Before we get into the meat of this week’s roadmap, a bit of housekeeping: if you haven’t yet reviewed our latest healthcare update, now’s a good time. It extends our core thesis and highlights a handful of under-the-radar biotech names we believe are set to outpace the field thanks to both cyclical momentum and strong positioning within the value-based care shift. Link below.

Also heating up?

Our “Phase 3” AI basket, a high-conviction portfolio of names riding the AI deployment wave. Since April, this group has outpaced the S&P 500 by more than 2x, and in our view, it’s still in the early innings. If you’re looking for what to scoop up on the next pullback, start here:

Now, let’s dive in…

Tariffs, Tailwinds, and Tactical Tilts: Setting the Stage

Markets tiptoed through a relatively quiet macro backdrop this past week. But by Thursday, a better-than-feared Nonfarm Payrolls print gave traders something to cheer about, helping major indices end on a high note. Earlier in the week, we saw classic de-grossing: winners were trimmed, laggards were bought. That rotation benefited small caps and the Dow, while the Nasdaq 100 lagged, though still managed a respectable +1.5% weekly gain.

Looking forward, the calendar is light on fireworks… A few routine bond auctions and the usual FOMC minutes are on deck, plus the weekly jobless claims. But circle July 9th, that’s when the temporary tariff delay enacted after Liberation Day officially expires. Whether we see last-minute trade deals or a hard shift toward tariff enforcement (as hinted by Trump’s August 1st deadline) remains to be seen. Either way, that’s your geopolitical risk flare for the week.

The Rally and Real Risks: Parsing SPX

The S&P 500 continued its gravity-defying grind higher last week, notching yet another all-time high and closing just under the 6300 mark. It wasn’t just the headline level that impressed, market internals showed strong signs of broad participation. The advance/decline line surged, signaling that this wasn’t a narrow melt-up powered by a few megacaps. In fact, 80% of SPX stocks now sit above their 20-day moving averages… a sign of strength, yes, but also a signal we’re edging toward overbought territory. Some chop or sideways drift wouldn’t be surprising here.

The Forces Behind the Rally
The usual suspects were in play: dovish rate-cut optimism, better-than-expected labor data, and the long-awaited passage of the administration’s BBB legislation. The NFP report beat expectations and even saw upward revisions to prior months, yet another data point defying the doomers.

Breadth broadened, risk appetite held, and equities levitated.

But while the index soared, institutional hands were absent. Fund flows reveal that large investors have been net sellers for eight consecutive weeks. Positioning remains light, a quiet but powerful tailwind for any rally…

Tariffs Enter the Chat… Again
This week, the spotlight shifts to trade. July 9th marks the expiration of the temporary tariff delay first introduced post-Liberation Day. Trump, never one to miss a chance to stir the pot, made headlines by reaffirming his August 1st enforcement date. But there’s nuance: countries that negotiate in “good faith” may earn themselves a 10–20% tariff. Others? They’re staring down the barrel of 60–70%.

The Vietnam deal gives us a glimpse into how this game is being played:

• Vietnam drops its tariffs → U.S. slaps on a 20% rate for imports and 40% for transshipped goods.

• The market didn’t flinch, likely because the new deal still marks a reduction from the prior 46% rate.

• Bottom line: the administration’s math might be fuzzy, but they’re angling for deals, not destruction.

From April to now, here’s what we’ve learned:

• The administration does have a pain point, namely bond market volatility.

• There’s no appetite for a recession.

• Tariff announcements are more bark than bite.

• Other countries know the U.S. is negotiating from a weaker position.

Looking Beyond the Headlines
Investors seem to have developed a thicker skin. Back in April, trade war whispers sent shockwaves. Today, they barely move the needle. Only two official trade deals have materialized (U.K. and Vietnam), and yet SPX is now over 150 points above February highs.

It turns out a bit of rhetorical softening, plus a whole lot of underexposure, goes a long way.

The Setup Into Next Week
Expect a quieter data slate, but the tariff story will take center stage. The market is watching how deals unfold with heavyweights like China, the EU, and Japan. Less so with Canada and Mexico.

