“It’s just like 1999.”

“AI is the new internet.”

“This will end like the dot-com crash.”

“At some point, this bubble will burst.”

Maybe.

But what if it doesn’t?

Or maybe a better question is this. What if the market doesn’t have to crash from here?

That doesn’t mean stocks can’t go down. They can. It doesn’t mean there aren’t speculative areas of the market. There are. And it definitely doesn’t mean every company connected to AI is worth buying at any price.

But somewhere along the way, “this looks like 1999” became “we know exactly what happens next.”

I’m not so sure. There are certainly similarities between today and the late 1990s. But there are also significant differences. And those differences matter more than people think.

The comparison everyone is making

The AI boom is naturally being compared to the internet boom. Honestly, that comparison makes sense. The internet was a transformational technology. It changed how we communicate, shop, work, and live. AI could do the same thing.

But here’s where the comparison usually takes a turn. People start by saying AI is like the internet. Then somehow that becomes, the internet ended in the dot-com crash.

Except that’s not really what happened.

The bubble ended. The internet didn’t.

Amazon survived. Google was born shortly before the peak and went public after the crash. E-commerce kept growing. Cloud computing came later. Social media came later. Smartphones came later. The technology behind the boom ultimately became even bigger than investors imagined.

The problem wasn’t believing the internet would change the world. The problem was what investors were willing to pay for some of the companies supposedly leading the change.

That’s an important distinction. Because today we’re looking at a similar question. Is AI transformational? I think most people would say yes. The bigger question is whether investors have gotten so far ahead of reality that the market has to come crashing back down.

Let’s look a little closer.

Start with the simplest measure

The P/E ratio. Price divided by earnings. Now vs then.

During the dot-com peak, investors were willing to pay dramatically higher multiples for stocks than they are today.

Look at what’s happening in each of these two windows. Into the March 2000 top, the S&P’s price and its forward P/E were rising together. Investors were paying more and more for the same dollar of expected earnings. That’s what a multiple expanding into a blow-off looks like.

Into today, the S&P’s price is up sharply too. But the forward P/E has actually come down over the same stretch. Investors are paying less for next year’s earnings, not more. Same direction on price. Opposite direction on what people are willing to pay for it.

As Matt Cerminaro put it:

“Investors were paying more for the earnings that were expected in 2000. Today they’re paying less.”

Same setup. Opposite behavior.

That distinction has been buried under a mountain of “it’s just like 1999” takes, and I think it deserves more attention than it’s getting.

I wrote about this exact question back in June, in Why This Isn’t Like The Dotcom Bubble. The numbers have moved since then. The conclusion hasn’t.

Zoom out to a full 30-year view and the same story holds. Tech’s forward P/E is essentially in line with the S&P 500’s today. In 2000, tech traded at roughly double the market’s multiple.

That gap at the 2000 peak, tech near 48x against the broader market near 24x, is a big part of what defined the bubble. There’s no gap like that today.

Look at what’s leading the market

This might be the biggest difference of all.

Think about the companies leading the market today. Nvidia. Microsoft. Alphabet. Amazon. Meta. Broadcom.

These aren’t companies promising that someday they might figure out how to make money. They’re already making enormous amounts of it. Hundreds of billions of dollars in revenue. Enormous profits. Massive free cash flow.

That’s very different from much of what investors were chasing at the peak of the dot-com boom. Even among the legitimate technology leaders of that era, valuations were in another universe.

Look at the gap between Cisco’s price and its earnings at the 1999 peak. That’s a bubble. Price completely detached from what the business was actually producing.

Now look at Nvidia. Price and earnings have moved together almost the entire way. Earnings are now running slightly ahead of price. That’s a company whose stock has been playing catch-up to its own numbers.

A company can trade at a premium valuation because investors expect strong growth. That doesn’t automatically mean investors are irrational. The question is whether the growth actually shows up. So far, for many of the companies leading the AI buildout, it has.

Nvidia is the cleanest example of this, because it’s the company everyone wants to call the new Cisco.

Nvidia’s forward P/E sits at 17.1x. That’s below its own five-year average. The largest company in the world is growing so fast that its valuation is actually getting cheaper, not more expensive. That’s not what happened with Cisco.

Yes, the market is concentrated

Now let’s be fair. There are real similarities to the dot-com era, and market concentration is one of them. A small number of enormous companies account for a huge percentage of the S&P 500. That’s true.

But concentration alone doesn’t tell you whether something is a bubble. The better question is how much of the profits those companies are generating. There’s a big difference between a company representing 10% of the market while generating 2% of the profits, and a company representing 10% of the market while generating 10% of the profits. Those are two completely different situations.

Look at the gap between the two lines at the 2000 peak. Tech’s share of the market’s value ran far ahead of tech’s share of the market’s earnings. All that white space between the lines was investors paying for a promise.

Today those two lines are nearly on top of each other. Tech’s share of market cap, 37.1%, is almost identical to tech’s share of forward earnings, 35.5%. Today’s largest companies are incredibly valuable. They’re also incredibly profitable. The market’s weighting is following the earnings rather than running ahead of them.

What if we’re still early?

What inning are we in? Second? Third? Nobody knows, and anyone who tells you they do is guessing.

AWS, Azure, and Google Cloud all grew faster in their most recent quarter than the one before it, 37%, 43%, and 82% respectively. That’s hardly what you’d expect to see from a technology trend already running out of steam.

But look at what’s happening right now. We’re still building the infrastructure. Data centers. Chips. Networking. Power. Cloud capacity. Billions and billions of dollars are being spent building the foundation for AI.

The internet didn’t stop at infrastructure. The first chapter was building the foundation. The next chapters were the applications built on top of it, search, e-commerce, social media, mobile, cloud computing, entire industries created years after the original dot-com bubble burst.

So what happens if AI follows a similar path? Software. Robotics. Healthcare. Autonomous systems. Scientific discovery.

And businesses that probably haven’t even been created yet.

Maybe we’re in the third inning. Maybe the seventh. I have no idea. But the fact that everyone can see the potential for a bubble doesn’t mean one has to burst tomorrow.

What if the scary charts are right?

