Month: June 2026

Happy 250th Birthday America: Let The Fireworks Begin

This is a holiday week with the markets closed on Friday in observance of the Fourth of July.

Equity markets are biased to rally into a long holiday weekend. As we enter July, the Dow Jones Industrial Average (DJIA) and the Russell 2000 small cap index both reached record highs last week. The S&P 500 and Nasdaq 100 have been consolidating and approaching oversold readings. Historically, the S&P 500 has tended to rally into July before entering a more volatile period. August is often choppy, while September and early October have historically been among the market’s weakest months. Those seasonal pullbacks have frequently created attractive buying opportunities ahead of a year-end rally.

The S&P 500 has struggled recently in the 7,500–7,600 range and is currently trading at 7,354. We believe the market will attempt to rally to test the recent highs. We have maintained our year-end target of 7,500 as we do believe we can have a deep correction into the fall months. We maintain our longer-term secular bull market target range for the S&P 500 of 10,000–13,000.

Warsh, Bessent, And The Bond Market’s Vote Of Confidence On Inflation

Federal Reserve (Fed) Chair Kevin Warsh and Treasury Secretary Scott Bessent delivered closely coordinated messages last week on the importance of stabilizing inflation. Bessent publicly expressed confidence that Warsh will “optimize the path for both inflation and economic growth,” while praising the Fed’s decision to reduce forward guidance. Professional investors noted this alignment between monetary and fiscal leadership as a positive development for market stability.

Five-year Treasury breakeven yields—a market-based measure of expected inflation over the next five years—have collapsed to 2.22%, signaling the market believes inflation should fall in the future toward 2%. This move indicates that bond investors are not overly concerned about inflation reaccelerating.

Secretary Bessent has previously highlighted Truflation, an alternative, real-time inflation gauge that draws on a broad range of consumer price data. The Truflation index currently sits at 1.9% year-over-year, reinforcing the market’s view that inflation pressures are easing. We also anticipate that Fed Chair Kevin Warsh may place greater emphasis on a broader range of inflation measures rather than relying primarily on the Core Personal Consumption Expenditures (PCE) Price Index.

The market is currently expecting the Fed to begin raising interest rates by the end of the year. We believe the surprise this year could be that sharply lower oil prices—combined with a shift in how inflation is measured—lead to the Fed cutting interest rates by year-end.

Market Breadth Reaches Record High, Confirming Bull Trend

Last week, despite the volatility, particularly in Technology, the Bloomberg cumulative advance-decline (A-D) line reached an all-time high. The S&P 500 A-D line also hit a record high. This confirms the equity market remains in a bull market with new highs achievable.

Small Caps Hit All-Time High

The Russell 2000 small cap index hit an all-time high and is outperforming the large cap stocks so far this year. The S&P 500 is up 7% with the Russell 2000 up 21%. The relative price has made an important bottom, in our view, similar to the low in 1999. We believe small caps are in the early phases of entering a secular trend of outperforming. We would continue to diversify portfolios toward smaller cap stocks.

The Dow Jones Industrial Average (DJIA) also hit an all-time high last week. Google parent company Alphabet (GOOGL) will be added to the DJIA, replacing Verizon (VZ). Alphabet will be the Dow’s fifth Magnificent 7 member.

Debasement Trade Not Here

Many investors have been calling for the demise of the U.S. dollar, but last week the U.S. dollar began a rally as the market is expecting the Fed to begin raising interest rates. Should the dollar index break above 102, investors should expect a stronger rally in the dollar, in our view.

Risk Of Higher Rates & Stronger Dollar Put Pressure On Precious Metals

Higher interest rates, growing expectations that the Fed could resume raising rates, and a stronger U.S. dollar have put pressure on precious metals. Gold has been correcting since a peak of $5,586. It is traditional for a strong rally to correct one-third to one-half of a move. Gold has support near the 50% retracement level at $3,945. Amid elevated uncertainty, we expect Gold to remain in a choppy trading range, with good support near $4,000. Should this level not hold, the risk is a 61.8% correction near $3,557. We maintain the long-term projection for Gold is $10,000.

