S&P 500 bull channel continues
As the earnings season draws to a close, stock indices have hit fresh record highs. Indeed, the benchmark broad-based index has rallied 29% from its post-‘Liberation Day’ low in early April. The Magnificent 7 stocks – Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla – have led much of the gains. They continue to justify their elevated valuation multiples, having regularly beaten analysts’ consensus earnings expectations. The one exception to this seems to be Tesla. Collectively, these seven stocks now account for roughly a third of the market cap of the S&P 500, 23% of its aggregate forward earnings, and 12% of its aggregate forward revenues. Narrow breadth is only an issue when it becomes an issue. It is a brave person to make that call of when will that be, with bullish momentum still so strong. Big round numbers are the target bulls, so 6,500, 6,600 etc.
Cable powers ahead
GBP/USD has rebounded strongly in recent weeks, having been the big underperformer on dollar strength and markets eyeing up the worsening UK domestic finances and Autumn fiscal black holes. Prices touched a major Fib retracement level (38.2%) of this year’s rally at 1.3140. But since then, we’ve seen multipe days of buying, driven initally by a bullish outside reversal day after the recent disappontiing NFP report. Last week’s ‘hawkish cut’ by the BoE hinted that the easing cycle could be nearing its end, and gave a further boost to bulls. Persistent inflation is worrying officials and bets on more rate cuts have been slashed. The 50-day SMA sits at 1.3499 with the early July multi-year top at 1.3788.
New highs in Bitcoin
The world’s most popular cryptocurrency posted fresh record highs at $124,533 this morning, beating last month’s top at $123,231. Bullish sentiment has picked up again this month after prices found support at the May peak at $112,000 and the 50-day simple moving average (SMA). Real world adoption and capital confidence have been key. President Trump has signalled that BTC will be included in 401k retirement portfolios. This opens up the potential for $9trn of new capital investment. Rising institutional demand underpins support for Bitcoin too, with ETF fund inflows continuing to hit record levels. Interestingly, the BTC Fear & Greed Index is not overblown, and not on levels at previous all-time highs.