Wed, June 4, 2025 | 7:45AM ET

On a "quiet" macro week, equities rise... further evidence investors under-exposed. Is the next move a melt-up rally?

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VIDEO: The fact that stocks continue to rally on “quiet” macro is really telling. And evidence that more investors are cautiously positioned or even outright short. This is why we believe the odds are rising of a significant rally soon.

Please click below to view our Macro Minute (duration: 2:31).

On a quiet macro week, equities rise... further evidence investors under-exposed. Is the next move a melt-up rally?

On Tuesday, stocks saw positive follow through, following Monday’s positive reversal (gap down, rally strongly into close), and to us, this is telling. This has been a “quiet” macro period, yet equities are drifting higher. And more notably, our X.com (x.com/fundstrat) saw a stepped up level of attacks, calling us “constantly wrong” etc.

It is evident to us, the plurality and possibly majority of investors remain negative towards stocks, which ironically is bullish. After all, if a large share of investors are positioned for downside, the pain trade is for stocks to continue to rally.
In fact, we wonder if the next move in equities is a painful melt-up rally, which sees a sharp rise in stocks forcing short covering. This is sometimes referred to as a “face ripper”
The conditions are there:
– Short interest has been rising as hedge fund gross leverage rise is due to rising shorts
– NYSE Finra Margin debt shows 3 consecutive months of margin debt decline
– AAII sentiment remains persistently negative
– The social media attacks on us at X.com/fundstrat show many traders are fighting the rally
A sampling of those attacks is shown below and this level has surged in the last week or so. So this to us is “out of sample” and shows something unusual is taking place.
By the way, I did some zooms in the past week with portfolio managers, and a few were quite impatient with us, saying that our constructive views ignore the uncertainty in the macro.
Perhaps it boils down to the fact that there is a significant perception gap. And the market itself is telling us there is more clarity than economists believe:
– tariff uncertainty and negative impact on economy is more benign
– risk of surging inflation is more a consumer/economist perception than reality
– spillover to bonds and USD risks are smaller than “American exceptionalism is over”
If this is true, then equities are more attractive now than in Feb 2025. That remains our view. And we know stocks are starting to look at 2026, which is better fundamentally.

The macro for the rest of the week is below. The key is the jobs report Friday:
– 6/2 Mon 9:45 AM ET: May F S&P Global Manufacturing PMI   52.0 vs 52.3e
– 6/2 Mon 10:00 AM ET: May ISM Manufacturing PMI    48.5 vs 49.5e
– 6/2 Mon 1:00 PM ET: Powell Gives Opening Remarks
– 6/3 Tue 10:00 AM ET: Apr JOLTS Job Openings    7391k vs 7100ke
– 6/3 Tue 10:00 AM ET: Apr F Durable Goods Orders MoM    -6.3% vs -6.3%e
– 6/4 Wed 9:45 AM ET: May F S&P Global Services PMI    52.3e
– 6/4 Wed 10:00 AM ET: May ISM Services PMI    52.1e
– 6/4 Wed 2:00 PM ET: Jun Fed Releases Beige Book
– 6/5 Thu 8:30 AM ET: 1Q F Nonfarm Productivity QoQ    -0.8%e
– 6/5 Thu 8:30 AM ET: Apr Trade Balance    -66be
– 6/5 Thu 8:30 AM ET: 1Q F Unit Labor Costs    5.70%e
– 6/6 Fri 8:30 AM ET: May Non-farm Payrolls    130ke
– 6/6 Fri 9:00 AM ET: May F Manheim Used Vehicle Index
Taking a step back, we believe we are more akin to “start of a new bull market” rather than late cycle of a top. And while there are multiple factors, here are 5 reasons to consider:
– ISM still below 50: more consistent with “early cycle”
– Housing deficit this cycle: 1.7 million shortage of homes past decade
– NYSE Finra Margin Debt: declined $90 billion since Jan, not consistent with “top”
– AAII Sentiment: -21 6m avg. Always +5 to +29 6m avg at “top”
– Still most hated rally

BOTTOM LINE: Still “most hated rally”

This still remains the “most hated” V-shaped stock rally. We view Bitcoin as a leading indicator and thus, we expect stocks to reattain all time highs, which Bitcoin achieved last week. We see S&P 500 reaching 6,600 by year-end.

And the drivers for this upside are:

Still most hated rally
Sizable perception gap: Tariff “bark worse than bite”
Hedge funds increased short interest recently
$7 trillion cash on sidelines
Investment outlook better now than in Feb 2025:
– tariff visibility
– tax and de-regulation visibility
– US cos survived 5^th major “stress test”
– Fed more dovish in 2026

As for what we would buy

Washed out stocks
MAG7 & Bitcoin
Industrials
Financials: Large-cap and regional banks
Small-caps

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Key Incoming Data June:

~~6/2 9:45 AM ET: May F S&P Global Manufacturing PMI~~ Tame
~~6/2 10:00 AM ET: May ISM Manufacturing PMI~~ Tame
~~6/3 10:00 AM ET: Apr JOLTS Job Openings~~ Tame
~~6/3 10:00 AM ET: Apr F Durable Goods Orders MoM~~ Tame
6/4 9:45 AM ET: May F S&P Global Services PMI
6/4 10:00 AM ET: May ISM Services PMI
6/4 2:00 PM ET: Jan Fed Releases Beige Book
6/5 8:30 AM ET: 1Q F Unit Labor Costs
6/5 8:30 AM ET: 1Q F Nonfarm Productivity QoQ
6/5 8:30 AM ET: Apr Trade Balance
6/6 8:30 AM ET: May Non-farm Payrolls
6/6 9:00 AM ET: May F Manheim Used Vehicle Index
6/9 11:00 AM ET: May NYFed 1yr Inf Exp
6/10 6:00 AM ET: May Small Business Optimism Survey
6/11 8:30 AM ET: May Core CPI MoM
6/12 8:30 AM ET: May Core PPI MoM
6/13 10:00 AM ET: Jun P U. Mich. 1yr Inf Exp
6/16 8:30 AM ET: Jun Empire Manufacturing Survey
6/17 8:30 AM ET: May Retail Sales
6/17 10:00 AM ET: Jun NAHB Housing Market Index
6/18 9:00 AM ET: Jun M Manheim Used Vehicle Index
6/18 2:00 PM ET: Jun FOMC Decision
6/18 4:00 PM ET: Apr Net TIC Flows
6/20 8:30 AM ET: Jun Philly Fed Business Outlook
6/23 9:45 AM ET: Jun P S&P Global Services PMI
6/23 9:45 AM ET: Jun P S&P Global Manufacturing PMI
6/23 10:00 AM ET: May Existing Home Sales
6/24 9:00 AM ET: Apr S&P CS home price 20-City MoM
6/24 10:00 AM ET: Jun Conference Board Consumer Confidence
6/24 10:00 AM ET: Jun Richmond Fed Manufacturing Survey
6/25 10:00 AM ET: May New Home Sales
6/26 8:30 AM ET: May P Durable Goods Orders MoM
6/26 8:30 AM ET: May Chicago Fed Nat Activity Index
6/26 8:30 AM ET: 1Q T GDP QoQ
6/26 11:00 AM ET: Jun Kansas City Fed Manufacturing Survey
6/27 8:30 AM ET: May Core PCE MoM
6/27 10:00 AM ET: Jun F U. Mich. 1yr Inf Exp

Economic Data Performance Tracker 2025:

Economic Data Performance Tracker 2024:

Economic Data Performance Tracker 2023:

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