$10 trillion and counting: Wall Street melts up as bears get steamrolled

S&P blasts to record highs: Panic fades, positioning takes over

What started as a narrow AI-led sprint has now evolved into a full-blown, cross-asset risk squeeze. The S&P 500 didn’t just retake its February highs — it torched through them with a nearly $10 trillion melt-up off the April lows. We’re no longer in bounce mode. We’re in response mode, and the market’s re-rating the whole playbook.

Yields are breaking down. The VIX has collapsed from a missile-crisis 52 to a yawning 16. And crude — the last holdout of the stagflation crowd — has folded, back down 20% year-on-year as the Middle East ceasefire sticks. That’s not just good for inflation optics — it’s oxygen for margins, credit spreads, and consumer resilience.

But the real tell? Financials are finally moving

This week, the Fed uncorked a stealth catalyst: a proposed rewrite of capital rules to lower the hit big banks take for holding Treasuries. Read that again. They’re basically telling banks: go ahead, warehouse more U.S. debt — we won’t ding your ratios. That’s a massive shift. It's not just regulatory relief — it’s an incentive to step back into the plumbing of the system. And traders got the message loud and clear. Bank stocks, long left for dead, ripped higher.

That’s what separates this move from Q1’s AI melt-up. Now the rally has breadth. Now it has rotation. This isn’t just about riding the silicon wave — it’s about positioning for regime change.

The market's reading the tea leaves. Powell may not have cut rates yet, but the curve’s already moved. Two cuts are fully priced for this year, with the third halfway baked in. Fed officials are doing the usual slow dance — “need more data,” “wait and see” — but PCE is expected to post the softest 3-month core run since pre-COVID. The floor’s in. Liquidity is loosening.

And that’s before you factor in Trump’s tariff smoke bomb. The July 8–9 “liberation day” deadlines that once had the market on DEFCON 2 now look more like a pressure valve than a detonator. White House spokespeople hit the wires overnight with language like “not critical,” “possibly extended,” and “President’s decision.” Translation: the tariffs might not land that hard — or if they do, they’ll come with 12-month off-ramps and more headlines than teeth. It’s textbook Trump: rattle the cage, then declare victory on the climb down.

Markets love that kind of chaos theater — especially when the real-world takeaway is reduced uncertainty. You slash volatility, you clear the runway for multiples to expand, and you let capital flow.

And that’s exactly what’s happening.

Retail’s back in with $3.2 billion in inflows over five days. High beta’s outperforming. Biotech’s stirring. Spec plays are catching a bid. Options flow is still hedged, fund managers are still light risk, and nobody really believes the rally. Which, of course, is why it keeps ripping due to forced buy-ins.

We’ve entered the part of the cycle where the pain trade is up — and it feeds on skepticism.

Systematic flows are fading — the CTAs and trend-following traders who dictated the tape for years are now working with limited capital and flat-out wrong signals. Their influence has been clipped. This is a human trader’s market again — headline-driven, event-reactive, positioning-sensitive.

It’s not about 20-day momentum or backtest-confirmed mean reversion setups. It’s about understanding that macro has teeth again, policy matters again, and regime shifts, not trends, are where alpha lives.

Currently, the regime shift is bullish. Not euphoric. Not delusional. Just tactically bullish in the face of easing financial conditions, softening inflation, and a Fed that's boxed into blinking.

You can fade this tape if you want. You can call it overbought. But you’re fighting dovish policy drift, capital rule tailwinds, collapsing energy costs, a tariff narrative that’s been neutered, and a positioning deck still tilted cautiously.

That’s not bearish. That’s fuel.

We're not asking for permission anymore — we're running until someone pulls the plug. And so far, no one has. Powell's still talking. Trump’s still tweeting. But the market? The market has already priced in the pivot and is now reaching for upside that nobody is prepared for.

This is a response-phase bull. It climbs the wall of disbelief. And it doesn’t ask twice

The FX market, unlike equities, is still voting with its “ Sell America” feet. And the question now is this: which market is telling the truth?

Is the stock market right — pricing in an AI-led productivity boom, falling inflation, where rate cuts arrive in a relatively resilient economy?

Or is the FX tape smarter — sniffing out structural risk, foreign capital flight, and a political wildcard that could reshape the Fed and rip the script on monetary independence?