Silver Testing Major Breakout Support Level

Silver broke out from a nearly 15-year base and we believe Silver is now testing that breakout near $50. We believe the long-term potential is for Silver to trade toward $200.

What Are The Risks?

Risk 1: Leverage Is High In Margin Debt & Leveraged ETFs

There are always risks in the market. Today, the greatest concern we see is the buildup of leverage and margin debt, particularly within the Technology sector. Leverage has risen sharply relative to total market capitalization, as measured by the Wilshire 5000 Index. If we do get a correction in the fall months, it may be a deeper correction of 10%–15% as investors would be forced to deleverage positions. We expect this to cause volatility but not end the bull market rally.

Risk 2: Semiconductors Rallying But Price Momentum is Weakening

The VanEck Semiconductor ETF (SMH) is exhibiting a negative divergence, with prices continuing to advance while momentum has begun to weaken. This could be signaling a potential correction coming in semis. Since there is leverage built into this sector, it could be a significant correction of 30%. We expect semis to maintain leadership. We do not believe this is a bubble that is popping.

Looking back to the 1990s, the semi stocks have had several bear market corrections (30%+) before peaking. With AI infrastructure and data center development still in the early stages, we do not believe the semiconductor cycle has yet reached its peak or the point at which semiconductor demand becomes commoditized.

Semi Fundamentals Remain Positive Longer-Term

Strong Cash Flows, Rising Orders, And Tight Supply

Semiconductor companies are generating record free cash flow while investing heavily for future growth. Industry-wide projections show chip makers on track to produce roughly $1.0 trillion in cumulative free cash flow by 2027. At the same time, the major hyperscalers (such as Microsoft, Amazon, Alphabet, and Meta, all building massive AI data centers) are expected to spend close to $1.0 trillion on capital expenditures in 2027.

The hyperscaler spending versus chip-maker free cash flow shows nearly mirror-image ramps, a powerful visual of how supply and demand are aligned for strong multi-year growth in the AI infrastructure buildout. Because current production capacity still cannot meet surging demand, unfilled orders continue to rise, pushing prices for key memory chips higher.

Shortage Of Memory For Chips Has Caused DRAM Prices To Surge

Memory chip makers such as Micron (MU) have seen their stock rise sharply on the shortage of enough memory to meet demand. This has resulted in DRAM (Dynamic Random-Access Memory) prices skyrocketing. This has also caused some technology companies such as Apple (AAPL) and Microsoft (MSFT) to raise prices on their products.

Sector Readings

Information Technology Remains In First Place, Followed By Industrials, Then Energy; Consumer Discretionary In Last Place, Followed By Communication Services

Information Technology is still strongest, followed by Industrials, then Energy. Consumer Discretionary is in last place, followed by Communication Services. Energy returned to the top three sectors, where except for last week, it has been for 30 weeks. The decline in Communication Services is dramatic.

Our sector model analyzes S&P 500 GICS sector classifications, using a weighted measure of price momentum across three time periods. We rank each sector from best to worst based upon the average of its 40-, 26-, and 13-week relative price performances. We rank each sector from 1 to 11, with 1 being the strongest and 11 the weakest.

Stars, Stripes, And Jobs

This week investors will look at jobs within our borders and geopolitics outside them.

As America prepares to celebrate its 250th birthday, investors will be closely watching this week’s labor market data, including JOLTS job openings, the ADP employment report, and Thursday’s June nonfarm payrolls report. The employment data will be scrutinized for signs of labor market strength, wage growth, and unemployment as investors assess whether Fed Chair Kevin Warsh is likely to maintain a higher-for-longer interest rate policy.

Markets will also monitor developments in the Strait of Hormuz to gauge whether the U.S.-Iran ceasefire can hold. Early in the week, attention will focus on housing data, including the S&P/Case-Shiller Home Price Index, along with Conference Board consumer confidence and manufacturing activity.

