In this July 8, 2026 morning market briefing, Kenny Polcari reports from Cape Cod and warns investors of heightened volatility after the Iranian Revolutionary Guard Corps (IRGC) attacked three commercial vessels in the Strait of Hormuz. The attacks reignited oil‑price risk, pushing crude to $74 /barrel and sending Treasury yields higher (2‑year at 4.2 %, 10‑year at 4.57 %). Polcari notes that the AI‑semiconductor trade was already weakening, with key memory‑chip makers (Micron, SK Hynix, Western Digital, Samsung) in bear‑market territory, and that a Reuters story about Deepseek’s AI chip sparked fresh concerns about the AI infrastructure narrative. He highlights a sector‑rotation theme: utilities, consumer staples, communications, energy, healthcare and real‑estate are outperforming, while the cap‑weighted S&P lags the equal‑weight index. The upcoming FOMC minutes from Chair Kevi Warszcza are expected to confirm a continued focus on balance‑sheet discipline and limited liquidity, signaling that the Fed will not revert to the ultra‑easy policies of the past 15 years. Polcari stresses that investors should shift from “buy‑the‑dip” mentalities to a fundamentals‑driven approach, emphasizing earnings, cash flow and valuation. He provides technical market levels – S&P 500 support at 7,410, potential test of 7,280, gold support at $4,000, and futures declines across the Dow, S&P, Nasdaq and Russell. After the market analysis, he offers a complimentary portfolio review (phone 561‑931‑0190) and shares a Tuscan ribollita soup recipe as a metaphor for markets that improve with time. The briefing blends geopolitical risk, macro‑economic data, sector dynamics, policy outlook, technical charts, and a personal culinary interlude.
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Well, good morning. Yes, it's me, Kenny Polcari, your host of the party. And here I am back in my happy place, Cape Cod, Massachusetts. There you go, right out behind me is the bay that leads right out to the Cape Cod Canal, goes straight across through Woods Hole, and you end up in Martha's Vineyard. And you make a left, you go to Nantucket. In any event, it is a gorgeous day here in Cape Cod. It's going to be about 80 degrees today. The sun is coming out after a couple of days of really kind of rainy, nasty weather. In any event, Today is July 8th, 2026, and here are the things you need to know to get your day started. Well, brace yourself again because here we go. The IRGC attacks 3 ships in the Strait of Hormuz. Oil surges back up and through $70. Bonds fall, bonds fall, yields rise, and now we're further into the danger zone. The FOMC, well, those minutes are out at 2 PM this afternoon, and global markets are under pressure, and US futures are lower this morning. And what we haven't done today, We're going to have the ribollita. We'll get to that in a moment. So, oh boy. Last night we launched a new round of strikes against Iran after the IRGC attacked commercial ships moving through the Strait of Hormuz. And just like that, the Middle East goes from the back burner right back to the front burner. So yes, brace yourself because we should expect more volatility in the days ahead as investors try to figure out what this means for oil inflation, the Fed, and the broader risk appetite, because any threat in the Strait of Hormuz is never a regional story. It becomes a global market story. So let's be clear, the chop though did not start last night. The AI trade was already showing signs of exhaustion before these latest headlines hit the tape. Some of the hottest names that we've been talking about, I think those memory names, are all now in bear market territory, meaning they're down more than 20% off their recent highs. Micron, SK Hynix, Western Digital, Storage Technologies, and Samsung were already under pressure. Valuations were already being questioned and investors were already rotating out of the high flyers ahead of the coming earnings season. We talked about that too on Monday. The narrative has been that this wasn't just about another speculative bubble. The case has been simple. Earnings have been growing even faster than stock prices. And those stronger fundamentals justified the supposed premium valuations. And yesterday Samsung essentially validated that whole argument with another blowout quarter. And what happened? They sold the whole group. They sold, they sold Samsung and they sold the whole group anyway. And all that says is that this sell-off wasn't really about Samsung at all. It's about repositioning and profit taking as investors are asking themselves once again, whether expectations have simply gotten too high heading into the earnings season, which begins next week. Again, we discussed that. And then Reuters, well, they just threw gas on the fire reporting that Deepseek is developing its own AI chip. Doesn't matter how far, how far along it really is. The market heard potential NVIDIA alternative and started asking questions about the whole AI infrastructure trade. All over again, and that sent the semis reeling. The Sox down more than 5%. Now, while the indexes all ended lower when the bell rang, the Dow did make it a new intraday high before giving it all back yesterday. And while the S&P ended the day lower, there was still underlying strength in the broader market, with 6 sectors ending the day higher and substantially higher— more than 1%. Utilities, consumer staples, communications, energy, healthcare, and real estate were all up. Again suggesting more rotation within the sectors that have been waiting patiently for investors to take a look. Now, this is the rotation thesis playing out in real time, as we've discussed, and it's exactly what I've been saying for a couple of weeks now. The generals, well, they're just getting tired, but the troops will keep marching on. Equal-weight S&P is now up 12% year-to-date, is holding up much better than the cap-weighted S&P, which is up 9.6% year-to-date. Rate. So that tells you a lot. Now layer in the oil headline and Treasury's— the Treasury revoking the license that allowed Iranian crude to flow is not a small thing. It only tightens the supply optics right as the Strait of Hormuz risk premium was starting to fade from the memory bank. Oil yesterday surged $2. It's up another $3.50 this morning, trading at $74 a barrel. Recall what I said on Monday, that the path of least resistance for oil was down unless we get an unexpected Iranian headline. And guess what? We got the headline. And this morning, Trump says that the deal is off. Iran doesn't want this to end, and so it won't. Which