A Bullish Tell Hiding in Plain Sight
New all-time highs are here again... A microcosm of 2025... Stocks are climbing the 'wall of worry'... The fear is gone... Sit tight and be picky... How to spot the next AI winners...
This was a microcosm of the year...
On Friday, 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 Donald Trump "terminating ALL discussions on Trade with Canada," as the president put it on Truth Social. Trump blamed a digital-services tax on U.S. businesses that was set to begin today.
The markets sold off on this news Friday, but – here's the thing – only briefly. Then stock indexes rallied into the close. The S&P 500 and Nasdaq managed to close at new all-time highs for the first time in months, after trading just below fresh records in the preceding days.
Late yesterday, Canada abruptly scrapped this 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 here we are today, with stocks higher again... and the S&P 500 and Nasdaq at new highs for a second straight trading day.
To me (Corey McLaughlin), this latest trading action was a microcosm of the whole year...
Tariff headlines sparked fear... and then stocks quickly bounced back to new highs.
A bullish tell...
The market's whiplash on Canadian trade appears to be one more tell about "risk on" or "green light" sentiment in the market right now, as we put it last week.
One signature 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 powerful signal about sentiment.
And that's what we've been seeing 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 this morning about Friday's Canada-U.S. dustup showing up in stocks...
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, Greg notes with the parallel red dashed lines an upward channel that has been in place since mid-May. And he shows 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 few 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 ("RSI"), which is at "overbought" levels.
Now, this doesn't mean the S&P 500 can't keep going higher. 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 be quick... And he's getting ready to perhaps recommend new bullish trades to Ten Stock Trader subscribers. As he continued today...
Can the market keep rallying into August with very little correction?
It's certainly possible. But employment data is coming out on Thursday and the government is trying to pass President Donald Trump's "Big, Beautiful Bill" before the end of the week. Those factors could pause the recent uptrend, and we could take advantage of the weakness.
Similar to last week, we may need to act fast... given the sharp drops that are quickly picked up. I'll be watching things very closely this week to capitalize on any negative sentiment in the market.
We will be, too.
Big spenders...
We're also keeping eyes on votes on amendments to the "big, beautiful bill" today. Trump's preferred July 4 deadline for the massive spending and tax bill (and we'll see what else) is coming right up on Friday.
Last I heard, the bill will increase the debt ceiling by even more than we initially thought: $5 trillion, rather than the nearly $4 trillion we reported earlier this month. It's worth repeating the context too, from our June 2 issue...
It's so "big" that even Elon Musk criticized it last week on his way out of heading up the Department of Government Efficiency ("DOGE"), which has come up short of its goal to cut spending by $1 trillion (downgraded from $2 trillion).
The only way the new tax and spending bill, as currently written, will pass the Senate is if Congress also agrees to raise the debt ceiling by about $4 trillion.
It's the same old story, even with tariffs and the pace of inflation coming down (for now). The U.S. debt increased by about $4.5 billion today. This is how much the U.S. added to its federal debt, on average, every day over the past year. Meanwhile, the U.S. budget deficit for the last fiscal year was $1.8 trillion. Uncle Sam is drowning in liabilities.
And after initially pulling back from his harsh critiques, Musk posted over the weekend that the latest version of the bill is "utterly insane and destructive."
We'll also be watching the labor market this week. The monthly Job Openings and Labor Turnover Survey ("JOLTS") is due out tomorrow, followed by a fresh look at layoff announcements from the Challenger, Gray & Christmas firm on Wednesday. Then on Thursday, we'll get the monthly "nonfarm payrolls" report.
The Fed calculus...
Investors will be interested in all of this for two reasons... First, they'll want to gauge trends in the jobs market itself. But they'll also be considering what the numbers might say about Federal Reserve policy in the months ahead.
As I wrote last week, lately it looks like the market has been pricing in a higher likelihood of interest-rate cuts in the second half of the year. Weaker jobs data this week could help move that idea along.
Alternatively, strong data might lead more traders to bet against it. However, given that the pace of inflation has been coming down, they might continue expecting cuts anyway.
Or the market could decide that Fed Chair Jerome Powell will be a goner sooner rather than later – and that whomever Trump installs next will cut interest rates to juice the economy and markets at the first opportunity.
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 market's "fear gauge."
I look at it every day to consider market sentiment.
So do Dr. David "Doc" Eifrig and his team, especially 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 Friday, 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," as I termed it a few weeks ago, knocked off the recent rally in stocks all that much.
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 this is the environment we're seeing. It's one where holders of riskier assets have been and are being rewarded – for now.
However, it is also probably wise to temper expectations. As Stansberry's Investment Advisory lead editor Whitney Tilson put it in his free daily newsletter today...
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 this 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. That's a recipe that likely won't end well.
We'll also be carefully watching market dynamics now that all-time highs have been hit again.
Concentration in the top 10 stocks in the S&P 500 has been growing again (to around 38%). That means the "Magnificent Seven" and a few others are mattering more again to overall "market" performance. And that means 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.
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New 52-week highs (as of 6/27/25): ABB (ABBNY), Alpha Architect 1-3 Month Box Fund (BOXX), BWX Technologies (BWXT), WisdomTree Japan SmallCap Dividend Fund (DFJ), Disney (DIS), Enel (ENLAY), Franklin FTSE Japan Fund (FLJP), GE Vernova (GEV), Intercontinental Exchange (ICE), iShares U.S. Aerospace & Defense Fund (ITA), Neuberger Berman Next Generation Connectivity Fund (NBXG), TransDigm (TDG), Telefônica Brasil (VIV), Vanguard S&P 500 Fund (VOO), VeriSign (VRSN), Vistra (VST), and Industrial Select Sector SPDR Fund (XLI).
In today's mailbag, feedback on Dan Ferris' Friday essay about "The Five Assets That Will Protect Your Portfolio"... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.
"Outstanding column today Dan on true diversification. Thoroughly enjoyed it and will take it to heart! Have a great summer." – Subscriber Jim B.
All the best,
Corey McLaughlin with Nick Koziol
Baltimore, Maryland
June 30, 2025