 156% since 2020. This is now more than the total value of real estate by $9.8 trillion — the widest gap on record. Equities account for a record 33% of total assets held by Americans and a record 47% of total financial assets. At the 2000 Dot-Com Bubble peak, these figures were 27% and 39%."

Chip demand anticipates broader manufacturing by 6–12 months. Torsten Slok, Apollo: "Chips go into virtually everything manufactured — cars, appliances, industrial equipment, phones. When manufacturers plan to ramp up production, they order semiconductors first, often 6–12 months in advance due to long lead times. Chip demand therefore anticipates broader manufacturing demand."

Long-term earnings growth expectations at a record 21.9%. Yardeni Research: "Exuberance check: S&P 500 long-term earnings growth expectations surged to 21.9%, a record outside the pandemic era." The AI capex buildout is what's driving this optimism — the question is whether fundamentals can support it.

Ex-TMT, US stocks are still below their February highs. Arthur Budaghyan, BCA Research via Daily Chartbook: "Excluding TMT (tech, media, and telecom), US share prices remain well below their February high." This is the broadening story the bull case needs — and it hasn't happened yet.

Healthcare has massively underperformed — worth watching. JC Parets: a chart showing just how much Healthcare has lagged the S&P 500 recently. Sometimes the simplest observations are the most useful. An oversold sector with a mean-reversion catalyst is a setup worth monitoring.

S&P up 8 weeks in a row with 12%+ gain — never lower a year later. Ryan Detrick: "The S&P 500 is about to be up 8 weeks in a row. There were only six other times it did this but also gained more than 12% during the win streak. Never lower a year later and up 16.9% on average (median of 20.1%) is yet another clue this bull market is alive and well."

US consumer confidence at lowest since October 2022. Gallup via Daily Chartbook: "Americans have continued to grow more negative about the economy in May, pushing Gallup's Economic Confidence Index to -45, down from -38 in April and the lowest reading since October 2022." Historically, extreme pessimism in consumer surveys has been a contra-indicator for stocks.

UMich consumer sentiment at all-time low. Daily Chartbook: US consumers have never been more pessimistic, according to the University of Michigan's Surveys of Consumers. The gap between sentiment and spending continues to widen.

New Fed chairs and the stock market. Ryan Detrick via Daily Chartbook: "Stocks can have some trouble after a new Fed Chair takes over. Dow down a max peak-to-trough 15.2% average the first six months of new leadership — but only 10.5% median, skewed by a few huge drops like 1987. The past three Fed changes have been fairly calm." Something to keep in the back of your mind with Chairman Warsh now in place.

Mutual funds chased semis in Q1 — hedge funds now trimming. Goldman Sachs via Daily Chartbook: "Mutual funds leaned into semiconductors in Q1, lifting their semis overweight by 25 bp to +49 bp while increasing their software underweight to -36 bp." Meanwhile: "Hedge funds have started trimming semis exposure while rotating modestly into software." The rotation from semis into software may be the next trade.

SpaceX IPO could force passive funds to buy ~19% of float. Rob Du Boff via Daily Chartbook: "Passive S&P 500 funds could have to buy roughly 19% of public SpaceX shares within 6 months under a fast-tracking framework — it would enter the index at the estimated 6th spot. Russell 1000 and Nasdaq 100 may buy another 5.5% within weeks of the IPO. Throw in active mutual funds benchmarked to those indices and you get to half of SpaceX shares." The mechanical buying demand for SpaceX is enormous.

IPO supply wave coming — "BIG" in nominal dollars. JPMorgan via Daily Chartbook: "How big is the coming wave of equity supply? In nominal dollars, BIG." SpaceX, OpenAI, and others will require capital to be redeployed from existing holdings.

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.