Published July 3, 2026
Last week we noted how the market is changing under the surface. That change continued this week. However, Delta Research offers the possibility of a coming shift back toward the Mag 7 as they note below.
“Second-quarter earnings season begins in about a week. Expectations are for revenue growth of 12.1% (vs. 11.9% in Q1 2026), earnings growth of 22.0% (vs. 28.8%), with 14.1% margins (vs. 14.8%). AI infrastructure stocks are expected to contribute nearly 60% of S&P 500 EPS growth this quarter, with Micron (MU) and NVIDIA (NVDA) together accounting for more than 40%. For the past couple of years, earnings expectations have been too low relative to actual results.
The Mag 7 stocks (Google, Amazon, Tesla, Nvidia, Apple, Microsoft and Meta) are collectively trading at their cheapest relative P/E in a decade. As measured by the ETF MAGS, the Mag 7 stocks have a year-to-date return of -2.52% through June 30. Over the past ten years, the NASDAQ 100’s best month has been July, averaging a 4.35% return with a 90% hit rate. August has also been positive in seven of the past 10 years with an average return of 1.68%.
The CNN Fear & Greed Index is currently in a state of “fear.” The Index is based on seven indicators, including market momentum, stock price strength, breadth, put/call options, volatility, “safe haven” demand (stock vs. bond returns), and junk bond demand. The index tracks how much these individual indicators deviate from their averages relative to normal ranges.
Negative investor sentiment can be a springboard for positive market returns. This does not mean returns are guaranteed; it simply means expectations may already be low enough to create opportunity.
The “Consumer Cash Pile,” defined as the combination of checking, savings, and consumer money market funds (‘MMF’), set a new record in the first quarter of 2026 at $22.9 trillion. This is the seventh consecutive quarter that the “Cash Pile” has set a record, likely due to a combination of capital markets gains, high-interest bank accounts, and lower tax rates. Increased consumer cash can support elevated consumer spending and may be a primary driver of stronger-than-trend real GDP growth.
Seasonal trading patterns, valuation, sentiment and the cash stockpile all provide fuel for further potential market advances in the second half of 2026.
Market Update
Stocks bounced back Monday with the Nasdaq snapping a five-day losing streak. The broad market S&P 500 rose +1% Monday with large-cap tech stocks posting gains after a dismal first three weeks of June. The same story Tuesday with the S&P adding another +0.8% to close the month of June little changed. However, the second quarter returns were stellar as stocks rebounded sharply in April and May from a first quarter swoon. Stocks kicked off July and the third quarter with slim losses as semiconductor stocks began to sell off. The selling continued into Thursday leading the Nasdaq to a nearly -2% loss. Semiconductor and AI-related hardware stocks have become very volatile over the past month as investors wrestle with future supply-demand imbalances and whether the story for semis might have peaked.
Stocks bounced back and forth this week as money rotated out of tech stocks and into other sectors. The rotation left the S&P 500 higher by +2.17% while the Nasdaq 100 (QQQ) managed a +0.86% move. Small cap stocks dipped -0.75%.
Warm wishes and until next week.