I'm Dan Sheehan, a wealth advisor / financial planner based in Charlotte, NC. I work with high earners, families, and business owners on the things that actually move the needle over a lifetime: building the plan, managing the portfolio, and getting the tax picture right. Most of my clients came to me knowing they were doing well but suspecting they were leaving something on the table. Usually they were. This newsletter is where I share the thinking behind that work, one topic at a time.
Good morning investors,
Its been great having more of you reaching out and I encourage more of this. Happy to sit down for a free portfolio / financial planning intro call.
The week's inflation data did its job, and the S&P pushed to a fresh record on Thursday, closing within reach of the 7,800s after touching an intraday high near 7,817. Wholesale prices came in tame, and the market read the pair of inflation reports this week as clearing the path for the Fed to stay on hold. The S&P gained 0.7%, the Nasdaq 0.8%, and the Dow finished flat, even as a couple of AI names sold off after earnings.
Futures are choppy this morning after that run, with the major indexes on track for a third straight weekly advance. Today brings the last data of the week, with July retail sales and the University of Michigan sentiment reading giving a read on the consumer. Applied Materials is lower premarket after its results, and Reddit jumped on news it joins the S&P next week. Oil and yields ticked up after the US signaled its naval blockade of Iranian ports could run indefinitely.
Two Inflation Reports, One Message
Wholesale prices followed Wednesday's tame consumer read, with PPI slowing to 4.7% annually from June's 5.1%, though the monthly figure came in flat against expectations of a small rise. Put the two reports together and the message is that inflation is contained enough to keep the Fed's wait and see approach intact, and the market has moved to price a September hold as the likely outcome.
The debate inside the Fed has not been settled by this, as the hawks who want a hike will argue that moderately good reports still do not prove inflation returns to 2%, and that more work is needed. The doves, who outnumber them, will read this week as confirmation that patience is the right call. My own view sits with the latter, and it has all year. The inflation we have is largely a supply driven energy story that rate hikes address poorly, the labor market is cooling rather than overheating, and a Fed on hold that eventually cuts remains the path I expect. What this week does is raise the stakes on the next round of data, since these prints now have the power to confirm a genuine downtrend or extend the mixed signals that keep the committee divided.
One note from the bond market is that yields eased on the inflation relief but did not collapse, and the 30-year still sits above 5.2%, near levels not seen in a quarter century. As one strategist put it, the data eases the pressure for higher rates without removing it, since real yields are elevated and likely to stay that way. That is the piece I keep watching most closely, because the long end is where any strain from inflation or the fiscal picture shows up first.
The Earnings Season Closes Strong
With more than 90% of the S&P having reported, this has been one of the strongest earnings seasons in memory, and it is the foundation under the record highs. The strength has been broad, the margins have expanded, and the beats have come with raised guidance rather than just cleared bars. This is a market being carried by profits rather than by multiple expansion, which is the healthy version of a rising tape and the reason I have stayed constructive through all the summer volatility.
Software has been the standout turnaround. After tumbling more than 24% early in the year, the software group has rallied around 28% over the past six months and jumped again Thursday. The market appears to have decided it overpriced the risks to enterprise software back when the AI replaces software fears were loudest, and Palantir and the cloud names have since proven those fears overdone. That reappraisal fits the broadening I keep pointing to, where leadership widens out rather than resting on a handful of chipmakers.
8,000 Comes Into View
I want to be plain about where I think this goes near term. Barring a shock, the S&P looks locked onto 8,000, and I would expect it to get there before we find out what happens next. The momentum, the earnings, and the positioning all point that direction, and a record close within striking distance of it tends to act like a magnet once the path is clear. What matters more than hitting the number is how the market behaves once it arrives, whether it powers through or pauses to digest, and that is what I will be watching for as we approach it.
One thing I am keeping an eye on is the Nasdaq, which did not make a new high alongside the other indexes on this latest push. I would expect it to push for one with the strength in tech and tech breadth reading that just saw 75% of S&P technology stocks reclaim their 200-day average for the first time in more than a year supports that. When that many names in the sector turn up together after a long stretch below trend, it has historically been followed by further gains rather than a fade. The Nasdaq catching up to the other indexes would be the confirmation I am looking for that this leg has real legs.
I am also watching the chips for a technical signal I have flagged for weeks. The semiconductor index and the DRAM names are still working to break the downtrends that have been in place since June, and a clean break there would put real momentum back into a group I have grown constructive on again. The demand keeps confirming itself through the buildout, but the price action needs to clear those levels before I would call the reversal complete.
Positioning Still Has Room
The flows this week reinforce why I am comfortable staying constructive even with the market at records. Hedge funds bought US equities last week at the largest weekly pace in eighteen years, and the two week total was the biggest on record. That is real money coming back in, and it followed the heavy deleveraging of July, which means positioning came into this rally cleaner than it went into the summer. The froth got flushed and the institutional money is rebuilding exposure from a lower base.
While hedge funds bought aggressively, retail investors were net sellers, which is the reverse of the pattern you often see near a top, where the professionals distribute to an eager crowd. When the big, sophisticated money is adding while retail steps back, and when institutional positioning still sits well short of stretched, there is a pool of capital available to keep buying or to step in on any dip. That is the kind of backdrop that tends to support a market rather than leave it fragile, and it is part of why I would treat any pullback from here as opportunity rather than a reason for concern.
Where I Land
The week ends with the S&P at a record, inflation cooling, and the Fed in a position to hold, which is close to the ideal setup for a market carried by strong earnings. The season now closing has been exceptional, the strength has broadened well beyond the mega-caps, and the money flowing back in is doing so from cleaner positioning than we had before the summer reset. That combination keeps me constructive looking into the back half of the year.
The near term risks are still inflation and the Fed, and I would not treat two good months as a settled trend with another CPI and Jackson Hole ahead of the September decision. I stay optimistic without confusing a record close for a straight line higher, and I keep my closest watch on the long end of the curve, on the Nasdaq confirming the highs, and on the chips breaking their downtrends. The S&P looks set on 8,000, and the more interesting question is what the market does once it arrives.
Retail sales and consumer sentiment at 8:30 close out the week. Enjoy your weekend. If any of this has you wondering whether your portfolio fits your goals rather than the day's headlines, that is a conversation I am always glad to have.
Best regards,
Dan Sheehan [email protected]
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Market Pulse with Dan Sheehan is a personal market commentary newsletter and is independent from my employer. The content is provided for informational and educational purposes only and reflects my views as of the publication date, which may change without notice. Nothing contained herein should be construed as personalized investment, legal, tax, or financial advice, or as a recommendation to buy or sell any security. Any positions discussed represent my own views and may not be suitable for every reader's objectives, financial situation, or risk tolerance. Information is derived from publicly available sources believed to be reliable, but accuracy and completeness cannot be guaranteed. Readers should conduct their own research and consult their own professional advisers before making financial decisions.