In this daily market commentary, Kenny Polcari opens by noting that the equal‑weight S&P 500 hit a fresh record high while the cap‑weighted index stayed flat, framing the day as a classic market rotation rather than a collapse. He walks through the performance of the “Mag 7” mega‑cap tech stocks, sector flows, and technical indicators (yields, oil, gold, VIX). Polcari then shifts to macro context, contrasting the 1990s fiscal surplus that helped the internet boom with today’s structural deficits that pressure long‑term rates, and discusses Fed Chair "Warsh"’s dilemma after Alan Greenspan’s death. He highlights a new source of inflation: AI‑driven chip shortages leading Apple and Microsoft to raise prices, and critiques the political outrage over discretionary tech price hikes versus everyday cost‑of‑living pressures. The commentary stresses that profit‑taking and rotation are healthy, using a pendulum metaphor and a spaghetti carbonara cooking analogy to illustrate proper portfolio management. He previews upcoming economic data (June non‑farm payrolls), notes European market mixedness, and offers a free portfolio review contact. The overall message is that the broader market remains sound, the AI trade is merely pausing, and disciplined rotation will sustain future gains.
Chapters
Well, good morning. Yes, it's me, Kenny Polcari, your host of the party, and today is Monday, June 29th, 2026. We're just 2 trading days from the end of the quarter. Uh, also very exciting. But here are the things you need to know to get your day started. Well, once again, the equal-weight S&P hit a record high while the cap-weighted S&P closed essentially flat. Most stocks rose. Again, that's not weakness. That continues to be rotation. Semis, they get hit again even as the group is on pace for the best quarter ever. Profit taking on the highs is not a collapse. Oil is down. Gold is down. Yields, they're holding steady. Alan Greenspan, well, he passed away on Monday. He was 100. Physically, the maestro's gone, but spiritually, he is sitting right in the middle of Warsh's problem. And what are we having dinner tonight? We're gonna have the spaghetti carbonara, and I'm gonna tell you why. And so the rotation story continues. The Dow lost 44 points, the S&P lost 3, the Nasdaq thought down 60, the Russell gained 2, the Transports lost 106, the equal-weighted S&P gained 36 points and ended the day at a new closing high, all while the Mag 7 added 464 points. And that makes sense, as though— as these names, the Mag 7, are all down double digits and sitting right on top of their oversold trend lines on the RSI scale. While the MAG7 is up about 8% from the beginning of the quarter, it is down 14% from the May high. So while it feels a bit uncomfortable, uh, I get it, but remember, this is not a disaster at all. And recall what I said, uh, on Varney Company to Stuart Varney on Friday when I was on Friday morning. We're at the end of the quarter and there's a lot of window quarter-end window dressing going on. It doesn't feel like the end of an era by any stretch. You can get the clip on my, uh, on my Twitter, which is @kenny_polcari. You can get it in the note. I put the link in there so you can watch it on, uh, if you didn't see it, you want to watch it. So in the end, here's the thing that nobody wants to say out loud because it really ruins that panic narrative that some people are trying to create. The broader market is fine. The selling is concentrated in the mega-cap tech complex. Again, the equal-weighted S&P closed at a fresh record high on Friday while the financial media accentuated the tech, the ongoing tech quote-unquote bloodbath. But remember, consumers are still spending, businesses are still investing, earnings estimates are still grinding higher, and the eco data is not collapsing at all. And while the market is pricing in one rate hike this year— and Bank of America is pricing in three, I'm not sure where they get that at all— the sense is that KW, Kevin Walsh, is going to have none of it. But neither will he be quick to cut rates either. And honestly, that's actually okay. At his swearing-in last month, Warsh singled out Alan Greenspan for praise, right, pointing to the prosperity without inflation that defined much of the 1990s. He believes that the AI-driven productivity boom can deliver a similar outcome today, just as the internet boom did 3 decades ago. There's just one problem: the backdrop is just the mirror image of each other. In the '90s, the federal budget uh, moved from deep deficits to a surplus under Clinton. That relieved inflationary pressures, it allowed for long-term interest rates to fall, and it freed capital to fund the internet and telecom boom that we all witnessed. Greenspan had the wind at his back. Whoosh! He's got it right in his face. Today's structural deficits mean that the Treasury must continue issuing enormous amounts of debt, and we've discussed that. Keeping upward pressure on long-term rates even if they eventually decide to lower short-term rates. That's Warsh's conundrum. AI may deliver the same productivity gains as the internet did, but it won't enjoy the same fiscal backdrop. Warsh wants Greenspan's outcome but without Clinton's— but with Clinton's balance sheet, right? So good luck with that. Now, last week the PC report reminded us that inflation remains sticky, and over the weekend Barron's highlighted another issue that investors should not ignore. The AI buildout is becoming expensive. We understand that. So many advanced chips are being diverted into the data centers that supply for consumer electronics is tightening, and those higher costs are now beginning to show up on Main Street. That's inflation finding another way into the economy. Now, Timmy Cook responded immediately by raising prices on Macs and iPads, saying that he could no longer absorb the higher component costs. Microsoft followed suit with price increases on their Xbox consoles. And suddenly all these politicians, uh, uh, who spent years dismissing inflation under the Biden administration are outraged because a MacBook, a discretionary one-time purchase, now costs more. Bernie, Lizzy, and AOC blasting Apple for raising prices. AOC even suggesting that Apple should be broken up. I mean, the lack of understanding is mind-boggling. I don't remember hearing the same level of outrage when families were paying more for groceries, gasoline, rent, insurance, and virtually every other almost daily recurring household expenses. But I digress. Let's not go there. Now, does that mean that the AI trade is over? No, I don't think so at all. What it does mean is that investors will continue to wonder, and this— we've been talking about this— has the AI trade gotten ahead of itself in the short term? I'd say yes, it has. I've said that for a while, but that's not necessarily a negative after the massive 30% rally in the NASDAQ, right? 