It's a real-time Rorschach test for traders.

Some reversion players are already betting on a dollar snapback — arguing that if AI truly turbocharges productivity and growth, capital flows will chase US returns higher, pulling the dollar off the floor. They’re leaning into the “wink-wink” tariff framework: a hawkish setup that’s really just a negotiation bluff dressed in hardball optics.

Which brings us back to Trump’s tariff game.

We’re days away from the 90-day deadline tied to the so-called “liberation day” duties, and markets are starting to realize the emperor may be wearing a velvet glove. Suppose Trump extends the deadline by a year and institutionalizes a lower 10 % tariff regime. In that case, he gets the best of all worlds: a perceived policy win, $400 billion in new revenue, and — paradoxically — a reduction in global uncertainty.

Think about it. A one-year grace period forces trade partners to lower non-tariff barriers without blowing up supply chains. Businesses get planning clarity. Markets get a reprieve. And the administration gets to declare a strategic victory without lighting the global economy on fire. Maybe Trump hasn’t just bluffed the market — maybe he’s outplayed it.

If so, the equity market’s read is spot-on. A lower, longer tariff regime with a dovish Fed pivot and resurgent productivity from AI is the holy trifecta for a bullish re-rating. But if the FX market is right — and policy chaos, Fed interference, and capital flight win out — then the rally's riding on thinner ice than it looks.

The bottom line?

We’re in a divergence phase. Stocks are screaming recovery. The dollar’s whispering risk. One of them is mispriced. But in a world where policy is the market and perception is policy, the real winners will be the traders who can front-run the next narrative, not the last headline.

And right now, that narrative is shifting from “crisis averted” to “Trump may have pulled off the most expensive bluff in trade history — and markets are just starting to price it in.”

The View

S&P shrugs off tariff tantrum, buries April's doomsayers in new highs

The April doom loop crowd just got run over by the very market they swore was about to implode. The S&P 500 flirted with all-time highs again Thursday, gapping higher into a wall of recession chatter, soft macro, and Washington soap opera risk. For anyone who sold in April on Trump’s tariff tantrum, Powell succession rumors, or geopolitical “what-ifs”—the tape just wrote a brutal eulogy. This market didn’t just recover—it humiliated the bears.

And it’s not just tech driving the bus anymore. Energy, materials, and communications joined the melt-up party, a clear tell that positioning has started to chase beta. Small caps ripped. Junk rallied. Shorts got their faces ripped off for the third time this week. That’s not hedging—it’s capitulation.

Meanwhile, under the hood, the macro is still wearing slight bruises. GDP was revised down to -0.5%. Consumer spending? Limp. Durable goods were only up because of a Boeing freak Middle East plane buying spree. thanke to Trumpian “ Art of the Deal” The labour market’s telling two stories: initial claims look clean, but continuing claims are bleeding higher—worst since 2021. The trade deficit widened, with exports of industrial goods declining. In short: not recession, not reflation—just stall-speed mush.

Which is exactly why the market is ripping. The “just weak enough” data cocktail is intoxicating for a tape that wants cuts, not collapse. The rates market is screaming “ease or else”—with a 95% probability of a September cut and even a quarter chance priced for July. Treasury yields dropped across the curve. The 2s30s steepener is back in fashion. The 7-year just slid below 4% for the first time since early May. Real yields are leaking, and financial conditions are easing—whether Powell likes it or not.

And the dollar? It’s circling the drain. Four straight days of selling, failing hard at the 50DMA, and now making fresh lows not seen since Q1 2022. Suppose the equity market is pricing in optimism and stabilization. In that case, FX is flashing a warning about confidence, capital flight, or maybe just the sheer uncertainty of a Fed being slowly taken hostage by the Trump campaign. With Powell’s replacement possibly coming in Q3, the street is starting to front-run the idea of a shadow chair and an era of jawboned dovishness. Call it what you want—it’s driving flows into gold, crypto, copper, and equities. Not dollars.

The April panickers? They’re watching from the sidelines, wide-eyed, wondering how their crash thesis turned into an all-time high print. The market, as always, isn’t here to validate your worldview. It’s here to crush the consensus.

And right now, the consensus is still playing defence in a game that’s moved fully back to offence.