Market Pulse with Dan Sheehan

Good Morning Investors,

The S&P 500 has traded for over 24,000 sessions. Yesterday, it dipped a mere 0.00033%, one of the smallest daily moves in history. On paper, it was a whisper. In practice, it was a market holding its breath, absorbing Nvidia’s relentless AI-driven surge, and mounting pressures from trade and inflation. Momentum didn’t break, it coiled, ready to strike. This is the exact environment I’ve positioned for since Q1: a market climbing despite stretched valuations, with Tech and the Magnificent 7 leading the charge. Our call on Nvidia’s breakout to a $3.77T market cap proved spot-on, and with July’s historical 1.7% S&P 500 gain as a tailwind, the stage is set for more upside. Now, all eyes turn to Friday’s CPI print and a July 9 trade deadline, critical catalysts for investors riding the AI infrastructure and high-margin growth wave.

Futures are firmer this morning. The S&P 500 ($SPY ( ▲ 1.59% )) is up 0.3%, Nasdaq 100 ($QQQ ( ▲ 1.63% )) up 0.4%, and Dow Jones futures higher by 126 points. This follows a session in which the Nasdaq closed at a record and Nvidia extended gains to reclaim its title as the world's most valuable company.

The upside was underpinned by Micron's strong earnings and forward guidance, which reinforced the AI-capex theme across data centers. Meanwhile, broader macro sentiment is balancing Fed uncertainty with a favorable seasonal pattern and relatively calm geopolitical headlines.

Jobless claims and the final Q1 GDP print are on deck today, alongside durable goods and inventories. The dollar index is under pressure, hitting its lowest level since September 2021, while gold remains firm. Oil is flat as traders digest easing tensions in the Middle East and the back half of the year's demand outlook.

AMD ($AMD ( ▲ 2.25% )) has completed a textbook inverse head-and-shoulders breakout, confirming a reversal of its prior downtrend. Support sits in the low $130s. I've increased my target from $130 to $150, with an extended upside view of $170.

Micron validated this setup with robust Q3 results:

Crucially, data center revenue more than doubled, highlighting the structural demand for high-bandwidth memory as AI workloads proliferate. This reinforces bullish views not just on Micron but on AMD and Nvidia as core beneficiaries of the AI infrastructure wave.

I've been overweight Tech and bullish on the Magnificent 7 since Q1. That positioning was based on secular growth drivers in AI, cloud, automation, and margin leverage. That thesis is playing out in price action and fundamentals:

Nvidia closed at a record $154.31, reclaiming its title as the most valuable company on Earth with a market cap of $3.77 trillion.

This comes despite an $8B revenue loss from China and a $4.5B inventory write-down. The market has effectively looked through these headwinds, because the structural AI story is intact. Nvidia is no longer just a semiconductor company; it is an end-to-end AI compute platform, spanning chips, networking, software, and data center integration.

Since April, I've held a bullish stance with a $152 short-term target (now reached) and a longer-term view toward $180. That call remains in place.

Amazon remains the most underappreciated AI infrastructure play among the megacaps. AWS is the operating system for enterprise AI workloads, and its custom silicon stack, Trainium and Inferentia, is starting to show real differentiation.

Beyond cloud, AI is now embedded in every vertical of the business: retail personalization, logistics automation, targeted advertising. Amazon's operating margins are expanding, gross margins remain robust at 49.1%, and retail market share continues to increase.

I maintain an overweight position and raise my target to $250, with a view that Amazon will retest all-time highs later this year.

Azure's 33% revenue growth in the most recent quarter speaks volumes. Microsoft is not just participating in the AI wave, it's monetizing it with precision. From enterprise Copilot to its $80 billion data center buildout, this is a high-leverage model with secular tailwinds.

I remain overweight Microsoft with a $540 price target.

All eyes turn to Friday's Consumer Price Index release, which could determine the Fed's September rate cut trajectory. The consensus expects core PCE prices to rise 0.1% month-over-month, matching April's increase, which would translate to a 2.6% annual rate versus April's 2.5%.

This seemingly modest uptick carries outsized significance. The Fed's 2% inflation target remains elusive, and any deviation from expectations could reshape monetary policy expectations for the remainder of 2025. A hotter-than-expected print would likely delay the September rate cut that markets have priced in. Conversely, a cooler reading could accelerate dovish sentiment and provide additional fuel for risk assets.

The technical setup suggests the market is positioned for a goldilocks outcome, moderate inflation that keeps the disinflationary trend intact without triggering immediate hawkish responses from the Fed. This would preserve the current environment where stretched valuations can persist amid accommodative financial conditions.

On April 9, President Trump announced a 90-day pause on all "reciprocal" tariffs imposed by the US, notably excluding China. As Morgan Stanley highlights, July 9 represents the next critical deadline for tariff negotiations, a date that could reshape trade policy and market dynamics heading into the second half of 2025.

