Last Monday we wrote about all the Animal Spirits in the ether pushing the markets to new highs (and they sure did!) This week, as promised, we will seek to bring you any elements trying to tear down the markets surge and mojo.
10 Forces Quietly Undermining U.S. Market Optimism
While the second quarter of 2025 closed with a burst of enthusiasm, with wildly enthusiastic gains in dozens of stocks, both in the S&P, and NASDAQ. Headlines were touting S&P 7,000 as “possible,” Wells Fargo still has 7,100 as their target for the S&P for 2025-year end and has not as yet waivered on that number. With the market now becoming a broader-based sector growth machine, it’s worth pausing to ask: is this a bull market built to last, or one skating on ever-thinner ice?
The original piece we sent out last Monday, celebrated momentum, rate-cut optimism, and political tailwinds like the BBB Bill, which is now signed into law. Beyond the headlines lies a growing list of risks and shifting global trends that may soon pressure U.S. equities.
Here are 10 signs that suggest the U.S. stock market’s mojo might not be as unshakable as it seems.
1. The U.S. Dollar is Too Soft for Comfort
The dollar index (DXY) continues hovering at multi-year lows, hovering in the mid 90’s. A lower dollar will help with some exporters of the US products be cheaper for foreigners to buy, and you might sell more because of that.
2. Germany’s DAX and Other Global Markets Are Outperforming
Look abroad: Germany’s DAX index is up over 19% YTD, in just 6 months’ worth of time, outpacing the S&P. Japan’s Nikkei, bolstered by a corporate restructuring wave, is also beating U.S. benchmarks. Investors are starting to see better value and growth potential in overseas equities than at home. Tim Seymour of tv’s Fast Money, has coined the term MIGA (Make International Great Again) as a jab at Trumps MAGA. Global fund flows show U.S. equities are no longer the only—or even primary—game in town.
3. Geopolitical Pressure is Mounting Steadily
The biggest item of news is the announcement on late Thursday, the 3rd of July by POTUS, twelve tariff letters were going out to various nations this coming week. These will be intentional, to the countries not currently sitting at the table for serious tariff negotiations. They will be put on notice of the April 2nd tariff percentages that each face.
Middle East ceasefires remain fragile. Russia has escalated its offensive on Ukraine with the largest attacks since the fighting began, ratcheting up global uncertainty. The USA as of this week, is no longer providing Ukraine with patriot missiles for the defense of shelling from Putin, Trump saying the US has its own shortage to deal within our own borders.
4. Foreign Buyers are Pulling Back on U.S. Treasury Purchases
Japan and China, historically major buyers of U.S. government debt, have begun quietly reducing their Treasury holdings. If that trend continues, or even broadens widely into Germany, UK etc. the U.S. will face higher funding costs, placing upward pressure on interest rates and crowding out private investment. That’s a drag on both stock valuations and future growth.
5. The Consumer Wealth Isn’t as Strong as Headlines Suggest
Credit card delinquencies are at a 10-year high. Student loan repayments have resumed. Real wage growth has slowed. Consumer discretionary spending is still positive, but increasingly reliant on debt rather than income, which is a dangerous foundation for growth in sectors like retail, travel, and services.
6. Oil Prices in April Were the Lowest in 5 Years
Drill baby drill hasn’t yet been the death of the oil industry, but prices for crude are possibly dipping into the high $50 range soon. Some Oil and Gas exploration companies say if it touches 50 dollars even, it would be wise to shut down any efforts toward new well drilling. However, a weaker US dollar is a definite tailwind for energy investors within emerging economies, reducing import costs and easing the burden of servicing dollar denominated debt.
7. The Fed Might Cut Rates Too Late
Rate cut optimism has fueled equity prices, but the risk here cuts both ways. If the Fed delays cutting, markets may feel punished. If it cuts too early, it may signal recession fears. Either way, the narrative of a “perfect soft landing” is in doubt. Reality is this, the economy is doing ok without the Feds help.
8. Volatility is Too Low to Be Sustainable
The VIX hovering near 17 is less a sign of market health than one of complacency. With so many macro risks in play, any surprise—be it earnings disappointments, geopolitical flare-ups, or poor economic data—could jolt volatility high enough to derail sentiment. Ok, I am not buying it either, we have as an investing community giving up on all but the loudest noise that would stir the VIX toward a much higher number.
9. Private Equity and Venture Flows Are Too Focused on AI
Capital raising in private markets has slowed dramatically. Although IPOs have picked up since May, too much private money is only being thrown at AI upstarts. Is that a reason for concern?
10. Valuations Are Still Stretched
The S&P 500’s forward P/E is near 23—well above its 10-year average. Even with solid earnings growth, the margin for error is razor thin. Any earnings misses or macro hiccups could prompt swift revaluation.
Conclusion: Compare the 10 Positive Vibes Versus 10 Headwinds
Yes, markets are riding a wave of momentum. These ten assumptions stated above are not going to be winning any high school debate tourney in an auditorium debate contest. Bullet after bullet from the positive side of the ledger from last week, stacks up better than this week’s poor effort of wolf crying.
Find us some better negative bullets by sharing here!
Bull markets don’t die from euphoria alone, but they often lose steam when too many headwinds converge at once. From abroad and at home, the evidence is attempting to stack up: the U.S. stock market’s current glow may be less about resilience, and more about denial. Nah, I am going to keep going long on some and trade on other equities.
Results are not typical. I teach methods that have made other traders’ money, but that does not guarantee you will make any money. Success in trading requires work and dedication. Past performance does not indicate future results. All trading carries risks.
