The State of Markets: “US Equities: Breaking out? Or Toppy?”
Risk appetite has been strong this week, with cyclically sensitive parts of the US equity market performing well. Both the Russell 2000 and DJ Transports, for example, are up ~3.5% on the week, with other high beta indices also outperforming (e.g., NASDAQ Banks: +5.4%). All three have broken above their 200 day moving averages in recent trading days (e.g., see key chart below), while other indices, like the S&P500 and NASDAQ100, made new record highs yesterday on the back of stronger than expected nonfarm payrolls data.
The key question is: Will US equities continue to push higher into mid-July? Or are they starting to look toppy? Of note, in that respect, our SELL-off indicator reached its key +20 threshold this week (at which it warns of a wave of risk aversion in global markets). Please see yesterday’s ‘Tactical’ Equity Asset Allocation publication for detail.
Next week’s US macro data is relatively light. Key data points, though, include the NFIB survey on Tuesday. Elsewhere the Fed minutes from the June meeting will be released on Wednesday evening (7pm London time), and there’s a speech by the Fed’s Daly on Thursday. In the UK, the ‘monthly GDP’ print is due out on Friday and, in Asia, Thursday is the key ‘macro data day’ (with Chinese CPI and PPI; Japanese money supply, and Japanese machine tool orders, all for the month of June). Policy decisions from the RBA and RBNZ are expected on Tuesday and Wednesday, respectively. Please see below for a full list of next week’s key macro data and events.
Key chart: NASDAQ Banks index, shown with key moving averages
Upcoming important data/events this week:
|
Events: |
Fed minutes from June meeting (Wed, 7pm); RBA policy decision (Tues, 5:30am); RBNZ policy decision (Wed, 3am). |
|
Monday: |
UK house price inflation (Halifax, June, 7am). |
|
Tuesday: |
US NFIB small business optimism (June, 11am). |
|
Wednesday: |
Chinese headline CPI & PPI (June, 2:30am). |
|
Thursday: |
UK RICS house price balance (June, 12:01am). |
|
Friday: |
N/A |
|
Key earnings: |
N/A |
Key Research
Tactical Equity Outlook, 3rd July 2025:
“Equities: Short Term Turbulence Ahead, a.k.a. Temporarily Remove Tactical OW”
There is a strong argument that the US equity market is enduring a multi quarter (or even multi year) uptrend: i) Liquidity is improving in the US financial system/economy (as credit conditions ease, spreads remain tight and our liquidity indicator continues to improve); ii) there was a full washout of risk in the April SELL-off and, with that, a reset of positioning. As a result the ‘buy the dip’ mentality is back (as confirmed by multiple meetings with investors in recent weeks – as well as by BAML FMS cash levels which remain above the key 4% dividing line); & iii) various (slower burning) technical models show continued headroom until they reach SELL signals once again. For example, the percentage of US single stocks which are overbought is mid-range (and therefore not signalling SELL – fig 2f). Added to which, the recent ‘breadth thrust’ (in late April) as well as the spike in the ‘Gold-Silver ratio’ to over 100, are both key technical signals that this US rally should endure.
Key North American macro data & events:
|
Events: |
Fed minutes from June meeting (Wed, 7pm); speech by the Fed’s Daly on US economic outlook (Thurs, 7:30pm). |
|
Monday: |
N/A |
|
Tuesday: |
US NFIB small business optimism (June, 11am); US New York Fed 1 year inflation expectations (June, 4pm); US consumer credit (Apr, 8pm). |
|
Wednesday: |
US wholesale sales & inventories (May, 3pm). |
|
Thursday: |
US weekly jobless claims (1:30pm). |
|
Friday: |
Canadian employment data (change in employment, unemployment rate & participation rate, for June, 1:30pm); Canadian building permits (May, 1:30pm); US Federal budget balance (June, 7pm). |
|
Key earnings: |
Progressive, Cintas (Thurs). |
Fig B: US NFIB small business optimism headline index, shown with US recession bands
Key European macro data & events
|
Events: |
Speech by the ECB’s Cipollone in Ljubljana (Thurs, 8am); Bank of Italy releases its Quarterly Economic Bulletin (Fri, 2pm). |
|
Monday: |
German industrial production (May, 7am); Eurozone Sentix investor confidence (July, 9:30am); Eurozone retail sales (May, 10am). |
|
Tuesday: |
German trade balance, imports & exports (May, 7am); French trade balance (May, 7:45am). |
|
Wednesday: |
N/A |
|
Thursday: |
Italian industrial production (May, 9am). |
|
Friday: |
German headline & core CPI (June final estimate, 7am); French headline & core CPI (June final estimate, 7:45am); German current account balance (May, 8:45am). |
|
Key earnings: |
N/A |
Fig C: German industrial production (volumes index, shown with trend)
Key UK macro data & events
|
Events: |
BoE publishes its quarterly financial stability report (Wed, 10:30am). |
|
Monday: |
Halifax house price inflation (June, 7am). |
|
Tuesday: |
N/A |
|
Wednesday: |
N/A |
|
Thursday: |
RICS house price balance (June, 12:01am). |
|
Friday: |
Monthly GDP estimate (NIESR), industrial & manufacturing production, goods trade balance & construction output (May, 7am). |
|
Key earnings: |
N/A |
Fig D: UK RICS house price balance (index, 6 months advanced) vs. Rightmove house prices (Y-o-Y %)
Key Asia-Pacific macro data & events
|
Events: |
RBA policy decision (Tues, 5:30am); speech by the RBA’s Hauser (Wed, 12am); RBNZ policy decision (Wed, 3am). |
|
Monday: |
Australian ANZ-Indeed job advertisements (June, 2:30am); Japanese ESRI leading index (May first estimate, 6am). Chinese FX reserves (June). |
|
Tuesday: |
Australian NAB business confidence (June, 2:30am). |
|
Wednesday: |
Japanese M2 & M3 money supply (June, 12:50am); Chinese headline CPI & PPI (June, 2:30am); Japanese machine tool orders (June first estimate, 7am). |
|
Thursday: |
Japanese PPI (June, 12:50am). |
|
Friday: |
Chinese vehicle sales (June) |
|
Key earnings: |
Fast Retailing (Thurs). |
Fig E: Chinese headline CPI & PPI (Y-o-Y %), grey bands illustrate Chinese slowdown/global recession
This week:
Longview on Friday, 4th July 2025:
“US Labour Market: Resilient or Rolling Over?”
Tactical Equity Outlook, 3rd July 2025:
“Equities: Short Term Turbulence Ahead, a.k.a. Temporarily Remove Tactical OW”
Monthly Global Asset Allocation No. 67, 2nd July 2025:
“US Small & Mid Caps: Buy Case Brewing, A.k.a. (still) a Two Tier Economy”
The SHORT VIEW (& market positioning), 1st July 2025:
“Gold: Golden No More”
Prior week:
Longview on Friday, 27th June 2025:
“All Over for the Bears? A.k.a. US Corporate Sector in Rude Health”
Monthly Global Asset Allocation No. 66, 27th June 2025:
“Japan: The Illusion of Lift-Off A.k.a. Reality Check (Bank Rally ≠ Boom)”
Longview Letter No. 149, 25th June 2025:
“Return of the Cyclicals a.k.a. From MAG7 to Macro”
The SHORT VIEW (& market positioning), 24th June 2025:
“OIL: What Next?”