Market Pulse with Dan Sheehan

Good Morning Investors,

The S&P 500 ($SPY ( ▼ 0.44% )) closed last week at 6,279.35, gaining 1.7% and finishing at a fresh record high. The Nasdaq ($QQQ ( ▼ 0.29% )) climbed 1.6% to its own new peak at 20,601, while the Dow ($DIA ( ▼ 0.78% )) jumped 2.3% and now sits just a few hundred points from an all-time high.

After a strong first half, stocks are riding a wave of resilient economic data, policy optimism, and a sense that the worst tariff fears have been kicked further down the road. As we head into the second half of 2025, the setup continues to look supportive for risk assets, even if the headlines try their best to shake us out.

Futures are lower this morning as investors digest another round of tariff brinkmanship. Dow futures are down 25 points (0.1%), S&P 500 futures are off 0.3%, and Nasdaq-100 futures are slipping 0.4%.

President Trump announced Sunday that higher tariff rates will now take effect on August 1 rather than July 9, giving negotiators more time to finalize deals. A deal with Vietnam was confirmed, dropping tariffs to 20% from a feared 46%, but deals with the EU and Canada remain on the table.

Trump also threatened a new 10% tariff on countries aligned with "Anti-American policies of BRICS," adding yet another layer of uncertainty. Historically, these deadlines have been more about headlines than actual economic shock, and markets seem to sense that. As Fundstrat's Tom Lee put it, this remains "the most hated V-shaped rally," and I tend to agree.

Friday's June jobs report came in stronger than expected, with 147,000 new nonfarm payrolls compared to 106,000 expected, and unemployment falling to 4.1% instead of rising to 4.3%. This data has effectively removed any chance of a July rate cut. CME FedWatch now shows just a 5% probability, and September odds have also come down to 78%.

I have maintained that we wouldn't see a cut until September at the earliest, and this report reinforces that view. Strong consumer spending and solid corporate balance sheets suggest the U.S. economy remains on firm footing despite softer spots in white-collar hiring, including the ongoing DOGE layoffs.

All year I have highlighted how elevated short interest can power further gains. According to S3 Partners, S&P 500 short interest has climbed to 5.8% of float, up from 5.4% at the start of 2025, and Nasdaq-100 short interest has risen to 6.1%.

These bearish positions create the potential for forced buying if momentum keeps pushing higher, adding an extra layer of support to the broader bullish thesis.

Circle's blockbuster IPO last month, raising $1.1 billion and soaring 168% on debut, signaled a resurgence of risk appetite. The IPO pipeline remains robust with names like Gemini and Bullish preparing to list, and companies like eToro and CoreWeave already posting strong post-IPO performances.

Regulatory clarity from the GENIUS Act and crypto-friendly policy from the administration are setting the stage for further "animal spirits" to emerge, especially heading into Q3 and Q4.

Tech and AI: Still overweight, especially in software and cybersecurity. Google ($GOOGL ( ▲ 1.17% )) is approaching key resistance at $181.50. A breakout could propel it into the mid-180s and possibly the 190s. I will be watching closely this week.

Financials: Strong balance sheets with CET1 ratios above 13% and high capital returns remain supportive.

Nuclear Energy: Critical for powering data centers and AI expansion, this sector continues to offer long-term upside.

Consumer: Select opportunities are benefiting from healthy spending and tax clarity, though Tesla ($TSLA ( ▲ 1.94% )) remains a cautionary tale. Shares fell 7% premarket Monday after Musk announced plans for a new political party, reigniting concerns about his focus. Tesla also reported a 14% decline in Q2 deliveries and faces intensifying competition, particularly in China.

Other headlines include Apple fighting a €500 million EU fine in court, Capgemini buying WNS for $3.3 billion to expand its AI capabilities, and Google facing a new EU antitrust complaint over its AI Overviews feature. These stories highlight both the regulatory risks and the ongoing innovation push in mega-cap tech.

Bitcoin has broken out of its late May downtrend, opening the door for Ethereum and Solana to potentially follow. Moves in crypto often mirror M2 money supply growth, which remains at record highs. The combination of "Goldilocks" macro conditions and thin summer liquidity could amplify crypto volatility and upside potential.

This week's economic calendar is relatively quiet, putting the spotlight on trade negotiations and tariff headlines. Earnings season kicks off with Delta reporting Thursday, alongside Conagra, Levi's, and WD-40.

I expect any dips from headline-driven volatility to be shallow and quickly bought as investors position ahead of Q2 earnings and potential rate cuts later this year. The market's record highs suggest that, for now, optimism outweighs fear.

At the midpoint of 2025, the S&P 500 is up over 6% year-to-date, and leadership is broadening beyond the tech titans. This is a sign of a healthy, durable bull market rather than speculative excess. Persistent skepticism remains one of the biggest tailwinds.

I remain steadfast in my year-end target of 6,500 for the S&P 500 and still see a path to 7,000 by mid-2026 as earnings, liquidity, and policy continue to align.

Stay opportunistic, stay patient, and enjoy the ride.

Please feel free to reach out to me on LinkedIn or by email if you'd like help navigating this environment or have any planning questions.

Dan Sheehan

[email protected]

This newsletter is for informational purposes only and should not be considered investment advice. Please consult your financial advisor about your specific situation.