Trading hours will be shortened on Thursday, July 2 (equities close at 1:00 p.m. ET), with full market closure on Friday, July 3, for the Independence Day holiday. As a result, labor market conditions, consumer confidence, and geopolitical developments are likely to remain the dominant themes heading into the long holiday weekend.

Disclosures & Disclaimer

Sanctuary makes no representation as to the accuracy or completeness of information contained herein. Any forward-looking statements are based on assumptions, may not materialize, and are subject to change without notice. The information is based upon data available to the public and is not an offer to sell or solicitation of offers to buy any securities mentioned herein. Any investment discussed may not be suitable for all investors. Investors must make their own decisions based on their specific investment objectives and financial circumstances. Investments are subject to risk, including but not limited to market and interest rate fluctuations. Any performance data represents past performance which is no guarantee of future results. Prices/yields/figures mentioned herein are as of the date noted unless indicated otherwise. All figures subject to market fluctuation and change. Additional information available upon request.

Warsh Takes the Reins: A Sharper, More Focused Fed

Kevin Warsh officially stepped into his role as Federal Reserve Chair on May 22. Presiding over his very first FOMC meeting and subsequent press conference, Chair Warsh signaled an immediate structural shift from prior leadership, prioritizing operational adjustments over sudden interest-rate modifications.

A “Less is More” Communication Strategy:

• Drastic Statement Trim: The June FOMC statement contained just 147 words, down drastically from the five-year average of roughly 380 words under former Chair Jerome Powell.
• End of Forward Guidance: Open-ended projections and future policy hints have been effectively eliminated. Warsh firmly deflected forward-looking policy queries at his press conference, quoting the late former Treasury Secretary George Shultz: “Press conferences are useful, but be sure you have something to say.”
• Stepping Away from the “Dots”: While the 19-member Summary of Economic Projections (SEP) will continue, Chair Warsh announced he will personally no longer contribute to the individual “dot plot” forecasts.

Markets are expected to undergo an adjustment period as they adapt to trading purely on incoming macroeconomic data rather than Fed management, likely introducing fresh short-term volatility.

This Committee Will Deliver Price Stability

Striking a deeply hawkish and confident tone, Chair Warsh reassured the public that the central bank remains fiercely committed to its inflation mandate, declaring, “This Committee will deliver price stability.”

Key Economic Observations:

• Uneven System Liquidity: Banking system reserves remain ample but are flowing in an uneven fashion.
• Real Estate Hardship: High mortgage rates continue to act as a highly restrictive weight on housing market activity and affordability.
• Hardware Resilience: On a brighter note, corporate capital expenditure (capex) and macro productivity gains remain fundamentally solid.

Market Impact: Because several FOMC members penciled rate hikes into the updated dot plots, fixed income markets aggressively pulled forward expectations for the next rate hike from December to September. The 2-year Treasury yield surged sharply higher, while equity markets corrected downward on the news. Crucially, 5-year breakeven inflation yields collapsed, demonstrating that bond investors have deep confidence in Warsh’s hardline approach to cooling high prices.

Five Independent Task Forces Launched

In a bid to modernize central bank operations, Chair Warsh announced the formation of five independent task forces slated to begin delivering initial findings this autumn, targeting full completion by the end of 2026. The groups will thoroughly examine:

• Fed communications
• The Federal Reserve balance sheet
• Data source utilization and methodological enhancements
• Macro inflation frameworks
• Productivity and jobs, specifically analyzing the speed, economic reach, and institutional footprint of artificial intelligence

On the Shift to High-Frequency Data: Warsh strongly criticized the Fed’s traditional dependence on lagging, backward-looking metrics, stating a clear preference for timely, high-frequency data to guide modern policy.

Bumpy Road to Peace in the Middle East

Geopolitical developments remain highly volatile. The United States and Iran electronically executed a 14-point Memorandum of Understanding (MOU) to pause hostilities. Under the framework, U.S. Treasury Secretary Scott Bessent announced a temporary 60-day general license permitting Iranian oil sales alongside International Atomic Energy Agency (IAEA) inspections.