26% in the Mag 7 off of those April lows. Some profit taking is actually healthy. In fact, you could argue that it's actually necessary. Bull markets don't move up in a straight line. They advance, they pause, they rotate, they shake out, they shake the weak hands before they look for the next leg higher. So the real question isn't whether AI is dead, it's whether investors have become too optimistic too quickly. Isn't that always the case when stocks move so quickly? Don't we always ask ourselves, are we ahead of ourselves? Yes, we do. And this is what I like to remind you, the pendulum, right? Because markets can be emotional. The pendulum, it swings too far to the right, then it swings too far to the left before eventually finding equilibrium. That's the ebb and flow of investing. It's really not rocket science. Long-term investors understand that corrections and rotations are not the enemy. They're just part of the process. If you need any more proof, 7 of the 11 sectors in the S&P finished higher on Friday. Healthcare led the way, jumping 3.3% after being one of this year's weakest groups. Utilities, consumer staples, consumer discretionary, real estate, communications, and and financials all moving higher as money rotated out of tech and into these areas, some of them which have been lagging. Meanwhile, investors took profits in the leaders, right, that we talk about. Industrials, they slipped 1.6% after an 18% run year to date. Technology fell 1.9%, but it's up 27% year to date. Energy and materials also eased. They both have also strong advances year to date. So it makes perfect sense. That's exactly what healthy markets do. Money rotates out of the winners and into the laggards, and it usually happens at the end of the quarter just like we're seeing. That's not liquidation, it's called portfolio management. Bonds ended the day mostly unchanged. The TLT flat, the TLH gained a tenth of a percent. The 2-year yield is now at 4.1%, the 10-year is at 4.37%, and the 30-year is at 4.86%, right where, where they were. Oil continues to trade below $70. This morning it's trading at $69.90, even after the weekend drama. For now though, the ceasefire appears to be alive and well, so gold— uh, oil should continue to trade lower. Gold is down $50 at $4,040 and continues to find support at $4,000. Recall what I said last week, from a technical perspective, trendline resistance is now at $4,470. Ironically, remember, that was support. Well, once it breaks down, support now becomes resistance. So now with $4,050-ish, $4,000 in that range, if that fails to hold Then the next meaningful chart support is way down at 3,500. And I know it sounds aggressive, I said that, but it's well within the realm of possibility, especially if geopolitical tensions continue to ease, inflation remains under control, and investors rotate away from more of those safe haven assets. So what's ahead? There's no economic data today that's going to drive the move at all, but remember, it's a short holiday week. The big number, the June Nonfarm Payroll report, will be out on Thursday. Because markets are closed on Friday. It's expected to show an increase of 115,000 new jobs. Average hourly earnings month over month and year over year expected to remain strong at +0.3% and +3.5% respectively. Unemployment expected to remain steady at a low 4.3%. This one data point— watch this, because this one data point is going to influence both Treasury yields and the market's expectations for the Fed. Now, European markets are mixed this morning. Uh, you know, kind of 3 of them are up and 2 of them are down. Nothing big, just kind of churning. US futures are higher. Dow futures up 250. S&P's up 66. The Nasdaq's up 376. And the Russell's up 13. The S&P closed at 7,354, down 3 points. But don't lose sight of the bigger picture. The market is not falling apart. I keep saying this, it's rotating. The AI story isn't over, it's just catching its breath. And if history is any guide The future should be bright. Now, there are now only 2 trading days left in the second quarter, today and tomorrow. Portfolio managers are going to continue to reallocate ahead of the marking season, the end of the marking season. Now, the third quarter, second half of the year, is about to begin on Wednesday. We are now deep into the midterm election season. We can expect to hear more and more about policy positions as we get closer to November. Markets will listen and react, but remember Politics can and do create some short-term chaos, but rarely do they price markets in the long term. So take advantage of moves that dislocate. The VIX is down 1% this morning at 18.20, and guess what? SpaceX is up $3 at $156.50. You can call me at 561-931-0190 to discuss your goals, your timeline. Let's assess your risk in your portfolio and your tolerance for volatility, as I'm always happy to do a complimentary portfolio review. And risk assessment. Okay, so now dinner. What are we doing? I had to come up with something that kind of once again, uh, gave you a sense of the tone of the markets. And so spaghetti carbonara comes up because it's a perfect dish for this rotation that we're seeing, I think, right? Carbonara is like a high wire act. You've got screaming hot pasta and raw egg, and if you let them touch each other in the wrong way, then the eggs scramble and the whole thing breaks apart. If you handle it right Off the heat, toss it fast. Those same eggs emulsify into a silky sauce. And if you handle your portfolio correctly, it too will become silky over the long term. So you want to start by bringing a pot of salted water to a rolling boil, add the spaghetti, cook it for 8 to 10 minutes. You want it al dente, you don't want it mushy. While this is cooking, sauté diced pancetta in a frying pan. Now in a separate bowl, you're going to scramble 2 eggs and 2 yolks. Mix it well. Add in a handful or two of Pecorino Romano cheese and mix it until it gets— forms like a paste. Set it aside. When the pasta is cooked, take the tongs and add it directly into the sauté pan with the pancetta, the guanciale. Mix it to coat the pasta. Now take it off the heat. Now you add in the egg and cheese mixture. Also going to add in a ladle of the pasta water. Mix it quickly, toss it quickly, and it turns glossy and it coats every single strand of the pasta. When you serve it, always have more pecorino on the table for your guests. Listen, it's a, it's a no-brainer. It's a great dish, easy to make, and it does reflect kind of where I think we are in the markets at the moment. Until tomorrow, take good care.