Technically, the bull-gap from Thursday’s post-NFP pop sits around 6240. If bulls can defend this level, we’re likely to see continued churning and consolidation near the highs before the next leg up. If that gap fills, eyes shift to:

• 6100 / 6050: previous highs and stronger support

• 5850 range: the last consolidation zone, now buttressed by the 200-day moving average.

As earnings season kicks off in July and August, two things will matter:

• Do results beat conservative guidance?

• More importantly, are the beats big enough to justify rich valuations?

Tariffs filtering into inflation prints could also be a curveball or a catalyst. If pricing pressures remain muted, the Fed gets more room to act…

QQQ: A Slow Grind Higher, with Depth Below

The Nasdaq 100 may have been the “laggard” last week, but that’s a relative term. QQQ still notched a gain of 1.56% and tagged yet another all-time high. The real story here isn’t weakness, but rotation.

Importantly, QQQ carved out a fresh bull-gap near 552.5, a level worth watching. If bulls can defend that zone, we expect the grind higher toward 560 to resume — and from there, potentially extend even further. But given how stretched broader indices are on shorter-term timeframes, don’t be surprised by a pause or a modest retrace to reset conditions.

Key levels to watch:

• 541 → Prior highs from February

• 515 → Major MA cluster (50D, 200D) and Yearly Open; bull line in the sand

Positioning still appears light in the mega-cap AI complex, which adds fuel for future upside if we continue to see soft macro data and dovish Fed posture.

Small-Caps Take the Torch: The Pain Trade Accelerates

A couple weeks back, we flagged small-caps as a classic “pain trade” and last week that theme played out with force. The Russell 2000 (IWM) surged ahead, outpacing both SPX and QQQ, driven by factor rotation and the revival of cyclical names like banks, housing, and real estate.

This is happening for a reason:

• Positioning is historically light in small-caps.

• Dovish rate expectations and improving soft/hard data provide macro cover.

• The July 2024 setup is still fresh in traders’ minds… when IWM and QQQ rallied ~20% in three weeks on the back of a surprise inflation beat.

If July’s inflation data comes in soft again, and especially if the Fed stays dovish, expect another violent upside move in IWM.

Technical outlook:

• The A/D line for small-caps just broke out — breadth is broadening.

• IWM cleared its 200-day moving average with conviction.

Upside targets:

• 230 -240 → Extension of current breakout

Support zones:

• 216 → Recent breakout pivot + 200D

• 200 → 2024 yearly open (must hold for constructive medium-term view)

Unless hard data weakens or tariff-induced inflation fears resurface, the setup is still Goldilocks for small-caps. Particularly as deregulation tailwinds are expected to kick in by late Q3…

Dollar Drama: Dovish Drift Meets Fiscal Fire

The dollar began the week looking punch-drunk, setting fresh local lows as traders leaned into a dovish Fed narrative, ballooning deficits, and signs of political meddling in monetary policy. But by Thursday, the jobs report threw a lifeline. DXY clawed its way back to end the week just a hair lower.

Still, the structural headwinds for the greenback haven’t changed:

• Fiscal credibility is fading: The administration is openly embracing a "run it hot" playbook: spend now, hope growth outpaces deficits later.

• Overcrowding: The dollar is still a consensus long, vulnerable to position unwinds.

• Political pressure on the Fed: Trump’s repeated calls for 1% rates and criticisms of Powell are eroding confidence in central bank independence. The market is already pricing in a more pliable Fed chair in 2025.

Technically, the dollar’s dancing on the edge:

• Hanging on by a thread inside a long-term parallel uptrend channel.

• Break below, and the 200-month MA (~92) is in sight.

• For any upside reversal, DXY needs to reclaim the 97.9 zone, and ultimately, 99.6, a level it failed to hold during the Middle East tension spike.

If weakness persists, the door remains open for a multi-year breakdown. But if we do get a snapback, expect USDJPY to lead, the yen typically underperforms in dollar bounces.

Powell, Bessent, and the Bond Market Chessboard

This week brought more dovish smoke signals from the Fed and Powell himself added a flicker of ambiguity:

“I wouldn’t take any meeting off the table.”

Translation: July rate cuts are not off the menu, a tame inflation print could be the final push toward action.

Then came Treasury Secretary Bessent, who raised eyebrows by echoing Janet Yellen’s once-criticized playbook:

“Why would we borrow longer term at these rates?”