Here’s the thing. Some of the charts are scary. You can overlay parts of today’s market with the late 1990s and make them look remarkably similar.

At the same number of days after launch, the Nasdaq’s ChatGPT-era gain of 141% is actually running slightly ahead of its Netscape-era gain of 128%. If you wanted a chart that supports the bears, this is it.

But look at what the Netscape line does after this point. It still had roughly two more years of parabolic rise left before it finally topped in March 2000. So even if you believe this chart, you still have to explain why this rally would need to top now, rather than one year or two years from here. “It looks similar so far” is not the same argument as “it has to end here.”

Maybe this ends badly. It certainly could. But there’s another possibility. What if the chart is right about the technology but wrong about the timing? The dot-com bubble is often used as evidence that transformational technology eventually ends in disaster. But that’s not really what happened. The bubble burst. The technology kept going. And eventually the companies built on top of that technology became some of the largest and most valuable businesses in history.

Maybe that’s the better lesson. It was never about whether to believe in the technology. It was about what you paid for it.

So, what if this isn’t a bubble?

I’m not writing this to tell you the market can’t fall. It can. I’m not writing this to tell you valuations don’t matter. They do. And I’m definitely not telling you to ignore the risks around AI spending, concentration, or expectations. Those risks are real.

Maybe this is a bubble. Maybe it isn’t. Maybe the market corrects tomorrow. Maybe some of the enormous bets being made on AI turn out to be spectacular mistakes. That’s possible.

But so is the alternative. What if earnings keep growing? What if the companies building this infrastructure today turn out to be laying the foundation for the next decade of economic growth? What if we’re still much earlier in this story than most people think?

The market doesn’t have to crash simply because everyone expects it to. And a chart that looks like 1999 doesn’t mean the calendar has to say March 2000 next.

Maybe this is a bubble. Or maybe we’re still watching the beginning of something much bigger. And maybe the better question isn’t whether this looks like 1999.

Maybe the better question is, what if it doesn’t?

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Here’s what I’m looking at today.

• The Market Looks Fine. Underneath, It Doesn’t.

• What to Own If Rates Keep Climbing

• Commodities Are Sending a Signal

• The Most Bullish Chart on Software

• A Mag 7 Shift?

• The Most Shorted Stocks in the Market

• Moves I’ve Made

Thanks for reading Spilled Coffee. Let’s get into it.

Eric

It was another solid week for stocks. The S&P 500 and Nasdaq notched their 5th positive week out of the last 6. But underneath the headline numbers, there’s quite a bit more going on.

The S&P 500 closed at 7,719, up a modest 0.1% on the week and still sitting on a 12.8% YTD gain. Nasdaq led again, up 0.4% and now up 14.1% for the year. The Dow lagged, down 0.3% on the week but still up 11.1% YTD. Small caps keep quietly outperforming. The Russell 2000 is up 19.0% YTD.

The bigger story might be commodities. Crude oil ripped 9.4% higher this week, its best week since July, and is now up a wild 57.4% YTD. The 10-year Treasury yield moved up 1.4% on the week, now at 4.78% and up 14.9% YTD. Gold barely budged, down 0.2% on the week, up 2.5% YTD. Bitcoin bounced 2.7% this week but is still down 8.8% YTD.

Market Recap

Weekly Heat Map of Stocks

Sentiment Check

The bulls are finally making a comeback. It’s the most bullish since July 15th.

The Jobs Report Was a Surprise

The economy added 162,000 jobs in August. The estimate was 53,000. That’s almost triple what economists expected, and it’s the kind of number that resets the whole conversation about where the labor market actually stands.

But the headline number isn’t even the most interesting part. Look at where those jobs came from. Leisure and hospitality alone added 62,000 jobs, the most since February 2023.

That is a pretty remarkable reversal. After months of weakness, one of the most consumer-facing parts of the economy suddenly added jobs at a pace we haven't seen in more than three years.

On the surface, this should increase the odds of an interest rate hike at the Fed’s September 16 meeting. And it has. Markets are now putting roughly a 60% probability on a hike, up from around 50% before the report.

You’ll hear plenty of talking heads over the next week say the Fed has to raise rates.

I won’t be paying much attention to that.

I think they should raise rates. I just don’t think they will.

The data is giving the Fed a pretty good reason to hike. The economy just added nearly three times as many jobs as expected, unemployment remains at 4.1%, and the labor market doesn’t look like it needs an emergency dose of lower rates.

But the Fed still has one more important piece of information to digest before September 16.

Inflation.

CPI comes out Friday.

And that’s the number I’m watching.

The Market Looks Fine. Underneath, It Doesn’t.

The index itself still looks calm. Grind higher, new highs, nothing to see. But look at what’s happening underneath that headline number and the picture gets more interesting.

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Maybe it’s because the start of another school year makes it impossible to ignore. Another summer is over. Another year has passed. My kids just started 3rd and 5th grade.

I swear they were just starting kindergarten. Now we’re talking about middle school.

They’ve also reached the age where sports take up a huge part of our lives. My daughter plays soccer. My son plays basketball and football. So we spend a lot of time in gyms, on soccer field and standing on the sidelines. Hours every week.

And I love it.

But I also know we won’t get those hours back.

We’re also in the process of buying a cottage. That has me thinking about all the things I want to do with my family while we’re still at a point where everyone wants to do them together.

I’ve also started noticing more gray in my hair.

None of this slows down.

In fact, it seems to speed up.

We’d all love to make time stand still, but we can’t.

And that’s what got me thinking about money.

Because I think we have the wealth curve backwards.

We spend much of our lives trying to accumulate money so that someday we’ll have the freedom to enjoy it.

We save. We invest. We work. We defer.

We’ll take that trip later. Spend more time with the kids later. Slow down later. Enjoy ourselves later.

Later, when we have more money.

Later, when we retire.

Later, when the mortgage is paid off.

Later, when work isn’t so demanding.

There is nothing wrong with saving. Quite the opposite. Saving and investing are among the best things you can do for your future self.

But somewhere along the way, future becomes the destination.

And I’m not sure it should be.

Think about the curve.

