Good morning,
Newton’s First Law of Motion—a body in motion remains in motion unless acted upon by an external force—is closely tied to the concept of momentum (mass × velocity). Both help explain why objects, or in this case markets, keep moving along the same vector (direction and velocity), or don’t. What looked like it might be a quiet summer week has been anything but. Despite a light calendar of economic data and key earnings reports, markets continued their upward momentum, driven largely by the continuation of FOMO – the Fear of Missing Out. So far this week, the S&P 500 and Nasdaq are up +1.06% and +0.78%, respectively, with both indices setting multiple new highs.
A clear FOMO indicator has been a surge in speculative trading: elevated call option volumes, meme-style squeezes (think Kohl’s and Krispy Kreme), SPACs, and IPOs. The Goldman Sachs Speculative Trading Indicator jumped sharply, although it remains below the peaks seen in 2000 and 2021. Momentum is holding firm heading into the August 1 tariff deadline, with markets rallying midweek on optimism around a U.S.–Japan trade deal that lowered expected auto tariffs to ~15%, lifting sentiment across sectors. Hopes for a U.S.–Europe agreement are also supporting global equity markets.
So much for a doldrums week. Wishing you a relaxing weekend, as next week is packed with market-moving events.
Be well,
Mike
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