Supply Dynamics & Shipping Volatility:

• Strait of Hormuz Instability: While commercial transit briefly resumed as WTI crude plunged below $80 per barrel, Iran’s Revolutionary Guards rapidly declared the Strait closed again following a sharp rise in military conflict between Israel and Hezbollah in Lebanon.
• Gulf Re-openings: Despite localized escalations, global oil markets continue to signal long-term optimism that a final peace deal will materialize. Once finalized, Gulf producers are poised to flood the market: Saudi Arabia can achieve pre-war capacity in two weeks, Kuwait expects 80% restoration in one week, and the UAE is prepared to instantly utilize an operational bypass pipeline.
• Technical Targets: WTI Crude futures recently settled at $77.39. Technicians expect a further slide into the low $70s, with a potential test of the unfilled $67–$69 price gap. Meanwhile, the national retail gas average fell to $3.99, breaking below the $4.00 mark for the first time since March.

Valuations Improve Even With Higher Stock Prices

Despite major indices pushing to higher ground, equity valuations have actually grown much more reasonable. The S&P 500 forward price-to-earnings ($P/E$) ratio has eased to just under 22 times—marking a 3.3% decline relative to last year.

This healthy contraction is entirely driven by blockbuster corporate profitability; aggregate Wall Street earnings estimates for the next four quarters have surged an incredible 28% to 30% year-over-year.

This historic surge in corporate profitability highlights immense corporate pricing power, significant administrative efficiency upgrades, and robust macro productivity gains.

Sector Momentum and Technical Readings

According to our quantitative momentum models, Information Technology remains firmly entrenched in first place, followed by Industrials and Communication Services.

Extreme Technical Disconnections

Our short-term 13-week normalized oscillator features an extraordinarily rare layout:

• Extremely Overbought: Information Technology is sitting completely isolated at an extreme value of 2.0058.
• Deeply Oversold: Energy (-2.3782), Consumer Staples (-1.8978), Healthcare (-1.8546), and Utilities (-1.6946) have all entered deeply washed-out territory.
• Near Oversold: Every single remaining sector in the S&P 500 is currently categorized as near oversold.

This extreme imbalance leaves technology highly exposed to a sudden, painful correction, while setting the stage for a violent, massive summer sector rotation into long-ignored value spaces. Notably, Energy fell out of the top three spots for the first time in 28 weeks, while Financials vacated the bottom tier for the first time in 19 weeks, signaling a clear structural bottom.

Looking Ahead: Inflation Gauges and AI Hardware

The upcoming corporate and macroeconomic calendar contains pivotal triggers for the summer season:

• The Core PCE Showdown: On Thursday, the Bureau of Economic Analysis will release May Personal Consumption Expenditures (PCE) data. As the Fed’s absolute favorite inflation gauge, this print will test the validity of Chair Warsh’s hawkish stance.
• Micron Technology Earnings: Reporting fiscal Q3 financial results on Wednesday night, Micron (MU) will serve as a crucial macro health check for global data-center spending and High Bandwidth Memory (HBM) infrastructure demand.

Passing of an Icon: Alan Greenspan (1926–2026)

We conclude this week’s report by noting the passing of former Federal Reserve Chairman Alan Greenspan at the age of 100. Managing American monetary policy for an extraordinary 18-year tenure (1987–2006) across four presidential administrations, Greenspan guided the nation through a legendary era of historic stock market expansion and low structural unemployment. He will permanently occupy a place in history as one of the most influential central bankers the United States has ever known.