So much for criticizing short-term financing. Bessent now appears fully onboard with the bill-heavy approach, minimizing interest costs today at the expense of rollover risk tomorrow.

The bigger macro context?

• The BBB (Build, Borrow, Boom?) bill is passed, pushing deficits higher.

• Bessent’s spin: “This bill will set off growth like we’ve never seen before… the bill pays for itself.”
  Optimistic? Sure. But the message is clear, the administration is all-in on a growth-led deficit reduction strategy.

Bond market reaction? A familiar dance.

• Yields initially dipped on the dovish tone but bounced right back post-NFP.

• 10Y yield surged back to ~4.35%, erasing gains and reinforcing the rangebound narrative.

Here’s the map:

• Short-term range:

  • Support: 4.25%

  • Resistance: 4.75%

• Macro range (past 3 years):

  • Support: 3.75%

  • Resistance: 4.75–5.0%

In short: bonds are still stuck in a behavioral sine wave. Traders are reacting emotionally to every economic print, while the underlying structure remains unbroken.

If we’re going to see a breakout to the upside, it’ll likely require disinflation + Fed cuts. A breakdown? That’s a slower burn, inflation resurgence is the lurking risk into late 2025 or 2026.

Until then, the game is clear: fade the extremes, respect the range.

Crude: Quiet, but Coiled for a Move

Oil prices took a breather last week as geopolitical heat faded, particularly in the Middle East. Still, crude found support, rising alongside other hard assets in what looked more like a sympathy bid than a directional breakout.

Bigger picture?

Not much has changed. Crude remains below the long-term downtrend line traced from the 2022 highs, the recent breakout attempt during Middle East tensions proved a false start. Unless geopolitical tensions reignite, the focus will likely shift back to supply-side dynamics, which could weigh on prices again.

Technicals to watch:

• Support: $64, aligns with the May breakout.

• Resistance: 200-day moving average / $72 per barrel, needs to be reclaimed for any sustained rally

• Long-term floor: Mid-$50s to low-$60s, key levels from 2019 and 2020 that acted as support earlier this year

Gold: The Metal of Political Mistrust

Gold had its feet to the fire last week, testing a support trendline that’s held firm since late 2024. The pullback was driven by fading geopolitical risk, particularly in the Middle East, but once again, gold found its footing.

The real story, though, is structural. Gold’s most important catalyst right now isn’t CPI or jobs data, it’s the perception of Fed independence breaking down.

• Trump has repeatedly attacked Powell and is openly hunting for a replacement who will cut rates and submit to White House guidance.

• The market sees this for what it is: a move toward politicized monetary policy and gold thrives in that vacuum of trust.

Add to that:

• The looming expiration of tariff delays → interim macro uncertainty

• Dovish tone from Fed + fiscal expansion → real rates likely stay low

Final Thought:

Markets don’t move on what’s obvious, they move on what’s underpriced. And what’s underpriced right now is the possibility that this cycle extends, not ends.

That growth outpaces debt.

That the Fed doesn’t break things.

And that real upside lies not in consensus trades, but in the forgotten corners where positioning is light and policy winds blow strong.

The week ahead will test that thesis not just with data, but with positioning.

Stay nimble. Stay asymmetric. And don’t fall asleep while the pain-trade sneaks higher.

-BSR

Disclaimer:

Remember, this is not financial advice. You are fully responsible for your own decisions!

The information provided on this website/Substack is for informational purposes only. While it is believed to be reliable, Blackshore Research does not guarantee its completeness or accuracy. This content is not an offer or solicitation to buy any financial instrument. The information and terms on these pages can change without notice. Unauthorized use of Blackshore Research’s websites and systems is strictly prohibited. This includes data scraping, unauthorized access, password misuse, or improper use of posted information. Your eligibility for certain services will be determined by Blackshore Research and its affiliates. Investment services are not FDIC-insured and carry investment risks, including potential loss of principal. The proprietary information from Blackshore Research or third-party providers is for individual use only and must not be redistributed or transferred without prior written consent from Blackshore Research.

Before we jump in, a quick note: last week we published a timely macro update (link below) where we pointed out that Trump, after responding to the Iran situation, was likely running low on political capital.