When you’re young, you generally have the most time and energy but the least money. Later you have more money and hopefully plenty of time and energy. Eventually you may have more money than ever but less time than you once did.

And you may not have the same energy or physical ability either.

So we spend decades sacrificing years when have the most time and energy. Assuming we’ll make up for it later.

But later isn’t guaranteed.

That’s the part that we don’t like to talk about.

We know it intellectually, but most of us don’t live as though we believe it.

We keep moving the finish line.

When I have $1 million.

When I have $2 millon.

When I retire.

When the kids are out of the house.

When the business is running itself.

When I finally have enough.

But what is enough?

And what exactly are you saving all that money for?

That’s the question I think we should ask more often.

Because there are things money buys that get better with time.

A bigger portfolio. More financial security. More choices. More flexibility.

But there are also things money can’t buy back.

Your kids being 8.

Or 10.

Or 12.

Your parents being healthy enough to travel.

Your knees working the way they used to.

Taking a trip with your family when everyone still wants to go.

Those things have an expiration date.

You don’t get to put them on hold and pick them back up at 70.

This doesn’t mean you should stop saving for retirement. It doesn’t mean you should spend recklessly. And it certainly doesn’t mean tomorrow doesn’t matter.

Tomorrow matters enormously.

That’s why we invest.

But today matters too.

There has to be a balance between building wealth for the future and actually using some of what you’ve built along the way.

I’ve thought about this more as I’ve gotten older.

Maybe it’s the kids getting older. Maybe it’s the gray hair. Maybe it’s buying a cottage and thinking about all the memories I hope we’ll make there.

Or maybe it’s simply realizing that time feels different now than it did 20 years ago.

When you’re 20, a year feels like forever.

When you’re 40, you blink and another year is gone.

And somehow, it feels like it’s getting faster.

That’s why I don’t think the goal should be to accumulate as much money as possible and then finally start living.

The goal should be to use money to make your life better along the way.

Take the trip. Go to dinner. Leave work early. Take the kids to the playground. Buy the nicer bottle of wine. Visit the people you love. Use the vacation days.

Whatever it is for you.

I’m not suggesting any of those things are financially optimal.

That’s kind of the point.

Life isn’t a spreadsheet.

There is a return on experiences that doesn’t show up in your brokerage account.

And there is an opportunity cost to waiting forever.

We talk constantly about the power of compounding when it comes to money.

Invest $10,000 today and let it compound for 30 years.

Of course.

But life compounds too.

The memories you make become part of your family’s story. The meals become stories. The trips become stories. The random Tuesday night at the cottage becomes a story you’ll remember years from now.

Money compounds. So do memories. But only one of them has a deadline.

So save for tomorrow. Invest for the future. Build wealth. Absolutely.

But don’t spend so much of your life preparing for a future that you miss the life happening in front of you.

Because someday, you may have more money than you know what to do with.

You may have the house paid off. You may have the retirement account you always wanted. You may finally have the time.

But your kids won’t be 8 anymore.

They won’t need you standing on the sideline.

They won’t ask you to come watch them play.

And you won’t be able to go back and buy those hours, no matter how much money you have.

There is a point when another $100,000 won’t change your life nearly as much as another year would.

Maybe the real goal isn’t to maximize the amount of money you have at the end.

Maybe it’s to build enough financial freedom that you can actually enjoy the middle.

The sidelines. The 3rd grader and the 5th grader. The cottage. The gray hair creeping in.

That’s the middle. That’s happening right now.

This window doesn’t stay open.

Walk through it.

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I made a move in my portfolio today, and I’m taking an updated look at how it’s doing.

It’s been a strong year so far. The portfolio is up 17.51% YTD vs 12.07% for the S&P 500. I’m on pace to beat the index for the 8th time in 10 years.

First, here’s the name I added to today.

Read more

Outside of stocks, the story was more interesting. Oil dropped 4.2% on the week. Gold fell 2.6%. Bitcoin slipped 1.5%. The 10-year ticked down slightly to 4.72%. Risk-off in commodities, risk-on in large-cap equities. Not the pairing you’d expect.

Market Recap

Weekly Heat Map of Stocks

Sentiment Check

The bears have now outnumbered bulls for six straight weeks. This is the highest level in 11 weeks. That’s despite the S&P 500 continuing to make new all-time highs during that period.

Global Equity ETFs

Looking to September

Bad news for the bears. We’re set to close out August with a double-digit YTD gain. That’s only happened 20 times since 1950. And history says it’s not the setup people think it is.

In every one of those 20 years, only one time did the S&P see a double-digit drawdown the rest of the year. One time out of twenty.

Now let’s talk about September specifically, because I know that’s the month everyone loves to be scared of.

Turns out the worst Septembers on record almost always had a tell. Nine of the ten worst Septembers ever came into the month with the S&P already negative YTD. We’re not negative. We’re up double digits.

Flip it around and the pattern holds. The best Septembers tend to walk in with strength already behind them, not weakness. And five of the best Septembers on record happened during midterm years. Which is exactly where we are right now.

None of this means smooth sailing though. Seasonally, volatility tends to pick up right about now, and this year hasn't given us much of it yet. The setup for a flare-up is there. Fed decisions, Jackson Hole, bond yields, geopolitics, midterms, or something nobody's even talking about yet. The good news buried in that seasonal script is simple. Even when the fall gets bumpy, seasonality typically turns positive again heading into year-end.

And if we do get some chop, there's a decent argument it won't be as bad as past pullbacks. Since the tariff crash in early 2025, every dip along the way has been shallower than the one before it, almost cutting the prior drawdown roughly in half each time. We're sitting less than 1% off new all-time highs right now, so even a correction from here starts from a position of strength.

Put it together and September looks less scary than the calendar makes it feel. Strong YTD gains, a midterm year, and a market that's been healing its own drawdowns faster each time it dips.

My Best Investing Day in Years

Read more

But I ended on a question.

What actually stops one?

Here are all the wrong answers. The ones you hear all the time.

Old age.

A magazine cover.

A round number on the S&P 500.

Rising interest rates.

Oil Spiking.

A hedge fund blowing up.

A scary headline out of Washington or overseas.

