Frank Curzio
Founder & CEO of Curzio Research, Wall Street Unplugged Host
US equities have a real floor because foreign investors are too heavily invested to exit quickly. 63% of foreign financial assets now sit in US stocks, above the 53% record set at the 2000 dot-com peak, and foreign holdings have tripled from $7.5T in 2020 to $23.2T. During the tariff panic, foreign capital piled in rather than fled, adding $2T in April alone. An unwind of $23T cannot happen quietly or fast; the exit door is too small. x.comÂ
US stocks should rise as consistently strong economic data pushes earnings estimates higher, while quarter-end selling is only noise. The US Economic Surprise Index hit 63.2, its highest since August 2023, after its largest 7-week surge since Q1 2022. JPMorgan estimates $165 billion of mechanical rebalancing into bonds by quarter-end, which unwinds fast and opens a better entry. Treasuries returned -3% a year after inflation over the past decade versus +12% for the S&P 500. x.com x.com x.com x.com x.comÂ
US large-cap equities look near a bottom because hedge-fund positioning suggests forced selling is in its final innings, not economic deleveraging. By many measures this is one of the largest hedge-fund equity deleveraging events in 30 years; AI positions built over 18 months are being unwound in 75 days. Yet profits are growing about 20% year over year, AI compute demand exceeds supply, and the S&P 500 has barely moved. Contagion has reached credit, multistrats and European bonds. x.comÂ
Strong corporate earnings make weekend crash panic a contrarian buying opportunity in US large-cap equities. Most individual stocks have already gone through bear markets despite the S&P 500 nearing record highs; weekend social-media panic rarely leads to a genuine economic downturn and instead offers long-term investors an attractive entry point. x.comÂ
US large-cap equities are vulnerable because earnings have not caught up with total market capitalization. The market is farther from its 200-week moving average than at any point in 18 years, and cracks are starting to show; staying bullish ignores these risks. Rate hikes remain possible, oil is still high, and yields may climb again, so now is the time for caution. x.com x.comÂ
Far less inflated valuations and significant AI earnings make US equities unlike the dot-com market top. AI/SI spending may still be overexuberant. Rates and yields have returned to historical averages; more oil through the Strait of Hormuz and from OPEC and Russia should lower oil and inflation. The market may not have bottomed yet, but falling yields, steady rates and the midterms passing should let it climb the wall of worry. x.com x.com x.comÂ
Beijing's reported plan to sell hundreds of billions in US bonds to support Chinese stocks makes Chinese equities extremely bullish. The aim is to make China's market look stronger than the US and attract investors worldwide. A massive US bond selloff would put enormous pressure on global markets. x.comÂ
The 10-year yield above 5% limits how far the US equity rally can stretch, even as stocks shrugged off the Fed hold. Two policymakers wanted a hike, the 10-year rose to about 5.04%, and bonds sold while all four major indices closed higher. Rates need to cool for the rally to extend. x.comÂ
Long-dated Treasury yields face more upward pressure than in the 1990s, a common comparison. Then, yields were high but falling from the early-1980s Volcker peak, and the US was the sole superpower. Now yields are turning up from their 2020 low, while the Iran war has driven oil-led inflation and exposed weaker US military dominance, denting confidence in Treasuries. Foreigners bought over $940 billion of US stocks in a year while selling Treasuries. Pressure persists until macro tensions ease. … Show more
US large-cap stocks are set for a catch-up trade after the biggest, best companies fell 15% or more on a manufactured conflict that is now irrelevant, even as AI usage exploded and their numbers kept rising. The Nasdaq 100 is up only 4% this year and the S&P 500 2%, less than Claude's inflection since December alone is worth. x.com x.comÂ
US stocks remain vulnerable because leveraged long positions could amplify an unwind of the mania. The SPY-versus-long-Treasury trade has given back only a few weeks of its gains. x.comÂ
US large-cap stocks look insanely bullish because the market no longer cares about war fears and interest-rate worries. The S&P 500 chart is not bearish, and another big leg higher is loading for equities, with crypto set to outperform rather than just follow. x.comÂ