We suggested he might seek concessions to steady the ship, most likely on trade talks with China or pushing forward the Big Beautiful Bill (BBB). Sure enough, just days later, the administration announced a trade deal with China.

Market Recap

It was an eventful week for stocks. The week started with anxiety and headline-driven fear as the U.S. joined an attack on Iran, pushing markets lower early on. Then came Iran’s retaliation, which appeared more like a save-face move than true escalation, marking the low for the week. Afterward, attention shifted to the Fed, where Waller and Bowman hinted at a possible July rate cut. Trump’s suggestion of replacing Powell with someone more dovish only added to rate-cut enthusiasm.

In response, stocks and bonds rallied, while the dollar sank to new lows. The S&P 500 and Nasdaq both notched fresh all-time highs, with the Nasdaq leading the week higher by 4.22%. Small caps lagged but still managed a respectable 2.87% gain.

Looking Ahead

This coming week will be shortened by the holiday, with an early market close Thursday and a full closure Friday. Despite the shortened schedule, there’s plenty on the calendar:

• Labor market data will be in focus, including Thursday’s Non-Farm Payrolls report

• Eyes will also be on whether the administration’s BBB legislation can be pushed through by July 4

SPX Check-In

The SPX closed at a new all-time high last week, driven by easing geopolitical tensions, dovish Fed commentary, and Trump’s positioning on the future of the Fed chair. The rally was healthy, with strong signs that the gains have been broadly supported, not just a few names carrying the weight.

Another point to note: only about 61% of stocks are above their 20-day moving averages, meaning the market is neither overheated nor stretched, even after this breakout. Given that the indices had traded sideways for nearly two months, this breakout looks robust rather than fragile.

July Technicals

On the technical side, the SPX has posted five bullish gaps since bottoming in early April, and none of those gaps have been filled. That strength was confirmed again last Tuesday with another bull gap.

Levels to watch:

• As long as SPX stays above our highest monthly close of 6040, bulls have the advantage and most likely target 6300 next.

• If that zone breaks, the next defense will be our yearly open around 5900.

QQQ

The Nasdaq 100 (QQQ) was the clear leader last week, closing up 4.22%. A key driver was a fresh bull-gap that opened after headlines of a ceasefire between Israel and Iran. As we’ve noted before, when bull-gaps aren’t quickly filled, the market tends to trend in the same direction and that’s exactly what played out…

Looking ahead, if QQQ can stay above that bull-gap area around 535, bulls should keep the advantage into the beginning of this month, with upside potential toward 557. July, after all, has historically been a strong seasonal month for the index. A continued breakout would also likely ride on the back of semiconductor strength.

IWM (Small Caps)

Small caps lagged the broader market last week, though still posted a respectable 2.87% gain. Conditions look promising heading into July, with a “goldilocks” setup possible:

• Plenty of dovish signals from the Fed

• Strong hard-data readings

• Inflation data remains generally contained

If these tailwinds persist, small caps could break out further, particularly with deregulation measures expected to kick in during the second half of the year. Positioning in small caps remains historically light, so a strong move above the 200-day moving average could spark a “pain trade” rally higher.

The Dollar

A theme we’ve been tracking is that the dollar remains at a critical juncture. Right now, the dollar index appears to have undergone a decisive break through the 100 level, a support that held for over 3 years… because of this a sharper flush lower toward the 200-month moving average around the 92 level looks likely.

Last week was especially interesting for the dollar. As tensions rose between Israel and Iran, the U.S. joined an attack targeting uranium enrichment facilities. That effectively removed near-term left-tail geopolitical risks, sending oil prices sharply lower by $12/bbl off the highs and deflating a minor “war bid” in the dollar.

Even though oil had rallied over 40% off April lows, the dollar barely budged only managing a 2-handle move off the lows. That stands out, because the last time oil was trading at these levels near $77.50–$80/bbl, the dollar index (DXY) was up at 110. This time, however, the dollar even made fresh local lows, showing how weak the bid truly is.

On top of that, more pressure came from Washington:

• Trump confirmed he wants to replace Powell with a Fed chair who is explicitly dovish and supports rate cuts.

• Trump even stated he thinks 1% interest is appropriate at present.