None of those, by themselves, kill a bull market. They rattle it for a week, sometimes a month, and then it keeps going. If you sold on any of those in the last three years, you sold too early.

Here’s what actually does.

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Small caps got hit hardest, with the Russell 2000 down 1.7% on the week, though it’s still up over 20% year to date. Bonds moved too, with the 10-year Treasury yield climbing to 4.74%.

Outside of equities, oil jumped 5.2% this week and is now up nearly 50% year to date. Gold notched its third straight week of gains, closing at $4,662. Bitcoin was the standout, up over 20% on the week, though it’s still negative for the year.

Market Recap

Weekly Heat Map Of Stocks

Dow Performance

Sentiment Check

This now makes it 5 weeks in a row of more bears than bulls.

Sector Breadth

% of stocks in each sector at their 4-week and 52-week highs.

Where The Market Stands

The percentage of S&P 500 stocks trading at least 10% below their 52-week highs has fallen to 49.5%. That’s the lowest reading since March. That’s a healthy signal for a market sitting just 2% off its all-time high.

Here's the seasonal wrinkle though. In midterm years going back to 1990, the S&P 500 equal weight has historically peaked around August 18th. That’s followed by a roughly 8% average pullback into October.

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You’ve heard it. And I know you’ve thought it too. Don’t deny it.

Thursday was a historic day for the stock market. The S&P 500 crossed 7,800 for the first time, making its 27th all-time high of 2026.

Yes, there will eventually be a top. The bull market will eventually end. They all do.

But the key word in that sentence is eventually. That makes it a great time to look at what history actually says about bull markets like this one.

A new all-time high sounds rare. They aren’t. At least in bull markets.

Look at all the zeros. 2001 through 2006 are all goose eggs. 2009 through 2012. Nothing!

Bear markets are where all-time highs go to die. Bull markets are where they pile up. 27 all-time highs in 2026 during a bull market isn’t unusual. It’s what bull markets do.

This bull market turned 3.8 years old this year. That’s not old. It’s actually younger than the historical average.

The average bull market since 1949 has run for 5.6 years. And there is a pattern here worth knowing. Once a bull gets past 3 years old, it tends to have a lot of road left. This bull market has already cleared that mark.

Want a chart to pull out at the dinner table for all the doomer and gloomers? Or for all the permabears out there?

Bear markets have made up roughly 21 of the past 95 years in S&P 500 history. That means that stocks have been in a bull market roughly 78% of the time. Call it 4 years out of every 5. That’s not a coin flip. That’s a deck stacked in your favor, if you can stay invested.

Age is one measure. Magnitude is another.

The S&P 500 is up almost 117% since the bull market began on October 12, 2022. That ranks 5th of the 8 bull markets since 1966.

A 117% gain sounds enormous. And it is. But history says that doesn’t necessarily mean the bull market is running on borrowed time.

The chart above covers every individual bull market run. If we zoom out a bit father, it gets more interesting.

This chart shows the length and magnitude of bull and bear markets.

We’re not just in a cyclical bull market. We’re also in a secular bull market that began back in 2009. That’s 17 years and still counting.

Even at 17 years this secular bull market is only up 10.51x from where it started. The last one 1978 to 2000 ran to 17.44x before it topped.

We know that this doesn’t mean smooth sailing. That doesn’t exist in investing. Corrections will always happen.

Just don’t mistake new all-time highs as warning signs. Being bullish in a bull market doesn’t label you as a permanent bull. It just means that you know history.

So then what actually stops a bull market?

Not age.

Not S&P 7,800.

Not S&P 8,000.

Not even a 100% gain.

Something more important does.

I’ll go over that next Wednesday.

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That combination is the core of the bear case in two headlines. The fear on Uber has never been about ride growth or delivery margins. It’s been that Uber becomes irrelevant the moment autonomous vehicles scale, that it’s just the middleman standing between riders and robots that don’t need a middleman. Both of those headlines in the same week said exactly that out loud.

You’d expect a stock built to hat fear to sell off double digits on news like that. It didn’t. It dipped and to by much. Then Uber reported earnings, dipped again on the print and climbed back within days.

That tells you something real. The stock has already been derisked. The autonomy fear isn’t a surprise anymore. It’s priced in and has been for a while. Uber was already down 17% year to date heading into the quarter that beat on bookings, EBITDA, and free cash flow.

I keep thinking about Google here. Not long ago, the market had basically written Google’s obituary. Search was supposedly dead. AI was going to eat it alive and the stock traded like a company in decline. That narrative aged badly.

I’m not saying Uber’s outcome has to rhyme with Google’s. Nobody knows that yet. But sometimes the market prices in the disaster case long before the disaster actually happens.

Readers have been asking for of my actual thought on specific names like this one. I’ve done a couple deep stock dives recently on CrowdStrike and Netflix. But they take time to put together, so they don’t come out as often as I’d like. This is the first in a new format that I’m building for exactly that.

If you’ve got 30 seconds for the rest, read the One Cup below. If you’ve got five to ten minute, keep going. This is where the actual work is.

Either way, thank you for being here. Spilled Coffee is growing and it’s one of the top newsletters out there because of you the reader, not because of me. So genuinely, thank you.

One Cup ☕️

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It wasn’t just mega-caps leading the way. The Nasdaq led at 4.7%, the Russell 2000 wasn’t far behind at 3.2% and even the Dow finished up 1.8%. Gold had its biggest weekly gain since January, up 8.7%, even as stocks ripped right along with it, an odd combo. Oil was the lone outlier down 9% on the week. About as clean of a risk-on week as you’ll see.

Market Recap

Weekly Heat Map Of Stocks

Sentiment Check

This now makes three weeks in a row of more bears than bulls. It’s quite surprising with the market at all-time highs.

The Setup

A few numbers worth visiting before we get to the good stuff.

Since 1950, buying the S&P 500 at the start of August in a midterm year has been positive 100% of the time. One year later, the average return is north of 19%.

Breadth back this up too. 57% of S&P 500 stocks are beating the SPY this year, the best reading since 2013. A sharp turn from the 30% and 33% reading that we saw in 2024 and 2025.

And under the hood, the percentage of S&P 500 stocks trading above their 200-day just snapped higher again at over 72% and climbing.

