Things you need to know
- The tech trade is NOT dead. The Mag 7 surges by 2.6%.
- Qtr end is upon us, Rebalancing is almost complete.
- UK’s BPT buys Kayne Anderson Real Estate.
- NFP report due on Thursday – Markets closed on Friday.
- Try the Tortellini Salad.
Good morning… Well, what happened now?
Last week they tried to bury Tech. They pronounced it dead. For five straight sessions the Nasdaq bled out – down 4.6% on the week. The AI trade looked tired, some investors worried about the future, then OpenAI started whispering about pushing its IPO to 2027, and almost everybody and their brother ran for the door – rotating OUT of tech and INTO defensive names. Then yesterday – they flipped the script reminding everyone to stop the hysteria. Tech came roaring back yesterday, dragging the broader market right along with it.
The Dow up 306 pts or 0.6%, the S&P gained 86 pts or 1.2%, the Nasdaq added 522 pts or 2.1%, the Russell ended the day flat, the Transports added 100 pts or 0.5%, the Equal Weight S&P added 15 pts or 0.2% (but remember- this index has been outperforming for weeks now), while the Mag 7 added 828 pts or 2.6%.
Now, here’s the thing… nothing fundamentally changed. There wasn’t a game-changing earnings report. There wasn’t some new AI breakthrough. There wasn’t a dramatic shift in the macro backdrop that suddenly forced the Fed to change course. What changed was opportunity.
We’ve been talking about this all week—I laid it out on Varney on Friday. Yesterday I told you that the Mag 7 had become oversold. Every one of those names had fallen double digits (10% to 15%) from its recent highs. And on Wall Street, oversold doesn’t mean broken… it often means opportunity.
Then there’s the calendar – we discussed this too. Today is the final trading day of the quarter, which means the quarter-end window dressing is essentially over. The rebalancing by pension funds, institutional asset managers and sovereign wealth funds – the rotation we’ve been talking about for two weeks – is just about complete.
The recent selling wasn’t a funeral for AI. It was an opportunity for institutions to harvest gains, raise cash and reallocate capital before quarter-end. Once that forced selling eased, buyers (including those same institutions) stepped right back into the names they still want to own.
That’s why I keep screaming – rotation is not liquidation!
Then there was the changing of the guard in the Dow. They wanted more exposure to the technology and communications landscape that is driving the economy. So, out with VZ, in with GOOG. And that caused institutions to move billions of dollars in passive money – every ETF and index fund that tracks the Dow had to sell VZ and buy GOOG. Now this was NOT a surprise…they announced this change on Tuesday June 23rd to be effective on Monday June 29th………. Everyone knew it, yesterday was just the day they had to complete the trade.
And in one more shoutout – yesterday news hit the tape that Bridgepoint Group – one of the world’s leading middle market investor groups out of the UK – agreed to acquired Kayne Anderson Real Estate for $1.4 billion dollars. The market loved it – BPT (LN) rose 16% on the back of that news. I want to congratulate my friend – CEO Al Rabil and the whole Kayne Anderson RE group for a job well done. The American dream is alive and well! Merry Christmas!
Bonds ended the day mostly unchanged…. The 2-yr yield remains 4.1%, the 10 yr is at 4.37% and the 30 yr is at 4.86%.
Oil – is trading at $70 – but the path of least resistance is still lower…..The conflict appears to be under control, the strait is functioning, but far from normal. Tankers are moving, but traffic remains well below pre-conflict levels. Security risks continue to be real and insurance costs remain high as Iran tries to control it. This is important – markets are convinced that the geopolitical risk has peaked, but it is not completely resolved yet – negotiations continue.
$70 is the trendline and right now it is holding, but I, like so many, do expect oil to decline in the coming weeks. I’m thinking $65 before $75.
Gold continues to churn…..finding support in the $4,000/$4050 range. This morning – it is trading up $12 at $4,030. You know how I feel – I think we are in the $3500/$4,470 trading range…with the path of least resistance lower not higher.
Eco data this morning…. includes the Consumer Conference Board index, and the JOLTS report. I am in the camp that UNLESS either of these reports’ surprises to the up or downside – the markets are not paying attention. Thursday is the latest NFP report, markets closed on Friday. I suspect after today – volumes will plunge as the country prepares for the 4th of July.
European markets are all higher…..Germany in the lead- up 1.4%.
US Futures higher…. Dow futures up 42 pts, S&P’s up 6 pts, the Nasdaq is up 42 pts while the Russell is up 3 pts.
The S&P closed at 7,440, up 86 points, today’s action will be about last-minute quarter-end rebalancing and final adjustments that square positions before we turn the page onto the new quarter.
Tomorrow the second half of the year begins. Before you know it – it’ll be Christmas….
We’re moving deeper into the midterm election season, expect more uncertainty and volatility. Markets don’t like surprises, they like certainty, even though certainty is never certain.
Election years can create plenty of headlines and short-term anxiety, but once it’s over and the political landscape becomes clear, markets generally settle down. Investors can finally price in what they know vs. worrying about what they don’t.
The street prefers gridlock, because it prevents ‘sweeping policy changes and creates a more predictable environment for business. Others are hoping for a dramatic political shift—but if that’s the goal, they’ll have to wait until 2028.
In the meantime, don’t let the political noise derail your investment strategy. Build a plan that matches your objectives, your risk tolerance, and your time horizon…and then have the discipline to stick with it. That’s what successful investing has always been about.
Give me a call at 561-931-0190 to discuss your goals and your timeline. Let’s assess the risk in your portfolio and your tolerance for volatility – happy to do a complimentary portfolio review and risk assessment.
Take good care,
Kp
[email protected]
Source: Bloomberg, CNBC, Reuters, Wall Street Journal
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Summer Tortellini Salad w/Sundried Tomatoes and Artichokes
This is a great 4th of July side dish for the burgers and hot dogs….
For this you need: 1 lb. of frozen cheese tortellini, fresh mozzarella balls, ½ c sliced kalamata olives, 2 cans of drained artichoke hearts, 1 jar of sun-dried tomatoes -sliced into strips (save the oil for the dressing) and chopped parsley.
Boil the pasta in a pot of salted water – when done – drain and set aside – always reserving a mug of the pasta water to keep it moist until you are ready to use it.
For the dressing you need: ¼ c of red wine vinegar, fresh lemon juice, ¾ c of the sun-dried tomato oil, 2 tsp of Dijon mustard, ¼ pecorino Romano cheese, 2 tsp dried oregano, 2 chopped/smashed garlic cloves, s&p and crushed red pepper flakes are optional.
Combine all the dressing ingredients in a food processor, blend until emulsified. Set it aside.
In a large bowl – combine the tortellini, tomatoes, artichokes, sliced mozz, olives, and parsley. Add enough of the dressing to season it – mix it well and taste? Do you need more dressing? If so, add, if not – then not. You can serve as is or put it in the fridge and serve later. You can eat this room temp or right out of the fridge.
Buon Appetito