• The administration also signaled it might use the same playbook as Yellen (extending short-term debt) despite earlier promises not to.

All of this adds up to a further challenge for the dollar’s credibility, weakening confidence in the Fed’s independence and encouraging financial conditions to keep easing, which weighs on the dollar.

Positioning is another factor worth noting: the dollar is the most underweighted it has been in over 20 years. But, as always, underweight positioning alone is not enough to spark a rally, there needs to be a clear catalyst to force an unwind. The failed bounce during Middle East tensions underlines that a bigger catalyst will be needed to reverse the dollar’s downtrend.

Bottom line: the dollar made new local lows last week and continues to look vulnerable to a breakdown toward the low 90s, with a key support target near 92 on the 200-month.

Bonds

Bonds continued to find relief last week as well, following the same easing of Middle East tensions and on the back of Trump’s dovish Fed comments. That narrative of extending short-term debt and picking a pro-cut Fed chair further supported bonds, which saw the 10-year Treasury yield break below 4.35%.

Key levels to watch on the 10Y:

• For a deeper bond rally, the 10-year yield would need to fall firmly below 4.2%

• Otherwise, bonds may stay trapped in the familiar range:

  • Low end: 4.15%

  • High end: 4.7%

In the bigger picture, bonds have been rangebound for nearly three years now, and the best trades have been to fade extremes.

Looking Ahead

It will be a holiday-shortened week, with markets closing early on Thursday and fully closed on Friday. Still, there are important events on deck:

• Non-Farm Payrolls (NFP) Thursday

  • Expectations: 129,000 jobs (vs. 139,000 prior)

  • Unemployment rate steady at 4.2%

  • Labor supply may stay tight given Trump’s mixed messaging on immigration, but that could keep the unemployment rate anchored

• Big Beautiful Bill (BBB)

  • The administration hopes to pass it by July 4

• Trade Deals

  • The previous trade-deal deadline is about to expire

  • Bessent now says trade deals could stretch to Labor Day

  • The administration is pushing the narrative that once BBB is passed, focus will shift to trade

Trump also made a notable comment last week:

“Bitcoin takes a lot of pressure off the dollar, and it’s a great thing for our country.”

This hints again at how the administration is willing to embrace anything that might ease dollar pressures.

In summary, the path of least resistance for the dollar still looks lower unless a powerful catalyst appears, while bonds will likely continue to chop within their long-established ranges unless data or policy surprises shift the narrative.

Oil

Over the weekend, the U.S. followed through on threats to attack Iran’s nuclear sites, essentially ending the “two-week window” Trump had offered Iran to reach a deal. There was no further escalation from Iran, and a ceasefire between Israel and Iran was declared. That de-escalation triggered a sharp unwind in crude, pulling prices down from the highs.

Zooming in:

• Crude struggled near $77.50, and as long as that level capped prices, we expected downside to emerge absent a major escalation.

• That played out almost perfectly, with crude retracing back to around $65 per barrel, currently sitting below nearly all its key moving averages.

• You could argue this is simply a backtest but for meaningful upside to reemerge, two things likely need to happen:

  • Renewed Middle East tensions

  • Crude reclaiming $71.80

Gold

Gold also saw a classic “war bid” fade as Middle East tensions cooled. The U.S. attack on Iran essentially ended immediate conflict risk, and as the week progressed, gold’s safe-haven premium unwound. Part of the late-week selling may have been driven by quarter-end positioning as well, plus continued Chinese demand shifting toward platinum instead of gold.

Another layer to gold’s setup is Trump’s continued public criticism of Powell. If Trump replaces Powell with a more dovish chair, as seems likely, it would further undermine Fed independence and encourage investors to hedge against currency debasement with gold. Structurally, that keeps a long-term bull case intact.

Short-term technicals:

• Gold broke below both its 21-day and 50-day moving averages last week

• It finished the week resting right on a trendline that has supported prices since late 2024

• If that support fails, gold could slip toward the 200-day near 3000, which also lines up with the April lows

However, dips are still likely to be bought, given persistent structural tailwinds (a dovish Fed, deficit spending, and ongoing concerns about long-term currency stability).