Was That The Market Reset?

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They offer useful context and highlight trends that could matter in the months ahead. I think readers of Spilled Coffee will get a lot of value from them.

Let’s jump into the charts. There are a number of them.

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The one note of caution came from the bond market, where the 10-year Treasury yield jumped 1.4% to 4.75%, its highest level in over a year, as investors grew less confident the Fed can keep inflation in check. In commodities, oil pulled back 2.8% to $86.80 but is still up a massive 50.0% year to date. Gold was little changed at $4,099, and Bitcoin slipped 1.3% to 62,905, leaving it down 28.1% on the year.

Market Recap

Weekly Heat Map Of Stocks

Sentiment Check

The bears remain firmly in control.

Best Performing S&P 500 Stocks YTD

Worst Performing S&P 500 Stocks YTD

The Calendar Turns Against You

Read more

Oil remains the main story. Up 9.6% on the week and now up 56% on the year. A hard number to ignore. Treasury yields moved higher too, with the 10-year jumping over 2% for the week alone.

Market Recap

Weekly Heat Map Of Stocks

Sentiment Check

Bullish sentiment fell 15%. That’s the lowest bull reading since September.

The Dow Components Update

The Bigger Picture

If you zoom out, the market is still sending some rather bullish signals.

Since March 30th, 46% of S&P 500 companies have made a new 52-week high. That number has risen from a recent 35%.

That’s a huge chunk of the index participating in this rally, not just a handful of names. That would explain why the S&P 500 is still only a few percentage points away from all-time highs.

Let’s break it down by sector and it gets even more interesting.

Energy, staples and real estate lead on the high side. Energy really stands out, zero percent of energy stocks are at lows across any single timeline. Not one. I’ll discuss energy more in a bit.

Technology tells a different story. Only 13.5% of tech stocks are at a 4-week high, but 44.6% are at 4-week lows. That’s the highest reading on the entire lows table. This is important and worth watching given how much tech drives the market, sentiment and the news headlines.

Money also continues to pour into equities at a pace that’s hard to wrap your head around. YTD equity flows are blowing away every historical comparison, running at more than double the pace of 2021 and 2025 at this same point. This year isn’t close to any other year on record.

Alphabet Just Raised The Stakes

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Everyone thinks that they know what happens next. Sports and investing are the same game that way. Nobody knows. That’s why we watch. That’s why we invest.

Eventually this bull market will end. I don't know when. You don't know when either. Nobody does. That's the point.

I’m a known bull. You know that about me by now. So take the next thousand words with whatever grain of salt that you want to take them with. But I didn’t get here on vibes.

I’m not asking you to trust my gut.

I’m asking you to trust my math.

The S&P 500 closed today at 7,509.

10,000 isn’t a headline I’m writing for clicks. It’s arithmetic. Let’s do it together.

The Gap Isn’t What You Think

From 7,509 to 10,000 is a move of 33.2%

Round numbers get treated like some distant mountain peak. Far off. Foggy. Maybe not even real. It's not. It's a percentage. So let's run it like one.

• At 8% a year, roughly the market’s long run average before dividends, you’re there in about 3.7 years

• At 10% a year, you’re there in right around 3 years

• At 12% a year, a good stretch but nothing we haven’t seen plenty of times, you’re there in about 2.5 years

That's a few years from now number, not a someday, maybe number. This is the part that gets lost every time a round number shows up in a headline. Nobody does the actual math. They just react to the zeros.

Or It Could Happen Faster Than You Think

Here’s the part that made me want to write this today instead of waiting.

The 8 to 12% math above assumes something close to average. But the S&P hasn't exactly been average lately.

Look at the last nine calendar years. Five of them, 2017, 2019, 2021, 2023, and 2024, closed with the index up more than 20%. That's better than half. Big up years haven't been some rare event you tell your grandkids about. They've basically been the house odds of late.

Run that forward instead of the long run average. Stack two years like 2023 and 2024 back to back, up 24.2% and 23.3%, and you're compounding to a 53% gain in two years. From 7,509, that clears 10,000 with room to spare. Get just one year like 2023 alone and you're sitting around 9,324, needing another 7% to finish the job, which could show up in a matter of months if the tape cooperates.

So the honest range isn’t 3 to 4 years. It’s as soon as 12 to 18 months if we get another year or two like the ones we just had, and probably no more than 4 years even if things slow back down to average.

Yes, there were bad years mixed in there too. 2018 was down. 2022 was ugly. That’s the deal. Nobody hands you the good years without the bad ones attached. It’s the price of investing.

But the person who sold in 2018 or 2022 missed every single one of the big years that came right after. That’s the actual lesson in that table, not the up years or the down years in isolation, it’s that you have to stay in the market.

We’ve Done This Dance Before

People act like round numbers are rare. They’re not. They just get closer together in percentage terms as the index gets bigger, even though the dollar gap looks scarier.

Here’s the actual history, not the vibes version.

The S&P first closed above 1,000 on February 2, 1998. It took until August 26, 2014 to close above 2,000. Sixteen and a half years for that one.

Then it started moving. 3,000 came July 12, 2019, under five years later. 4,000 came April 1, 2021, under two years after that.

Then it really started moving. 5,000 hit February 9, 2024. 6,000 hit November 11, 2024, about nine months after that. 7,000 hit in the spring of 2026, roughly a year and a half later.

1,000 to 2,000 = +100%
6,000 to 7,000 = +16.7%

Same headline. Completely different amount of work.

That’s the trick round numbers play on people, and it’s why 10,000 sounds so much scarier than up 33% from here, even though they’re the exact same thing.

This isn't a forecast. It's a probability exercise. The path won't be straight, and nobody knows the timeline. The point is simply that 10,000 requires far less than most investors assume.

What Would Actually Have To Go Wrong

I’m not going to sit here and pretend there’s no case against this. There’s always a case against this. That’s the whole first line of this post.

Plenty could slow this down. Sticky inflation. Higher rates. AI spending disappoints. Recession. Valuations compress. Those are all real risks.

I’m not brushing any of that off. It’s all real. It’s all worth thinking about.