Sanctuary makes no representation as to the accuracy or completeness of information contained herein. Any forward-looking statements are based on assumptions, may not materialize, and are subject to change without notice. The information is based upon data available to the public and is not an offer to sell or solicitation of offers to buy any securities mentioned herein. Any investment discussed may not be suitable for all investors. Investors must make their own decisions based on their specific investment objectives and financial circumstances. Investments are subject to risk, including but not limited to market and interest rate fluctuations. Any performance data represents past performance which is no guarantee of future results. Prices/ yields/figures mentioned herein are as of the date noted unless indicated otherwise. All figures subject to market fluctuation and change. Additional information available upon request. Comments regarding cryptocurrencies or cryptocurrency-based securities are for informational purposes only and do not constitute investment advice or a solicitation to buy or sell any cryptocurrency-related product. These products involve significant risks, including high price volatility, evolving regulations, limited market liquidity, and vulnerability to fraud and cyberattacks. Securities offered through Sanctuary Securities, Inc., member FINRA/SIPC. Advisory Services offered through the SEC registered investment advisers Sanctuary Advisors, LLC and tru Independence. Sanctuary Wealth consists of the wholly owned subsidiaries: Sanctuary Advisors LLC, Sanctuary Securities, Inc., and tru Independence, as well as Sanctuary Alternative Holdings, Sanctuary Asset Management, Sanctuary Insurance Solutions, Sanctuary Global, and Sanctuary Global Family Office.

Peace Deal With Iran Allows Oil Prices To Collapse

A major geopolitical breakthrough has sent shockwaves through the energy markets. The United States and Iran have reached an interim framework peace deal to end their four-month-long conflict.

Brokered with assistance from Pakistan, Qatar, and Saudi Arabia, the agreement institutes a 60-day ceasefire to negotiate a final nuclear accord, reopens the crucial Strait of Hormuz, and lifts the U.S. naval blockade on Iranian ports.

Market Impact:

• Oil Tumbles: Crude oil prices fell sharply to $80.21. If the agreement holds, prices are expected to continue trending downward toward the low $70s.
• Inflation Relief: Lower oil prices are expected to ease overall inflationary pressures and give consumers much-needed relief at the pump.
• Equity Rally: Global stock markets are celebrating the news with a strong, broad-based rally.

CPI & PPI: Hot Headline, Cooler Core

The economic data from May brought a mixed bag that ultimately comforted Wall Street. While headline Consumer Price Index (CPI) and Producer Price Index (PPI) figures climbed to multi-year highs due to surging energy costs, the core measures (excluding energy) came in softer than expected.

Treasury Inflation-Protected Securities (TIPS) 2-year and 5-year breakeven rates have completely retreated back to pre-conflict levels (2.4660% and 2.3980% respectively). This indicates bond investors view the recent inflation spike as a temporary anomaly rather than a persistent trend, scaling back expectations for further Federal Reserve interest rate hikes this year.

SpaceX Mega-IPO Triggers Historical Index Fast-Track

The biggest corporate event of last week was the highly anticipated initial public offering of SpaceX (SPCX). Debuting at an offering price of $135, shares surged nearly 20%, revitalizing investor risk appetite and fueling optimism for a wider growth-oriented IPO breakout.

Because of its sheer size, major index providers are breaking standard protocol (which usually demands months of seasoning) to fast-track SpaceX into their benchmarks:

Index	Expected Inclusion Date (After Close)	Estimated Index Weight	Potential Inflow Demand
Russell 1000	Mon, June 22	0.08% – 0.12%	$4.0 – $8.0 billion
MSCI USA	Mon, June 29	0.05% – 0.10%	$1.0 – $3.0 billion
Nasdaq-100 / QQQ	Tue, July 07	1.00% – 1.25%	$7.5 – $12.0 billion

Note: S&P Dow Jones has declined to waive its rules, meaning SPCX will not join S&P indexes for at least 12 months. Due to a limited public float of just 7%–8%, forced buying from passive funds could spark heavy short-term volatility. Leveraged ETFs (from ProShares, Direxion, and Themes) alongside official options trading will launch early this week to add liquidity.

The AI Infrastructure Super-Cycle

Investment in artificial intelligence infrastructure is expected to approach $1.0 trillion this year, with another $1.0 trillion projected for next year. Temporally, this mirrors the massive railroad buildout of the 19th century; practically, its impact on daily life is more akin to the adoption of electricity.