Wrapping Up

With the second half of the year kicking off, here are the key themes to keep on your radar:

✅ Easing geopolitical tensions have temporarily lifted market sentiment, though risks remain if new flare-ups emerge.
✅ Central bank policy remains the dominant force, with Trump’s push to install a dovish Fed chair likely to shape rate expectations and, by extension, the dollar, bonds, and gold.
✅ Labor data will be critical this week, with NFP expected to moderate but still show a resilient jobs market.
✅ Equity flows and seasonality: July’s strong historical performance and record systematic buy flows could continue to fuel breakouts, particularly in tech and small caps.
✅ Commodities: Crude is resetting after the geopolitical unwind, and gold remains structurally supported even if near-term pressures appear.

As always, stay flexible, stay informed, and stay focused on the bigger picture rather than the daily noise. Markets are still driven by a complex balance of macro tailwinds, geopolitical surprises, and investor positioning, all of which create opportunities if you’re prepared.

Thanks for reading this week’s roadmap.

Stay sharp and get ready for what July has in store.

-BSR

Disclaimer:

Remember, this is not financial advice. You are fully responsible for your own decisions!

The information provided on this website/Substack is for informational purposes only. While it is believed to be reliable, Blackshore Research does not guarantee its completeness or accuracy. This content is not an offer or solicitation to buy any financial instrument. The information and terms on these pages can change without notice. Unauthorized use of Blackshore Research’s websites and systems is strictly prohibited. This includes data scraping, unauthorized access, password misuse, or improper use of posted information. Your eligibility for certain services will be determined by Blackshore Research and its affiliates. Investment services are not FDIC-insured and carry investment risks, including potential loss of principal. The proprietary information from Blackshore Research or third-party providers is for individual use only and must not be redistributed or transferred without prior written consent from Blackshore Research.

Let’s begin with the most immediate wildcard…

The Israel-Iran conflict

This past weekend marked a dangerous escalation, with Israel launching strikes on Iranian sites, and the U.S. (under Trump’s watch) effectively greenlighting the move. Military analysts can debate strategy, but for investors, the first-order concern is oil. A wider war, or a disruption to the Strait of Hormuz, would send energy prices higher and shake global markets. But you already knew that. The real question is what this means for policy, inflation, and the Fed.

Trump, famously averse to starting foreign wars, campaigned on keeping U.S. troops out of new conflicts. That promise still matters. I suspect his base has little appetite for another Middle East quagmire, and unless all options are exhausted, direct U.S. engagement remains unlikely.

More probable?

A calculated use of pressure to force Iran into negotiations, potentially setting the stage for a nuclear peace deal. A flashy handshake photo-op might suit Trump’s playbook far more than boots on the ground.

But here's where it gets interesting: the ripple effects on Trump’s broader agenda.

Oil price spikes create a chain reaction; higher inflation, higher bond yields, and a hawkish Fed. All of these are counterproductive to Trump's priorities: cutting rates, refinancing debt at lower costs, and avoiding a recession heading into an election year.

So, even as he navigates global flashpoints, Trump is constrained by the domestic consequences they trigger.

That brings us to the framework we’ve consistently emphasized: restrictions over predispositions.

When evaluating policy outcomes, especially on trade, rates, or foreign affairs, it’s less useful to ask, “What does Trump want?” and more helpful to ask, “What is he boxed in by?”

Previously, we highlighted three core limiting factors:

1. Debt financing (i.e., 10-year Treasury yields)

2. Tax bill passage and fiscal headroom

3. Recession risk in an election cycle

Rare earth mineral dependence, particularly in the context of U.S.-China trade dynamics, is also becoming a strategic bottleneck and could shape how aggressive the U.S. can afford to be on tariffs and tech restrictions.

Speaking of trade… remember tariffs?

The specter of tariff-induced inflation has returned, but we continue to view it as transitory. Goods inflation may tick higher due to tariffs, but this is likely to be offset by cooling services inflation, especially in shelter and rent. As we’ve noted before, rent tracks wage growth, and wage growth is already slowing in line with a softening labor market.

If not for the lingering uncertainty around tariff policy, and its implications for inflation optics, the current macro setup might already justify Fed rate cuts. The economy is cooling but not collapsing. Services inflation is easing. The labor market remains intact, but wage pressure is fading. On balance, the conditions are there.

