Things you need to know.

• Stocks went into OVERDRIVE – S&P and Nasdaq back in BULL mkt mode.
• The move added $1.8 trillion in market value.
• Shorts got crushed and Investors that got OUT want back IN.
• US/China play nice – Scotty promises more discussions in 2 weeks.
• Gold declines, bonds decline, while Oil rallies.
• Try the Pesto di Limone.

Scotty ‘B’ and Jamieson ‘G” brought it home! Announcing a major de-escalation and breakthrough in trade negotiations with their Chinese counterpart He Lifeng and Liao Min in Geneva….and

Stocks surged adding $1.8 Trillion of value across the US stock market – ….the S&P and Nasdaq are now ‘officially in a bull market – meaning they are up more than 20% off of the April lows – even though they remain below their January highs….……They both blasted up and thru 2 trendline resistance lines– 5750 and 5774 for the S&P and 18,321 & 18,478 for the Nasdaq….in fact both indexes GAPPED up on the opening, leaving a gaping, ‘beautiful’ hole in the charts that will need to be filled…but we can discuss that later.

Now the Dow, Russell, Transports, and Mag 7 –also gapped open – while they did NOT ‘break out’……they did not pierce 2 trendlines and still had a ‘good’ day – the Dow up 1160 pts or 2.8%, the Russell up 69 pts or 3.4%, the Transports added 979 pts or 7% while the Mag 7 surged by 1369 pts or 5.7%

It was a palooza! The apparent de-escalation of tensions between the US and China giving investors all kinds of hope….hope that we can achieve trade agreements that make sense, hope that we can avoid a recession, hope that all of that inflation the left is worried about, won’t be an issue at all and hope that JJ can now reconsider his stance and give us those rate cuts that so many members of the community continue to demand. (I do not agree that JJ has to cut rates at all – yet).

Now, while the majority of investors, traders and algo’s welcomed the weekend news – there are those that remain negative, not sure what to think. The perceived ‘lack’ of any detail (which I disagree with) in yesterday’s announcement causing them to talk about the ongoing risk of a trade deal gone bad (hoping to try and get the market to sell off so that they can re-engage. Let’s be clear, that is not happening).

I have to believe that some of those ‘traders’ must have been short coming into the day and got absolutely clobbered, or they are the ones that hit the SELL button 4 weeks ago to ‘get out’ and run to the ‘safety trade’ of US treasuries/gold and never got back in – so if they try to convince themselves that the headline isn’t substantive enough, they can reconcile the losses they suffered or the moves that they made. I say – ok – you do you, but that was not me!

Now, if you were one of the investors that didn’t panic, on liberation day and watched you portfolio decline by anywhere between 5% – 20% depending on your risk score – You are very happy today….Some of you have turned positive while the investors further out on the risk scale are just returning to flat…with more upside to come…..especially if we start to get 3, 5, 10 more countries signing new trade deals.

Some of the biggest names that got taken out to the woodshed and got beaten up – have now taken it all back and actually moved higher…AAPL, AMZN, MSFT, NVDA, PLTR, IBM, JPM, D, CEG…..Are you seeing a pattern here? These are all some of the biggest names in the sectors they represent….and you can find plenty more of them…..and what that tells you is BUY quality when you build your portfolio….not quantity of ‘lower quality’….Because when the sh*t hits the fan you want to be able to sleep.

Of the 11 S&P major sectors – only Utilities lost ground and that makes sense too – why? Because Utilities are typically boring, names you buy when rates are going lower because they are good divvy payers….names you buy to add some stability to your portfolio when you’re worried about the future and so – they lost about 0.6% but are still up 5.4% ytd. Of the gainers – it was Consumer Discretionary that stole the show – up 5%….now remember – that was the worst performing sector, so you can imagine that there were lots of bargains there for the trader and investor types…Up next – Tech + 4.6%, Industrials +3.1%, Energy +2.6%, Healthcare + 2.5%, Basic Materials + 2.3%, Communications +2.1%, Financials +2%, Consumer Staples + 0.15% while Real Estate gained 0.1%.

Homebuilders + 4.6%, Retailers + 5.9%, Airlines + 3.25%, Semi’s +7.2%, Disruptive Tech + 6.1%, Aerospace and Defense +1.5%, Exploration and Production + 3.7%, Metals & Miners + 1.25%, The Growth Trade + 3.9% the Value Trade + 2.7%, the Triple Levered LONG – SPXL + 9.8% (so you can imagine what the Triple Levered Short did?).

Of course the contra trades all lost ground, while the VIX (fear index) plummeted – falling 16% (VIXY etf fell 13%) to end the day at 18.39 and is now below all 3 trendlines – taking us back into the complacent zone – suggesting we have further upside to go.

Bonds fell – the TLT down 0.9%, the TLH – 0.8% and that sent yields up a bit…the 2-yr ended the day at 4.01% while the 10 yr is yielding 4.46%. 30 yr mortgage rates are at 6.85% with an APR (Annual Percentage Rate) of 6.91%.

And housing inventory? It is steadily increasing….. and is significantly higher than the record lows seen during the pandemic. However, it does remain below historical averages. Currently, Realtor.com tells us that there are 959k Existing homes for sale in the United States (19k of those here in Palm Beach County) and this represents a 30.6% increase year-over-year from April 2024 and is the highest April inventory since 2020.