The AI narrative is now entering a secondary infrastructure phase as it collides with physical hardware limits:

• Copper-to-Optical Shift: Traditional copper cables hit a signal and thermal wall at roughly 1 meter in next-gen GPU setups like Nvidia’s Vera Rubin. Data centers are rapidly switching to optical (light-based) links. Key Beneficiaries: Broadcom (AVGO), Coherent (COHR), Lumentum (LITE), and Corning (GLW).
• Severe Memory Shortage: High Bandwidth Memory (HBM) remains in a severe structural shortage. Top manufacturers SK Hynix, Samsung, and Micron (MU) are completely sold out for 2026, with no supply relief expected until 2027–2028.
• Power Constraints & Pricing Power: Data centers are consuming electricity at a gigawatt scale. Massive demand has given suppliers immense pricing power; Nvidia recently raised the price of its Blackwell chip from the $8,000 range up to $13,250 (a 66% jump).

The Resilient Consumer

Bank of America internal deposit data for May highlights that the American consumer is still spending robustly, supported by healthy wage gains. Overall year-over-year spending is up 5.4%—marking a four-year high.

Higher-income households saw after-tax wage growth jump 5.6% YoY, while lower-income households registered a 3.1% YoY wage increase. Though summer events like the World Cup are driving near-term traffic, underlying wage acceleration remains the true backbone of this demand.

Technical Outlook: Oversold & Ready to Rally

From a technical standpoint, equity markets are prime for a summer run. Both the S&P 500 and the Nasdaq 100 are hovering at heavily oversold levels on their 14-day stochastic indicators.

Historically, equities tend to trend upward through the summer months before hitting seasonal turbulence in the September–October stretch. If the S&P 500 breaks to new highs, our technical upside target sits at 7800–7850—representing a 5% to 6% rally from recent levels.

Sector Momentum Leaderboard

Our quantitative models show that Information Technology continues to hold the #1 spot, followed securely by Energy and Industrials. Conversely, Financials and Consumer Discretionary remain anchored at the bottom of the relative strength rankings. Because an extraordinary number of sectors are currently technically oversold, conditions are highly ripe for sudden, violent sector rotations.

Looking Ahead: Kevin Warsh’s Fed Debut

The upcoming macro week turns its focus squarely to central banking. Newly appointed Federal Reserve Chair Kevin Warsh will preside over his very first FOMC meeting on June 16-17.

While interest rates are widely expected to remain unchanged, the market will hang on every word of Warsh’s inaugural press conference. Investors are eager for clues regarding his communication style, the updated “dot plot” projections, and how the newly minted Iran peace pact—and subsequent collapse in oil—alters the Fed’s long-term inflation trajectory.

Reminder: U.S. stock and bond markets will be closed on Friday, June 19, in observance of the Juneteenth holiday. Consequently, quarterly options and futures expiration will occur one day early on Thursday, June 18.

Sanctuary makes no representation as to the accuracy or completeness of information contained herein. Any forward-looking statements are based on assumptions, may not materialize, and are subject to change without notice. The information is based upon data available to the public and is not an offer to sell or solicitation of offers to buy any securities mentioned herein. Any investment discussed may not be suitable for all investors. Investors must make their own decisions based on their specific investment objectives and financial circumstances. Investments are subject to risk, including but not limited to market and interest rate fluctuations. Any performance data represents past performance which is no guarantee of future results. Prices/ yields/figures mentioned herein are as of the date noted unless indicated otherwise. All figures subject to market fluctuation and change. Additional information available upon request.
Comments regarding cryptocurrencies or cryptocurrency-based securities are for informational purposes only and do not constitute investment advice or a solicitation to buy or sell any cryptocurrency-related product. These products involve significant risks, including high price volatility, evolving regulations, limited market liquidity, and vulnerability to fraud and cyberattacks.
Securities offered through Sanctuary Securities, Inc., member FINRA/SIPC. Advisory Services offered through the SEC registered investment advisers Sanctuary Advisors, LLC and tru Independence. Sanctuary Wealth consists of the wholly owned subsidiaries: Sanctuary Advisors LLC, Sanctuary Securities, Inc., and tru Independence, as well as Sanctuary Alternative Holdings, Sanctuary Asset Management, Sanctuary Insurance Solutions, Sanctuary Global, and Sanctuary Global Family Office.