But none of it kills the math above. It just changes which line you land on. Even the slow, higher for longer, multiple compression path still gets you to 10,000 in well under a decade at a mediocre growth rate. The honest bear case here isn't that we never get there. It's that it takes longer than the fast case.

And that path, even the fast one, was never going to be a straight line. Remember that chart above. The S&P has averaged an intra-year drop of 14.2% going back to 1980, and it still finished positive in 35 of the last 46 years. That’s 76% of the time.

The people who miss the big years aren’t the ones who guessed wrong about the economy. They’re the ones who got off the roller coaster during one of those normal, average, 14% dips and never got back on before it turned green again.

The One Thing I’d Tell You

Stop asking whether 10,000 is realistic. It is. The math says so. The history says so.

Start asking yourself a different question instead.

Are you actually going to be in the market when it happens?

Or are you going to be the person who spent years waiting for the perfect entry? Or worse, the person who finally got shaken out during a perfectly normal dip, right before the recovery.

The market gives you reasons to sell every single year. It also finishes green in 3 out of every 4 of them anyway.

Play your own game. Buy your stocks. Let the math do what it’s done every single time before.

10,000 isn’t a prediction. It’s what happens if you just stay in the game long enough.

The only question is whether you’ll still be playing it.

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Chip stocks and AI names led the damage. The Nasdaq took the brunt of it, down 2.9%, while the Dow held up better at -0.9%. Classic rotation out of momentum, not a broad based selloff. Small caps actually shrugged it off better than the majors, with the Russell 2000 down just 0.5% and still sitting on an 18.5% YTD gain, best of the bunch.

The 10 year yield slipped, oil ripped 14.5% on the week, and Bitcoin actually gained 2.6% even as stocks sold off. Gold was the outlier, down 2% despite the equity weakness.

Market Recap

Weekly Heat Map Of Stocks

Sentiment Check

The bulls return!

Inflation’s Surprise Cooldown

Zoom out and you can see just how rare this is. A decade of monthly core inflation readings, and June actually printed negative, only the second time that’s happened since 2017. Everything else on this chart sits comfortably above zero.

Now the headline numbers. Prices rose 3.5% year over year, a sharp step down from May’s 4.2% and well under the 3.8% Wall Street was bracing for. That’s the fastest one month deceleration since April 2020. Not a typo. Strip out food and energy and core inflation landed at 2.6%, down from 2.9% in May and under the 2.8% consensus call.

Cheaper gas drove a lot of this. On a monthly basis, headline prices actually dropped 0.4%, the steepest single month decline since May 2020. Energy alone dragged the print down by nearly half a point.

But I don’t want to hand this whole print to energy. Gasoline fell almost 10% in the month and did the most damage, but a handful of other categories chipped in too, apparel, electricity, even motor vehicle insurance all came in negative.

Here’s the part that actually gets my attention. Core CPI barely budged month over month, coming in flat and missing the +0.2% estimate by a wide margin. And it wasn’t just one category dragging the number down, shelter and medical services both cooled off too. A single soft reading here or there is noise. When shelter, a number that almost never moves, starts rolling over alongside everything else, that’s a trend the Fed has to take seriously.

Markets clearly agreed, odds of a July hike backed off fast on this release. If the next couple prints confirm this isn’t a fluke, the rate conversation shifts from “how high” to “how soon do they cut.”

Did You Write Off The Mag 7?

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Lately the pile has been leaning one direction. Bearish.

I started saving them. Not because I’ve flipped. Regular readers know where I stand. I’ve had a 7,900 S&P target on the board all year and I’m still holding my Mag 7 names. But a chart shows up in my inbox often enough and it earns a second look.

So here they are. All in one place. No spin, no cherry picking to make a point. Just the data that’s been landing in my inbox, organized so you can see it the way I’ve been seeing it.

Let’s start with the one that got the most attention.

The Money Is Changing Hands

The chipmakers building the AI boom and the companies paying for it are heading in opposite directions on the one number that matters most. Cash.

Nvidia, Micron, Broadcom, and Applied Materials are on pace for a combined $430 billion in free cash flow over the next year. That’s more than triple what they generated two years ago.

Meanwhile Amazon, Alphabet, Meta, Microsoft, and Oracle are about to see their combined free cash flow go negative. First time that’s ever happened. Two years ago these same five companies were throwing off $260 billion.

The chipmakers are getting paid. The hyperscalers are the ones paying, and it’s showing up on their books.

Most of that hyperscaler spending is going right back to each other. Buying compute, leasing data centers, funding partnerships. It’s a lot of capital moving in a circle. That works great as long as the demand on the other end shows up. If it slows even a little, a lot of balance sheets get exposed at the same time.

And that spending isn’t a side story anymore. It’s holding up the whole economy.

AI investment, meaning software, data centers, R&D, and equipment, is now responsible for more than a quarter of US GDP growth. That’s the biggest share on record. For every four dollars the economy grows, better than a dollar of that is AI capex.

AI spending itself is running near 8% of GDP. During the Dot Com bubble, tech spending topped out around 6.5%.

The US economy has quietly become an AI spending story. If that spending slows, this stops being a stock market conversation and becomes a GDP conversation.

The Technicals Are Getting Loud

Semiconductors have led this entire market higher. They’ve also gotten extended in a way that’s only happened a handful of times in history.

Over the last 50 trading days, the Philadelphia Semiconductor Index has moved an average of 3.36% a day. Up or down, doesn’t matter, that’s just how much it’s swinging daily. The only other stretches with this much daily movement were the runup and crash of the Dot Com bubble, the depths of the Financial Crisis in 2008, and the COVID crash in 2020.

Big swings aren’t inherently bearish. But this is the company this chart keeps. Every other time we’ve seen this level of daily chop, something big was already breaking.

On top of that, semis are trading well above their own trend, at a level that’s only really been matched once before. Right at the top in 2000.

And the smart money knows it’s stretched, they’re piling in anyway. Hedge funds bought more US semiconductor stocks last week than in any week in at least three and a half years. That followed the two biggest weeks of selling since 2024. Semis now make up 10% of total hedge fund exposure, double where it was a year ago, though still shy of the 14% peak hit back in May.

