Santoli: Stocks return to winning ways. Why the market gods may not be satisfied with July's brief pain
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- S&P 500 closed above 7750 on Friday after posting three all-time highs in a single week, capping a clean breakout from a 3% trading range it had occupied for nearly three months.
- Hedge fund Situational Awareness was liquidated after its leveraged AI-hardware positions unwound — an event Santoli frames as the kind of offering to the 'market gods' that frequently marks a market low.
- Semiconductor stocks retreated 25% from Q2 highs, with Renaissance Macro's Jeff DeGraaf noting a long-short tech momentum strategy fell from $100 to $61 since the June peak.
- S&P 500 Q2 earnings growth of 47% received roughly 20 percentage points from $140 billion in unrealized gains tied to Alphabet and Amazon's investments in Anthropic and SpaceX — windfalls the market cannot extrapolate, Santoli notes.
- David Snyder and Tim Hayes of Ned Davis Research flagged market-topping behaviors, with Hayes's Secular Bear Watch model warning the market is 'overbought, overowned and overvalued.'
- Federal Reserve Chairman Kevin Warsh's July press conference was 'intentionally cagey,' Santoli writes, creating the scare-and-relief dynamic that powered the index's final breakout thrust.
- Corporate earnings are tracking to rise 30% in 2026, while some $750 billion in partly debt-financed AI capex flows into the economy alongside nominal GDP growth above 6%.
Why it matters: Nearly 20 percentage points of the S&P 500's 47% Q2 earnings surge came from unrealized third-party investment gains in private companies like Anthropic and SpaceX — gains that can't be extrapolated or valued, meaning the headline earnings picture is materially better than the underlying fundamentals. Yet the market treated that same week as a breakout moment, even as veteran strategists Snyder and Hayes flag 'overbought, overowned, overvalued' conditions historically associated with secular tops.
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