If there’s ever been a make-or-break for the great Trump bull market, it’s probably this week — the week that SpaceX goes live on the public markets for the very first time. Investors went into the week pretty unsettled after Friday left investors pondering what to do over the weekend after semiconductors imploded, dragging down the entire stock market with it.
As it turned out, it was a good day to be diversified into the names beyond tech that many investors may have forgotten all about. Of course, it’s not just the looming SpaceX (SPCX) IPO and its $1.77 trillion valuation, but investors need to keep digesting the jobs data that just came hot off the shelf, and whether that makes interest rate hikes the new path forward for markets as Kevin Warsh takes his seat as Fed chair.
Of course, just because the jobs number came in hot and the odds of a rate hike rose as bond yields spiked, does not mean a new hiking cycle is a given. At some point, AI might cause some disinflationary pressure, especially once productivity gains across the economy are more apparent.
Add the desire for rate hikes despite inflation into the equation, and the possibility of coming to terms with hotter inflation for longer, and maybe it’s a bit too soon to think that the gravity of higher rates, perhaps much higher rates, is coming for stocks, most notably tech stocks.
It’s not yet over for the great bull market
As always, time will tell, but I do think that it’s not curtains for the latest leg of the Trump-era bull market, especially with Citi recently raising its price target on the S&P 500 to 8,100. That’s a high point, for sure, and, yes, AI is part of the reason for the target hike.
In any case, there’s a lot for the bears to get behind this week. The liquidity needs for the SpaceX IPO, the threat of higher rates, and a bit of fragility in the most overheated part of the tech sector have made for a rather uneasy time. At the same time, the Iran war, higher oil prices, more inflation, and unknowns surrounding AI CapEx are also reasons to hit that sell button.
In my view, though, the bull case might outshine the bear case, and it’s all about AI and its monetization potential. Even if a steep correction is overdue at some point, I think the Trump-era bull market has legs. And it might take it all the way to 8,100 before the year comes to a close. It all comes down to where exactly we lie on that AI monetization timeline.
Could we be further ahead? It’s definitely possible. The market’s resilience is remarkable, and I certainly wouldn’t get my hopes up for a breakdown of the bull run. Though, as always, it remains shrewd to be ready for the odd dip, even into a bear market, as investor sentiment can shift at the drop of a hat.
The bottom line
As some of the market’s biggest concerns get answered this summer, we’ll certainly see some action, whether it’s to the downside or the upside.
Will the SpaceX IPO be a liquidity drain? What about the OpenAI and Anthropic IPOs to follow? How about new Fed chair Kevin Warch? Though I’m bullish on stocks, I would fasten the seatbelt because a summertime sell-off may very well set the stage for the real show and a continuation of the bull market.
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