Hedge funds are betting the selloff already happened and it’s over. That’s a crowded bet either way it goes.

One more worth sitting with here. Margin debt, going back to 1960, tells a strange story. It’s not the level of margin debt that’s ever marked the top. It’s the turn.

Look at 1972, 2000, 2007, 2021. In each case, margin debt growth climbed into a danger zone, then rolled over. That rollover is what lined up with the market topping out, not the high reading itself.

Right now margin debt growth is sitting at 54%, deep in that same danger zone that’s preceded every major consolidation on this chart. It hasn’t rolled over yet. History says that’s the number to watch, not the one we’re looking at today.

Valuations Have Stopped Being a Footnote

Here’s the one I keep getting sent more than any other. The Shiller PE ratio, which smooths earnings out over ten years to strip out the noise, is one tick away from taking out its all time high. Set during the Dot Com bubble.

Valuation alone has never been a great timing tool. Stocks can stay expensive for a long time before anything happens. But expensive and as expensive as the most infamous bubble in modern market history are two different conversations.

The gap between what the market is trading at today versus what it’s projected to earn next year is also about as wide as it’s ever been. Trailing PE sitting near 28x while forward PE sits closer to 21x. That spread has only been this wide twice before. The Dot Com peak, and the 2022 bear market.

A wide gap like that means the market is pricing in a lot of earnings growth that hasn’t shown up yet. Sometimes it shows up. Sometimes that’s exactly the setup for disappointment.

Households have noticed the run and piled in right alongside it. Equities as a share of total household financial assets are sitting near an all time high, tracking almost perfectly with the Shiller CAPE ratio. When everyone’s already in, there isn’t a lot of dry powder left to keep pushing prices higher.

None of this means a crash is required. Valuation isn’t a clock. But it’s worth remembering how this usually works. Valuation doesn’t matter, until suddenly it’s the only thing that matters.

If you want the chart that’s been making the rounds and giving people a genuine chill, it’s this one. It overlays the current S&P 500 on top of the 1995 through 2003 run, bubble and bust included. The two lines have tracked each other closely enough that it’s hard to unsee once you look at it.

I want to be careful here. Overlay charts are seductive and they’re not a forecast. Two lines can rhyme for a while and then completely diverge the moment you screenshot it. But it’s the kind of chart that explains why so many smart people have one eye on the exits.

The Money Flow Doesn’t Match the Story

For most of the last five years, companies have been buyers of their own stock. That’s flipped. Companies are now issuing more shares than they’re buying back for the first time in five years. Secondary offerings, IPOs, and new issuance to fund AI buildouts and acquisitions are outpacing buybacks.

For years, buybacks were a quiet source of support underneath stock prices. Fewer shares outstanding, higher earnings per share, a built in bid. That support is fading right as valuations sit near record highs. Historically, stretches of heavy net issuance have shown up right around market tops.

At the same time, the retail crowd that’s been a reliable source of buying power the last few years has pulled back hard. One month rolling retail buying across US stocks just hit its lowest level since Covid.

And this next one might be the strangest of the bunch. Consumer sentiment and the stock market used to move together. They don’t anymore. Sentiment has been sliding since 2021 while the S&P has kept grinding to new highs. The gap between how people feel and what their portfolios are doing has never been wider.

People don’t feel good about the economy. Their portfolios have never told them to feel better. That disconnect has to resolve somehow. Either sentiment catches up to the market, or the market catches up to sentiment.

The Backdrop Nobody Can Fix Quickly

Last one, and it’s less about the market and more about the ground it’s all standing on. US debt held by the public just crossed back toward levels not seen since World War Two, relative to the size of the economy.

This is a slow moving story, not a this week story. But it sets the table for everything else. Higher debt levels mean less room for the government to step in and cushion the next slowdown the way it has in the past.

Where I Land

So. Are these reasons to be bearish?

Some of them, sure. Taken together, they’re at minimum reasons to stay disciplined. Stretched valuations, fading buyback support, retail pulling back, and a market that’s leaning harder on a handful of AI names than it has in 25 years. That’s not nothing.

But I’m still not bearish. I still think the long term winners in this AI buildout are worth owning through the noise, and I laid out exactly why, along with the names I’m sticking with, in my 2nd Half Outlook last week. If you haven’t read it yet, that’s the natural next stop after this one.

I’ll keep collecting these as they land in my inbox. If the pile keeps growing, you’ll be the first to know.

👉 Read the 2nd Half Outlook here

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Only two down weeks since the start of April for the S&P 500. Two. That's how quietly this market has been grinding higher while everyone's busy arguing about tech.

Elsewhere in the market. Small caps are on a tear, with the Russell 2000 up 19.1% year to date. Oil is having a moment too, up 4.1% on the week and 23.4% YTD. Bitcoin is the lone holdout, still sitting on a 26.6% loss for the year despite the risk-on backdrop.

Market Recap

Weekly Heat Map Of Stocks

Sentiment Check

Still more bears than bulls.

Before we move into my 5 stocks for the 2nd half, a few charts worth hitting on first.

The S&P 500 has continued to hold the 50-day moving average, exactly what you want to see in a healthy uptrend.

Leave it up to my friend Ryan Detrick to come up with this great stat and chart. There have been 41 other times since 1950 that the S&P 500 gained more than 10% in a quarter. The next quarter was higher 85% of the time. The next two quarters were higher 85% of the time. And the next year was up a median of 13.4%. Momentum is real, and history says this kind of strength tends to keep going, not reverse.

On top of that, the VIX has fallen below 16, the second lowest close over the past month. It’s the lowest point since January, a fresh 120-day low. A falling VIX alongside a market grinding to new highs is about as clean a “risk on” signal as you’ll get.

Here’s the part worth watching closely though. We’re seeing new highs in energy and health care stocks. Outside of those two, there just aren’t many new highs to point to. Look at the percentage of stocks hitting 4 week and 52 week highs by sector, energy is the standout at 24% and 10%, while most other sectors are stuck in the low single digits. This rally is still narrower under the hood than the index level suggests.