means expect more volatility in oil as well as the broader markets— and not the US, the global markets. Today also brings the FOMC minutes from Kevi Warszcza's first meeting as chair. And I think that's going to give us a first a real look into how he intends to run monetary policy. And I've said it before, and I still believe this is where we're headed. My gut tells me that while the Fed may provide some relief— think rate cuts at the short end of the curve when the conditions warrant, and right now it's not warranted— uh, he has no intention of returning to the easy money policies that define much of the past 15 years. Balance sheet discipline is likely to remain front and center. Which means liquidity isn't gonna come flooding back into the system anytime soon, anytime the market throws a temper tantrum, anytime, you know, the algos stamp their feet. And that's an important distinction because financial conditions can remain restrictive even if short-term rates begin to move lower. And we talked about this last month when we discussed quantitative tightening and the shrinking of the Fed's balance sheet. Long-term Treasury yields and credit spreads and overall availability of liquidity all matter just as much. Now, my sense is that, uh, Kevin Walsh is comfortable letting the market do some of the heavy lifting rather than relying on the Fed to support asset prices at every turn. So for investors, that means that the days of buying every dip because the Fed has your back may be behind us. Investing is likely to become more selective. Valuations will matter more, and companies are going to have to earn the premiums that investors have been willing to pay and that will pay going forward. And I suspect that's going to be an adjustment for an entire generation of investors and market professionals who came of age during the Bernanke, Yellen, and Powell years when extraordinary monetary accommodation became just the norm. Now, this environment is different. Liquidity won't be as abundant. I think the Fed may not be as quick to come to the rescue. And that means that fundamentals, earnings, cash flow, and valuation once again become the primary drivers of investment success. Now, frankly, that's the way markets are supposed to work. So welcome to the market driven by fundamentals. It takes me back to a time when I first came into this business in 1980, when Greenspan was Fed chair. Now, bonds took a hit yesterday. The TLT lost 1%. The TLH was down 9/10, and that sent yields higher. The 2-year is now yielding 4.2%. The 10-year has pierced 4.5% and is now yielding 4.57%, while the 30-year is yielding 5.07%, putting us further into the danger zone. Today brings little in the way of market-moving economic data, so investors are going to likely turn their attention, uh, to today's release of the FOMC minutes, right? And we have already discussed this, uh, so let's move on. Gold, that's plunging. It lost $58 or 1.4% yesterday. It's down another 1.3% or $52 today, trading at $4,050 an ounce, a direct result of the change in tone and the expectation of what the Fed, uh, what we'll see in the FOMC minutes today. Now technically, the chart still says that gold should find support at $4,000 an ounce. Now, if we break that, then that $3,500 target that we discussed last week, uh, should, uh, is— it becomes now the target. And that should not be a surprise. Overnight, the cost to get hit again, it was down 5.3%. And that's not helping the overall tone of the AI slash tech trade. European markets are all down. Spain getting whacked down 2.5%. The UK is down 1.3%. Everyone else is down somewhere in between. US futures are getting smoked. The Dow futures down 580 points or 1.1%. The S&P down 70 points or just under 1%. The Nasdaq down 400 points or 1.6%, while the Russell is down 45 points or 1.7%. The S&P closed last night at 7,503, down 33 points. Trendline support is down at 7,410. And if we break that over the next couple of sessions, and we likely might, then expect us to test the June lows of 7,280, which would be a 3% move down from here. You can give me a call at 561-931-0190 to discuss your goals and your timeline and assess the risk in your portfolio versus the tolerance for risk that you may have. And I'm always happy to do a complimentary free portfolio review to assess what that risk exactly is. Okay, so we have a— we're gonna have the ribollita, which is a Tuscan reboiled soup. Now, given the action, this recipe makes sense. The name comes from the Italian word ribollare, which means to reboil. It was born out of the necessity in the Tuscan countryside where families would make a large pot of vegetable soup and then reheat it or reboil it the next day. In fact, many Tuscans will tell you that rivoletta tastes better on the second or third day than it does when it's first made. And I would agree, right? As it sits and it marinates, it always gets better in the days that follow. So for this, you need the basics: carrots, celery, onions, cannelloni beans, fresh garden tomatoes, garlic, kale or spinach, right? If you don't have the kale, you can use spinach. Olive oil. You need day-old stale Italian bread, chicken stock, and then you need parsley, sage, rosemary, and thyme. Begin by sautéing the onions and the carrots and the celery in the olive oil until it's nice and soft. Add a few cloves of chopped garlic. Let it all come together. Then you're gonna add in the fresh chopped garden tomatoes. And if you don't have that, you can get a can of crushed tomatoes, 'cause that works just as well. Let it all cook down for about 10 minutes. Then you're gonna add in the cannelloni beans, water and all. You're gonna smash some of them, you're gonna leave some of them whole because that adds to the body of the soup. And then you're gonna add the kale or the spinach if that's what you're using. And then cover it all with chicken stock, right? Make sure the chicken stock covers everything. Season it with the salt and pepper and the herbs. Let it simmer on low for about 45 minutes. When you're serving it, you're going to lay down the day-old torn— day-old crusty Italian bread, put that at the bottom of the bowl, ladle the soup over it, and let it sit for 5 minutes to soak in. And then finish it with a generous drizzle of olive oil. It is delicious, trust me, you won't be disappointed. Anyway, look at this day out there. The sky is blue, the Sun is out, the tide is on its way up. Right now it's low, but it'll be on its way up, and when it does, it'll be splashing right here against the wall where I'm standing. Until tomorrow, take good care.