The implications extend beyond traditional trade-sensitive sectors. Given the current AI infrastructure buildout, any escalation in trade tensions could impact semiconductor supply chains, cloud infrastructure costs, and the broader technology ecosystem that has driven this year's market leadership.

Three scenarios emerge:

Extension Scenario: Trump extends the tariff pause to maintain negotiating leverage while avoiding immediate economic disruption. This would be market-positive, particularly for multinational technology companies and semiconductor names that have supply chain exposure.

Targeted Implementation: Selective tariff reinstatement focused on specific sectors or countries, with carve-outs for critical technology imports. This middle-ground approach would create sector-specific volatility but preserve the broader risk-on environment.

Full Reinstatement: A return to comprehensive tariff policies that could reignite inflationary pressures and complicate the Fed's policy normalization. This scenario would likely trigger a rotation from growth to defensive positioning.

The timing is particularly relevant given that companies have been building inventory ahead of potential tariff implementation. Any clarity on July 9, regardless of direction, should reduce this overhang and allow for more normalized inventory management in Q3.

Both events arrive at a moment when markets are consolidating at strength rather than showing signs of exhaustion. The key will be whether these catalysts provide the next leg higher or introduce short-term volatility that ultimately gets bought.

My base case remains that both the CPI print and tariff decision land within market-friendly parameters, providing the foundation for continued gains into year-end. However, the concentrated positioning in AI infrastructure and megacap technology creates asymmetric risk if either catalyst disappoints.

For investors, this setup argues for maintaining core technology exposure while building in some tactical flexibility around these known dates. The structural AI thesis remains intact, but near-term execution around these policy pivots will determine the pace of gains through summer.

We are approaching the second half of the year with stretched valuations, declining GDP momentum, and elevated policy uncertainty. But this is not a topping process. If anything, it's a recalibration of expectations within a broader upward trend.

Here's how I break the outlook into three plausible paths:

This remains my core view. Inflation continues to moderate, even as tariffs push through the system. The Fed holds at the July meeting but sets the stage for a September rate cut. Earnings stay resilient, particularly among large-cap Tech and AI-linked names. Corporate capex continues to normalize upward in infrastructure and cloud.

Under this scenario, markets break out to new all-time highs, led by secular growth, with a broadening in participation by Q4.

If June CPI shows a meaningful uptick, potentially driven by delayed tariff effects, commodity price spikes, or energy costs, the Fed may delay its rate cut until later in the year. That would drive a short-term increase in bond yields, potentially pressuring high-multiple names and leading to a short-lived pullback.

This path likely results in a rotation into defensive equities and value-oriented cyclicals. I'd expect that dip to be bought, particularly in semiconductors and quality large-cap names.

If companies overbuilt inventory ahead of tariffs and face margin compression in Q3, earnings revisions could drift lower. That would tighten financial conditions and reintroduce volatility into equity markets, especially in small-cap and rate-sensitive sectors.

However, with fiscal spending elevated and nominal GDP still positive, any drawdown would be contained. The Fed's reaction function would also become more supportive in this setting.

Positioning: I remain overweight Technology, semiconductors, and AI-linked infrastructure. Neutral on financials, with select exposure to private credit and infra-financing. Underweight cyclical consumer and low-margin industrials without AI leverage.

AI is rewriting the rules of energy demand. According to the U.S. Department of Energy, data center electricity consumption is expected to double or triple by 2028, after already doubling over the past decade. That's not a niche problem, it's a national energy security issue.

On May 23, President Trump signed four executive orders to:

The AI infrastructure buildout is now inseparable from the energy grid. Companies like Microsoft, Meta, and Amazon are locking in multi-decade nuclear power contracts. Microsoft's agreement with Constellation Energy (CEG) is a blueprint for this shift.

For investors, the implication is clear: nuclear is no longer a contrarian energy trade, it is a tech infrastructure trade.

Holtec is preparing to go public in what will likely be the largest nuclear IPO in over a decade. It is profitable, cash-generative, and operational, not speculative. Key facts:

Holtec isn't chasing the AI trade, it is building the physical infrastructure that will power it. As nuclear converges with cloud demand, Holtec is likely to attract institutional capital as a differentiated, tangible exposure to the AI-energy axis.

Markets are not drifting, they are consolidating at strength. The smallest loss in S&P history tells a story: investors are positioned, not panicked. Tech leadership is intact. Energy transition is accelerating. And AI is moving from narrative to infrastructure.

I remain long AI, long Tech, and structurally bullish into year-end.

The next CPI print and trade deadline are catalysts. But the broader direction? That's already in motion.

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

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Dan Sheehan

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