That narrowness shows up in the flow data too. Sector flows in June leaned more defensive, with money moving into industrials, materials, and utilities. Meanwhile there were outflows from consumer staples, communication services, and energy. Worth noting since energy is also putting up the best new high numbers, so positioning and price action aren’t fully in sync there.

Put it together and you get a market that’s technically healthy, historically well supported after a quarter like this one, and running with low volatility, but still narrower beneath the surface than the headline numbers let on. That’s the backdrop heading into the 5 stocks I want to highlight for the second half.

5 Stocks For The 2nd Half

I’ve got three stocks I picked for 2026 that I still love. If you asked me today, they’d be the first three names on this list. No hesitation. 3 Stocks For 2026

But that’s not what this piece is about. You’ve already heard my case for those names. I want to give you five fresh picks for the second half. Names we haven’t covered together yet. Some of these will feel obvious. A couple might surprise you. All five are names I think can work between now and year end.

Let’s get into it.

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This year was no different. I got a flood of them. Investing questions, personal questions, Wisconsin questions, bourbon questions, questions I never expected to answer in a newsletter. I read every single one.

I couldn’t fit all of them in here. If yours didn’t make the cut, don’t worry. You’ll get a direct email from me with your answer. I don’t leave anyone hanging.

For the 25 that made it in, I kept nothing off limits. My worst investment year ever. The one stock I said I’d never sell and what would actually change my mind. A financial mistake I’ve never written about before. My go-to bourbon. Where my wife and I actually go on date night, a spot most of you have never heard of. What keeps me up at night about this bull market. And a rapid fire round from a reader who clearly wanted to have some fun with me.

Let’s get into it.

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The 10-year Treasury yield rose 2.1% to 4.49%. Oil slipped 0.7% to $68.78, still up 18.7% YTD. Gold jumped 2.7% to $4,187 but remains down 4.2% on the year. Bitcoin had its best week in a while, up 4.3% to $62,699, though it’s still down 28.4% YTD.

Market Recap

Weekly Heat Map Of Stocks

Sentiment Check

July Seasonality

If you like green, you love July. It’s historically the best performing month of the year for the S&P 500. Since 2005, the index has averaged a 2.5% gain in July, more than four times the average return of the other 11 months combined.

Even better: July hasn’t posted a loss in 11 straight years, the longest positive streak of any month over that stretch.

Can it make it 12 in a row?

1st Half Recap

The first half was stronger than most investors realize.

• S&P 500: +9.5% (best first half since 2024)

• Q2: +14.9% (best quarter since the 2020 rebound)

• Nasdaq: +12.8%

• Dow: +8.9% (best first half since 2021)

• Russell 2000: +21.9% (best first half since 1991)

This wasn’t just another AI rally. By the end of June, participation had broadened well past mega-cap tech, and the Russell 2000 was the real story of the half.

This next chart backs up what the index returns already told you. Small caps beat large caps by 12.3 percentage points in the first half, the widest first half spread since 2005. After years of large caps running away with everything, small caps finally showed up.

Here’s the industry breakdown. Semiconductors were the best performing industry in the market, up 94% YTD. Computer Hardware gained 74%. Telecom gained 49%. On the other end, Software and Service was the only major industry to finish the half in the red, down 8.3%, even after bouncing 20.6% in Q2.

This S&P 500 heat map shows exactly where the money went and where it didn't in the first half.

Here are the best performing S&P 500 stocks. SanDisk is the runaway winner, up 857%. Corning is the only name in the top 10 that isn’t a pure chip or storage play, and even that’s an AI data center bet. Nine of the top 10 best stocks in the entire S&P 500 make the physical infrastructure for AI.

These are the worst performing S&P 500 stocks. Intuit is the worst, down 61%. Accenture and Cognizant losing half their value is the market saying it thinks AI is coming for consulting headcount.

Here’s the Dow sorted by return. Caterpillar led the entire index, up 67.59%. Cisco gained 45.78%. UnitedHealth, last year’s Dow disaster, actually gained 28.52% in a real rebound. On the other end, Salesforce was the worst Dow stock, down 37.37%. Nike was next worst, down 31.22%, and Microsoft finished down 19.58%.

Here’s the view from outside the US. South Korea was the best market in the world, up 118.61%. Taiwan gained 62.38%. The US, at 9.88%, was actually below the global average. Indonesia was the worst market in the world, down 41.49%, followed by China and India. If you only watched US headlines this year, you missed one of the wildest global divergences in a long time.

Last is my favorite chart, the asset class total returns table. Small caps led all major asset classes in the first half, up 22.6%. Convertible bonds, the Nasdaq 100, and commodities all followed close behind. Bitcoin and gold were the worst performing major assets in the first half, down 31.4% and 7.0% respectively, after gold’s monster 63.7% run last year. 90% of asset classes finished the half positive. I love this table because it’s the fastest way to see the entire market’s story in one screen.

That's the recap. Now the part that actually matters, how I did against all of it, and where I think this market goes from here.

My 1st Half Performance

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I agreed with the diagnosis. I said we were in one. And I said that to pull out of it, we’d need the 30-year mortgage rate to start with a 5. Even then, I wasn’t sure that would be enough.

So here we are. Let’s check in.

The 30-year mortgage rate is sitting right around 6.5% today. A year ago it was 6.77%. Rates have drifted lower, but they never came close to that 5-handle I said we’d need. The market got a brief look at 6.09% back in February. Then it reversed. That was as good as it got.

Rates touched their low for the year, buyers got excited, and then rates climbed right back up. The refinancing index tells the same story. Every time rates dip, there’s a brief pulse of activity. Then the window closes.

Existing home sales in May came in near the highest level in nearly four years. Closed sales jumped. Inventory hit a 6-year high. Prices are at a record. On the surface, things look better.

But look at this chart, which goes all the way back to 2010.

That red line is where we are today. 3.64 million. We were at this exact level for years before the pandemic, on the way up. The market has spent three years clawing back to a level it passed through casually on the way to something much better. There has been no progress in existing single-family home sales since the fall of 2023.

Here’s the question I keep coming back to. Everyone wants to know when housing goes back to normal. Lower prices. More inventory. Rates that make the monthly payment manageable.

What if this is normal?

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