Wall Street rallies to new highs – But complacency creeps In as VIX drops below 15

• And the push higher continued. S&P kissed 6400.

• It’s a big TECH Earnings week and a bunch of others too.

• EU/US have a TRADE deal – 15% tariffs NOT 50%.

• Bonds UP, Oil down, Gold down.

• Try the Peach/Burrata Bruschetta.

Wall Street capped off the week with fresh all-time highs, fueled by strong corporate earnings, optimism around trade negotiations, and investor confidence that continues to defy warnings about overvaluation as the VIX continues to sink – down 3% - closing at 14.93 – a level last seen in December 2024. This suggests a level of complacency that is ‘screaming’ we are way overdue for a pullback.

The S&P teasing 6400 before ending the day up 25 pts or 0.4% this as we enter the busiest week of the ‘earnings season’. It’s RSI (Relative Strength Index) is now at 76.2131 or 8% above the overbot line (70), just sayin’! The Dow gained 208 pts or 0.5%, the Nasdaq added 50 pts or 0.25%, the Russell added 9 pts or 0.4%, the Transports gained 183 pts or 1.15%, the Equal Weight S&P up 37 pts or 0.5%, while the Magnificent 7 keeps marching higher — up another 131points, or 0.5% on the day.

Now you ask why? Well, it’s a convergence of factors – It’s a resilient economy, (think strong economic data), it’s a historically high rate of earnings beats (over 80% of S&P 500 companies that reported are ‘beating’ expectations), and signs of progress on key U.S. trade deals—including a pending agreement with the European Union* (more below). These tailwinds have helped investors brush off concerns over valuations and speculative excess, including the return of meme-stock trading (OPEN, DNUT, KSS, RKT, GPRO) and increased activity in low-quality names (this is always a RED flag).

The market's gains aren't without skeptics. Many are warning that complacency, FOMO (fear of missing out), and looser monetary and regulatory policies could sow seeds of instability. Bank of America sees ‘asset bubble risks,’ while Morgan Stanley warns investors not to be lulled by low volatility and rising prices. Sounds like they are mimicking my calls of late to be patient.

This week is packed with potential market moving catalysts: Ongoing big TECH earnings…think MSFT, META, AAPL, AMZN along with UNH, COIN, LLY, QCOM, V, PG, & BA. We have the latest Fed’s rate decision (Wednesday) – will JJ cave or not? Thursday brings us the June PCE Price Index (Fed’s favored gauge of inflation) while Friday brings us the July jobs report and an August 1st U.S.-EU trade deadline (although this appears to be a non-event now). Anyone of these could disrupt or fuel the rally.

While Trump’s recent meeting with Fed Chair Powell was low-drama it sparked more rate-cut talk. Trump pushed for lower rates (of course he did) while JJ gave no indication that that was happening. The ‘bookies’ are expecting the Fed to hold steady, while possibly signaling a September cut. The issue is that while inflation is benign, the labor market is strong, tariffs, which many expected to cause inflation to surge, have not and this might justify easing in the fall.

*And that ‘pending trade agreement’ is now a ‘massive’ deal – just ahead of the August 1st deadline. Over the weekend – Trump and European Commission President – Ursula von der Leyen announced a trade deal that imposes 15% tariffs (not 30, or 40 or 50% as many had feared) on ‘most’ of the exports coming out of the EU – Ursula tells the world that this deal will bring ‘stability and predictability’. In addition - The EU also agreed to spend $750 billion on American energy products while investing $600 billion in the US.

As you can imagine - there are 27 countries in the EU bloc and some of them are not happy. Stevie Olson – former US trade negotiator said.

“The EU sees value in a healthy, robust, and open North Atlantic trade relations; President Trump does not. The simple dynamic put the EU behind the eight ball throughout the negotiations.”

A major German lobby saying, ‘it sends a fatal signal to the closely intertwined economies on both sides of the Atlantic.’

