The S&P 500 just formed a golden cross, when the 50-day moving average crosses above the 200-day. Technicians love this signal, but it’s less about magic and more about momentum. It marks a shift: the short-term trend has aligned with the long-term uptrend.
This has occurred a number of times since 1975, and the market was higher 12 months later 88% of the time.
Now, the same people who were telling you to sell in April are declaring that a new bull market has begun.
Luckily our game plan does not involve aligning with analysts or following the headlines. We bought into the selloff and are in much better shape than the “smart money.”
Let’s break down the major themes shaping the market this week:
The Big Beautiful Bill passes
Congress passed and President Trump signed what’s being dubbed the “Big Beautiful Bill.” It’s a sweeping package combining infrastructure investment, defense funding, and select tax breaks. (Read)
Bullish implications: major capital flows into defense, energy and select construction sectors. Tax incentives may boost corporate earnings, especially for capital-heavy industries.
Bearish considerations: the legislation will raise the deficit over time, creating long-term inflationary consequences.
Our rules-based system has us invested in companies that will benefit from this spending no matter what. That’s why we remain bullish on names like Palantir PLTR 0.00%↑ and Willdan Group WLDN 0.00%↑.
The dollar slides (by design?)
The U.S. dollar has continued to sell off, a move welcomed (and likely engineered) by the Trump team. A weaker dollar helps make U.S. exports more competitive and inflates the value of overseas earnings for multinationals.
This is bullish for U.S.-based global companies (tech, industrials, consumer goods) and commodities priced in dollars (gold, oil, copper). Bearish for importers and companies reliant on overseas supply chains.
I’ve always advocated for a small allocation to gold to balance out portfolio volatility. But it might be time to consider adding a mining company or two to the portfolio.
Housing gloom and doom
Recent housing data shows a slowdown in new home sales and affordability pressures rising. Headlines are framing this as a harbinger of recession reminiscent of 2008.
But unlike the 2008 financial crisis, credit quality remains strong, and millennials are entering peak homebuying years which will support long term strength.
Home sales are slow because of interest rates. 40% of homeowners are mortgage-free and many homeowners are locked into sub-3% mortgages. There is little incentive to move with mortgage rates near 7%.
This will change when the Fed cuts rates, likely later this year. Homebuilding stocks have been rallying in anticipation of this.
The housing market is cooling, not collapsing.
Credit spreads: the confidence barometer
Credit spreads narrowed across both investment-grade and high-yield debt. This signals rising investor confidence and a “risk-on” environment.
If we were on the cusp of crisis, spreads would widen as investors de-risk by selling high-yield debt. Instead, the opposite is happening.
Also notable, the flight to safety in the face of geopolitical shocks was incredibly short lived.
Investors are positioning for growth, not fear.
Payroll puzzle
Labor market data had many scratching their heads. The ADP Employment Report showed a loss of 33,000 jobs in June (vs. an expected gain of 105k), the weakest reading in more than 2 years.
However, the BLS nonfarm payrolls report showed a gain of 147k jobs in June (beating the 106k that was expected). Job openings in May also surprised to the upside by about 500k.
The contradiction really comes down to methodologies, and the fact that survey data is becoming less accurate with response rates in decline.
ADP uses anonymized payroll data from its clients, whereas the BLS surveys government and private employers.
The decline in the ADP report was led by small businesses. This suggests the labor market remains resilient for large employers, with smaller businesses more impacted by tighter credit and wage pressures.
Bottom line: the labor market isn’t breaking, but it’s bending in places, as employment levels are uneven across industries and business segments.
Economic growth is likely to be slow in the short term, but tax cuts and stimulus from the “big beautiful bill” along with rate cut later this year are likely to accelerate growth in 2026.
Final thought
The headlines will trick you. A rules-based approach won’t.
Investors who sold when the headlines screamed “war” and “recession” missed one of the fastest recoveries in market history.
The golden cross isn’t just a chart pattern, it’s a metaphor. Momentum rewards those who stay the course.
Have a plan. Stick to it. Let others chase the headlines. And if you need help, join us with a paid subscription to get our best ideas immediately.
That’s all for now. Hope you and yours had a wonderful Fourth of July!