The 'Wall of Worry' Isn't Stopping This Rally... Yet
The Weekend Edition is pulled from the daily Stansberry Digest.
One day was like a microcosm of the year...
On June 27, the S&P 500 Index and tech-heavy Nasdaq Composite Index were trading near new highs for the first half of the trading day...
Then came some unexpected tariff news, with President Donald Trump "terminating ALL discussions on Trade with Canada," as he put it on Truth Social. Trump blamed Canada's digital-services tax on U.S. businesses, which was set to begin on Monday.
The markets briefly sold off on this news... but then rallied into the close. The S&P 500 and Nasdaq managed to close at new all-time highs for the first time in months.
Late on Sunday, Canada abruptly scrapped the tax – which would have collected 3% of Canadian revenue above $20 million from the likes of Alphabet (GOOGL), Meta Platforms (META), and Amazon (AMZN). And its finance ministry said Prime Minister Mark Carney will try to finalize a new trade deal with Trump by July 21.
And stocks closed higher again on Monday, with the S&P 500 and Nasdaq at new highs for a second straight trading day.
To me, Monday's trading action was a glimpse of what we've seen over the whole year...
Tariff headlines sparked fear... and then stocks quickly bounced back to new highs.
U.S. Stocks Are Still Climbing
A bullish tell...
The market's whiplash on Canadian trade appears to be one more sign of "risk on" or "green light" sentiment in the market. Investors have been willing – even eager – to take on risk in stocks.
One hallmark of a bull market is stocks climbing the proverbial "Wall of Worry." When the market consistently rises despite risks that you'd think should hurt stocks, that's a sign that greed is winning over fear.
And we've been seeing that for more than two months. Since Trump's 90-day tariff "pause," the market has largely looked past further trade strife and even war in the Middle East (which was reflected more in oil prices).
As our Ten Stock Trader editor Greg Diamond wrote on Monday morning about the latest Canada-U.S. dustup...
The small correction we saw on Friday was quickly scooped up. And futures are higher this morning. Here's the S&P 500 futures chart...
Greg is a master of technical analysis, or looking for patterns in price action. On this daily candlestick chart, the parallel red, dashed lines identify an upward channel that has been in place since mid-May. And Greg also pointed out how S&P 500 futures traded mostly above their long-term average (the upper chart's red solid line) over the same period.
Let me also note a couple other things...
- The "tariff fall" of nearly 20% – starting in February and concluding on the day of Trump's "pause" announcement in early April – has been completely reclaimed.
- Along the bottom of this chart is a measure of the relative strength index, which is at "overbought" levels. That's a sign that today's bullish sentiment may be overheated.
Now, this doesn't mean the S&P 500 can't keep rising. Stocks and other assets can trade higher despite perceived overbought conditions. But this setup does suggest that some kind of breather could be ahead.
Even then, Greg says an interruption to this rally might happen soon... And he's getting ready to perhaps recommend new bullish trades to Ten Stock Trader subscribers to buy the weakness.
In any case, the fear is gone right now...
The CBOE Volatility Index ("VIX") tends to make headlines when it's at extremely high levels... like it was at the height of the Liberation Day panic, the COVID-19 panic in March 2020, or the great financial crisis nearly two decades ago.
When things are relatively "normal," you don't see so many headlines about the VIX – often known as the market's "fear gauge."
I look at it every day to consider market sentiment.
So do Dr. David "Doc" Eifrig and his team. It's especially important to them, given their options-selling strategy in Retirement Trader. The way the strategy works, greater fear in the market means more income and profit for their subscribers.
Every month, Doc and the team update subscribers on the VIX. In their latest issue on June 27, they noted how it didn't spike in response to Israel and Iran bombing each other...
Even with the world inching closer to an all-out war, the market was not rattled. The VIX was above 20 by the end of last week, but it's back down to around 16 today...
Take this as another sign of appetite for risk assets in the market right now. Not even the threat of a growing world war knocked off the recent rally in stocks all that much.
Sit Tight... And Temper Expectations
Sit tight and be picky...
Once again, this doesn't mean you should go "all in" (or "all out," if the bullish buzz concerns you). It just means we're seeing an environment where holders of riskier assets have been and are being rewarded – for now.
However, it's also wise to temper expectations. As Stansberry's Investment Advisory lead editor Whitney Tilson put it in his free daily newsletter on Monday...
We've had five years' worth of market returns in two and a half months. So my view is that investors should have very modest expectations for the next five years.
But if you have a long-term investing horizon and own quality stocks and/or funds (ideally index funds, not actively managed ones), then my advice remains the same: Sit tight.
And we'll add: Be deliberate with the buying decisions you do make. Make sure they align with your long-term goals.
For example, consider this stat that Bespoke Investment Group shared on the social platform X last weekend: 14 stocks in the Russell 3000 Index have more than tripled since April's lows... and 10 of them have zero earnings.
Don't go chasing stocks like that right now. It likely won't end well.
We'll also be carefully watching market dynamics now that all-time highs are back.
Concentration in the top 10 stocks in the S&P 500 has been increasing again (to around 36%). That means the "Magnificent Seven" and a few others matter more to overall "market" performance. And that can be for better... or worse.
But if you survived the Liberation Day panic of 2025, take a deep breath and look at your portfolio. Enjoy the market mood right now... But don't be caught off guard by some hiccups, even if brief, and the inevitable surprises.
Good investing,
Corey McLaughlin
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