The National Association of Realtors (NAR) reports that this is a 4-month supply of existing homes today up from 3.5 months in February 2025, but still below the 4–6 months considered a balanced market. In addition – there are 500k New Homes – or an 8% increase y/y representing an 8.3-month supply – considered relatively high vs. existing homes.

And if all these existing home sellers want to move their houses – They are going to ‘cut’ their price in order to sell and that is what we are beginning to see…..42 of the 300 largest metro areas are seeing y/y price declines and you can credit ‘high’ mortgage rates, rising inventory, and affordability challenges due to high real estate taxes. New home builders just ‘add’ extra’s at no cost to attract buyers -think getting more for less – like upgraded tiles, countertops, flooring, and landscaping.

It’s just like the stock market – prices had gotten overheated, and they needed to correct, how did they do that? Buyers pulled back causing sellers to get anxious and hit bids…The same thing has to happen so that the housing market can reprice. Now, clearly there are always the outliers, the blue-chip homes that appear to be immune from market forces – the same way blue chip stocks are mostly immune from market forces. Location, Location, Location!

Gold plunged – falling $102 to end the day at $3,230. This morning gold is trading up $28 at $3,258. A bit of a bounce after the drubbing it took yesterday…. but I do not think it takes it all back UNLESS these trade deals collapse. Gold now appears to be in the $3,160 (trendline support)/ $3400 trading range. And if we continue to get good news on trade – the path of least resistance will be down, not up.

Oil is up 40 cts at $62.40 – about to kiss trendline resistance at $64 where I think it hits a wall. Yes, the rally is direct result of the good news, but let’s not forget, there is plenty of supply and the Saudi’s just ramped it up…

Eco data today is about the CPI and by now you know it is not expected to surprise in either direction. M/m expected to be a bit higher while y/y is expected to be flat. For me, the surprise will be if it is better than expected (weaker) and if that’s the case then it essentially ‘kills’ the inflation narrative for things we need every day. Now are baby strollers more expensive? Sure, but are you buying multiple baby strollers every month? Stop the histrionics!

European markets are all slightly higher today…. After closing higher yesterday on the back of the trade deal news. Eco data today includes UK Retail Sales, UK unemployment figures and Germany’s ZEW survey…. Which is a monthly economic indicator that measures the sentiment and expectations of financial experts regarding Germany’s economic outlook over the next six months. It’s an opinion piece, soft data not hard data.

The S&P closed at 5844 – now while I loved the move – let’s remember – yesterday’s trading created a 148 pt GAP in the chart, a GAP that most likely will need to be filled…..US futures are a bit lower today….and THAT should not be a surprise……Dow futures -200, S&P’s down 16, Nasdaq -65 while the Russell is down 2.

Now, understand that there will be plenty of ‘analysts’ and politicians that will try to question the trade talks, attempting to paint it as a negative, saying that there isn’t a deal, there is only an outline – suggesting that nothing has really changed. I would take the other side of that argument all day long. The narrative has changed and will continue to change in the weeks ahead. These trade talks are a positive, the reconciliation bill is positive, the economy remains robust (positive) and inflation IS declining and that is positive as well.

But like any good investor – let’s not completely overreact and make like there are no issues ahead…..Remember, politics create chaos which creates opportunities, but it is the economy that ultimately prices stocks…..We have now broken out of the prior trading range and are in a new range – 5690 (the gap)/6000.

Stick to your plan and remain resilient – Call me for a free portfolio analysis. 561-931-0190

Take good care,

kpolcari@slatestone.com

Sources:  Bloomberg, CNBC, Reuters, Wall Street Journal

Disclosure: The content provided in this material is designed for educational and informational purposes only, and it is important to note that it does not constitute personalized recommendations. This commentary is not nor is it intended to be relied upon as authoritative or taken in substitution for the exercise of judgment.  The comments noted herein should not be construed as an offer to sell or the solicitation of an offer to buy or sell any financial product, or an official statement or endorsement of Kenny Polcari or SlateStone Wealth.

The market commentary is the opinion of the author and is based on decades of industry and market experience; however, no guarantee is made or implied with respect to these opinions, which may not necessarily align with our firm’s standpoint.

While considerable effort has been invested to ensure the accuracy and dependability of the information presented, we must clarify that we cannot guarantee the accuracy of third-party information. Our usual sources for third-party data include channels such as Bloomberg.

Pesto di Limone (Lemon Pesto!)

An absolute summertime dish! – Simple, Quick and so good.

For this you need: Fresh lemon juice (1 lemon), and some grated zest, pignoli nuts, fresh grated parmegiana cheese, olive oil, s&p, garlic, fresh basil and fresh parsley and of course you need the spaghetti.

Now – this recipe feeds 2 people – so double it for 4!

Begin by adding the juice and a bit of the lemon skin to the food processor. Now add 1 garlic bulb, Pignoli nuts, handful of cheese, olive oil, s&p, fresh basil and fresh parsley.

Blend until creamy. Taste to adjust seasoning if necessary.

Now bring a pot of salted water to a rolling boil – add ½ box of spaghetti, cook until aldente.

In a large sauté pan that is warm, add some of the lemon pesto and pasta. Add in ½ ladle of the pasta water (tears of the Gods) and stir to coat. Serve immediately in warm bowls with a sprig of basil to decorate.

Buon Appetito