By Alex Financials

Market Context: Fed in Focus

As investor focus converged on the Federal Reserve’s interest rate decision, U.S. stock markets remained generally steady. The S&P 500 edged up ~0.2%, Dow Jones rose ~0.1%, and the Nasdaq gained ~0.4%.
Treasury yields climbed, with the two‑year note approaching 3.89%, reflecting strong Q2 U.S. GDP growth of 3%, which complicates the Fed’s rate cut considerations.

Bullish Sentiment Replaces Stagflation Scare

Earlier this year, fears of stagflation dominated sentiment. However, strong GDP data, robust earnings, and softened trade dynamics have ushered in a wave of optimism. Major banks like Goldman Sachs and BofA have revised up their forecasts, and 65% of global fund managers surveyed expect a soft landing.
Around 80% of S&P 500 companies have exceeded earnings estimates in Q2, further fueling confidence.

Retail Investors Driving the Rally

Retail investors have surged into equities, accounting for 12.63% of S&P 500 inflows—the highest since February. Over $50 billion flowed into global stocks from retail in the past month. Meanwhile, speculative trading in meme stocks like Krispy Kreme and GoPro has intensified.
Margin debt has now surpassed $1 trillion, raising concerns about market froth, especially if Fed policy shifts or earnings disappoint.

Trade & Tariffs: Shifting Narrative

Despite Trump-era tariffs peaking at 18.2%, markets have shifted focus to trade deals that limit further escalation. New agreements with Japan, the EU, and others have reassured investors—even as some tariffs persist.
These developments may be reversing earlier “Sell America” sentiment, boosting confidence in U.S. equities.

Earnings Spotlight: Tech & Consumer

Upcoming earnings from megacaps are center stage. Microsoft ($MSFT) and Meta Platforms ($META) report after the close today, with analysts expecting healthy revenue growth (~14% and 15%, respectively).
Other movers today: Starbucks ($SBUX) shares jumped ~4.6% after better-than-expected Q3 revenue; Visa ($V) fell ~2% despite solid numbers; and Palo Alto Networks ($PANW) saw its stock drop ~4.8% after unveiling a $25 billion acquisition of CyberArk.

Risks to Watch: Bubble Signals & Seasonal Weakness

Despite the rally, signs of speculative excess are emerging. A recent WSJ piece flagged bubble characteristics: stretched valuations, speculative assets like ARK Innovation funds, and rising retail frenzy.
Analysts from Evercore, Pimco, and HSBC warn valuations may be too optimistic and anticipate a possible seasonal correction between late July and September.

✅ Bottom Line

Markets are riding a wave of optimism driven by strong economic data, earnings beats, reduced tariff escalation, and a surge in retail investor activity. However, elevated valuations and rising speculative trading, paired with Fed uncertainty and typical seasonal headwinds, suggest investors remain on alert.