Italy’s Giorgia Meloni holding back on commentary until she sees the ‘deal’ appears to be in favor of it. In the end – Ursula did say that ‘this was the best that we could get’ which sounds a bit negative – but let’s not get hysterical yet. This needs to play out. Expect all kinds of arguments – both pro and con - coming from all parts of the world around this latest headline. While this is far from over – it seems to be moving in the right direction, so the August 1st deadline is now OFF the table. (Negative catalyst removed).

Bonds — they rallied. TLT was up 0.6%, TLH +0.5%, and AGG +0.2%. The 2 yr is at 3.90%, the 10 yr is at 4.37% while the 30 yr remains at 4.91%. 30 yr conventional mortgages are now between 6.62% and 6.83%. 5 yr/6-month ARMS are now 6.03%.

Oil ended the week at $65.07 down 1.5% - although it was all over the place mid-week – as low as $64.70 and as high as $66.74. This morning it’s up 50 cts at $65.57. We remain below long term trendline support ($66.05). OPEC+ set up to increase production in August so that will put more pressure on prices unless of course demand remains robust. My sense is that we are in a tight range - $62.84/$68.14. If we break below $62.84 the next stop is $60. That said — let’s not forget, demand remains strong.

Gold fell by $35 or 1% to end the day at $3393 - as we moved into the weekend – ahead of the EU/US trade negotiation. This took it down and through trendline support ($3407). Did the gold bugs know something? Last Thursday we broke out of the APEX of the trend triangle and on Friday – we reversed course and broke down thru the APEX of the triangle. My sense is that if the trade deal is trade deal then we should see gold settle down a bit. We should find support at $3325.

And the VIX remains well into the complacent zone. For me that is a red flag that just says – slow down – be patient. Remember – you are invested, so if the mkt rallies – you are benefitting – put some money into your gov’t mm fund (earning you 4.25%) and wait for the pullback. Remember it is now August/September/October – it is usually a weak time for the markets – so no need to chase anything. And even IF JJ suggests a September rate cut is coming – it won’t be a surprise…the mkt is already pricing that in.

U.S. futures are up. Dow +70, S&P +16, Nasdaq +105, Russell +12. No surprise here – think EU/US trade deal. And remember – we still have the ongoing US/China trade deal negotiations taking place which are also moving in the right direction. It’s a big tech week – expect to hear more about the role that AI will play in our lives – next week, next month and next year.

And guess who else is UP? All of the European markets – Spain and Italy vying for the lead – up 0.9%, the Euro Stoxx + 0.85%, France up 0.6%, Germany up 0.4% while the UK is ahead by 0.1%. Now, while it is not signed, sealed, and delivered – the agreement was broadly in line with what the smart money had been betting. Now, while that’s all good – it is a big earnings week across the zone – so sit tight.

The S&P closed at 6,388, up 25 points. This morning’s action suggests we are going to push higher…. but I still think it feels a bit tired, so I am in the ‘be patient camp.’ Recall that the S&P is now ‘overbot’, the Nasdaq is overbot, the Mag 7 is overbot, now while the Industrials, the SMIDS and even the Transports are not overbot, any pullback by the broader market will take the whole place lower…. That tells me: sit back, don’t chase. Let the market come to you.

Grilled peaches/burrata bruschetta

This is a summer favorite. Simple to make and works well for a summer dinner outside on the deck or at the beach.

For this you need – a baguette sliced into rounds, thin sliced prosciutto, fresh burrata, ripened peaches, salt, olive oil, fresh thyme, and honey.

Begin by slicing the bread and brushing with olive oil.

Slice the peaches and set aside.

Now in a grill pan – heat it up and grill the bread slices on both sides. Set aside.

Now take the peach slices and grill those also in the pan. – just enough that you have nice grill marks on both sides.

Now place the peach slices in a bowl, season with a bit of salt and a splash of olive oil – toss to coat.

Now – take the bread – slice the burrata open to expose the creamy cheese inside. place a spoonful of the burrata on the bread. Top with a slice of Prosciutto and 2 slices of peaches. Drizzle with the honey, season with fresh thyme (just a little – not a lot) and serve.