Weekly Newsletter: June 15, 2026
By the time of the closing bell on Friday, a newly minted billionaire was created along with a company that is among the top ten in size. SpaceX could dominate the investing landscape (good or bad) for the remainder of the year. The IPO of SpaceX went, like many of their flights, without a hitch. Even the closing price was less than 10% away from the first trading price. Oh, and there are two more companies coming to market that may rival SpaceX for excitement later this year as Anthropic and OpenAI. For all the ink and pixels that have been spilled about technology dominance in the market, these three collectively are worth over $2 trillion. That matches the annual output for Brazil or Spain. A lingering question is whether the US markets can absorb these companies without sapping energy from other parts of the market that are profitable today. A scary note that may or may not mean anything. The last couple of periods of high stock issuance were in 1999 and in 2007, both ahead of major declines in the market. The key may not be the supply, but whether the companies can generate profits and not need to raise further capital down the road.
Outside of the Friday excitement, there was plenty to keep investors occupied during the week. Inflation data was mixed, with the CPI printing in line with expectations. However, PPI came in well above estimates and created further concerns about the ability of the Fed to actually cut rates this year. Based on the Atlanta Fed’s “GDPNow”, economic growth may come in a bit north of 3%, unemployment near historical lows at 4.3% and inflation (depending on what is included/excluded) running around 3%. Hardly an economy that is in need of help from lower rates. One release that got very little attention was the levels of debt carried in the US economy. Outside of Covid, debt rose in the government sector, the corporate sector and the consumer. There are a few caveats. First, corporations are generating more cash flow than capital expenditures, making the increase a bit less worrisome. Much of the borrowing was (surprise) in the tech sector as that buildout continues. Second, the consumer, borrowing more on mortgages, remains in decent shape as home equity is at decade highs. Household debt to income has been trending down since peaking during the financial crisis. Lastly, government debt is now larger than the US economy. While the trend of higher debt to GDP has been going on since the 1980s, it has ramped up dramatically since the financial crises. This could hamper long-term economic growth, as GDP has been steadily slowing since the 1980s.
The “maybe this time for sure” agreement with Iran has pushed down oil prices and could provide some relief on the inflation front. The bond market is already reacting to lower energy prices, even in the face of higher inflation prints, with declining yields during the week. Various economic reports of financial stress, whether from the high-yield market, overnight financing or volatility in the bond market, indicate very little stress. As with the economic growth, this too would argue for a Fed to stay on hold for the foreseeable future. The Fed meeting this week will be important to watch for signals of changes to the way the Fed has communicated in the past. Fed Chair Warsh has indicated less Fed chatter and less scripted and shorter press conferences. A new Fed era begins mid-week.
As we approach the summer solstice, it may help to look back at the markets over the first six months of the year. The first quarter was marked by the start of the war with Iran, pushing equity markets lower and oil prices near $120 per barrel. From there, technology took over, led by the semiconductors and pushed the market to new all-time highs. A few surprises have come from the small and mid-cap portions of the market, up nearly 20% on the year. Zooming out, there have been a few, relatively short periods of time where the small/mid-cap stocks bested the SP500. However, the chart still shows a domination by the SP500 (led by tech) over small/mid cap since 2019. While this looks like a blip on the big chart, it could be part of a rotation from large to small. Given that the entire small-cap index (Russell 2000) is approximately the same market cap of Nvidia, it won’t take too much to keep the small-cap train running.
In a holiday-shortened week, keep an eye on the Fed meeting and press conference that follows for signs of changes that may be coming from the way the Fed deals with and communicates to the financial markets.
The opinions expressed in the Investment Newsletter are those of the author and are based upon information that is believed to be accurate and reliable but are opinions and do not constitute a guarantee of present or future financial market conditions.