Ultimately, this all ties back to Trump’s finite political capital. Each new shock, whether a regional war, inflation flare-up, or trade tiff, drains his ability to push other priorities forward.

The calculus then becomes: what does he concede in one area to stay viable in another?

If escalation in the Middle East forces his hand on energy prices and yields, expect some dialed-down rhetoric, or outright concessions elsewhere. Trade policy is a likely candidate. And that’s where we, as investors, should be watching closely.

The US-China Trade Dance: From Reconciliation to Realism

In our last macro memo, we laid out a framework for understanding the U.S.-China relationship, one rooted not just in ideology or posturing, but in mutual constraints and tactical incentives. That thesis has largely held up.

Shortly after that memo went out, the U.S. and China entered trade talks in Geneva. The results were surprisingly constructive. Both sides agreed to pause their tit-for-tat tariff war, and Presidents Trump and Xi followed with a direct phone call. Mutual state visit invitations were exchanged, and Trump declared a deal was “already reached”, only minor details remained to be finalized.

For a brief moment, it looked like the U.S. and China had gone from Cold War to cuddle session.

But reality set back in quickly.

The next round of talks, held in London, was framed as a formality to iron out remaining issues. Instead, they dragged on with little resolution. The end result was a vague “positive framework.” It became increasingly clear that even if Trump himself isn’t ideologically committed to economic decoupling, he’s operating within a U.S. political environment that absolutely is. There’s now bipartisan consensus that strategic disentanglement from China is not just preferable, but necessary.

This is no longer a fight over tariffs. It’s the beginning of a slow-motion negotiated divorce, and neither side can afford to walk away entirely. The U.S. holds critical advantages in advanced semiconductors, aircraft parts, and global consumer demand. China, meanwhile, dominates the rare earth minerals supply chain, particularly refinery capacity, a vital input for U.S. defense and industrial production. Both sides are using their leverage as bargaining chips. Neither has a clean exit…

From an investor’s standpoint, this means that tariffs and trade tensions aren’t going away, they’ll ebb and flow, driven by each side’s domestic political and economic pressure points.

For President Xi, the pressure is economic. Despite a recent narrative shift driven by China’s push into AI and robotics, the underlying fundamentals remain fragile. China’s property bubble continues to deflate, youth unemployment is alarmingly high, and core deflation lingers.

Consider this perspective:

While the U.S. enjoys a genuine economic surge despite negative sentiment, China is trapped in a superficially positive mood amid an actual economic downturn.

Since early 2024, Beijing has responded with sizable fiscal stimulus. At the National People’s Congress, China set ambitious growth targets and gave local governments latitude to issue long-term debt. That was followed by real estate lending support and consumption incentives. These measures have helped improve sentiment, and stocks, as always, bottom before fundamentals.

But the deeper takeaway here is why China wants a deal. A weak economy erodes legitimacy, even in autocratic regimes. Xi needs a win, and stable trade relations with the U.S. would help ease both external pressure and internal unrest.

On the U.S. side, Trump is facing his own complex calculus. In addition to the economic constraints we outlined previously (inflation, bond yields, recession risk, and tax legislation), we now add rare earth minerals as another limiting factor. It’s not easy to take a hard line when your defense supply chain depends on your rival’s exports.

More importantly, Trump has a personal preference for striking a “big deal” with China. He sees it as a legacy-defining win, a demonstration of his self-styled negotiating prowess. And there’s public opinion to consider.

Tariffs aren’t popular.

The bottom line? While full decoupling is off the table, a stable, strategically constrained trade relationship is not only possible… it’s likely.

Both leaders want a deal, albeit for very different reasons. And as long as neither economy tips too far into distress, we remain constructive on the path forward for U.S.-China trade.

Labor Market Slows, But the Fed Stalls… For Now

Outside of trade war tremors, the U.S. economy continues to hum along, not booming, but not breaking either. One of the clearest indicators of this economic resilience lies in the labor market, which has entered a kind of uneasy equilibrium.

Job growth remains positive, but the underlying dynamics are shifting. Initial jobless claims have held steady, while continuing claims, which track those who remain unemployed, are quietly climbing to multi-year highs.

Translation?

People who lose jobs aren’t finding new ones quickly. At the same time, nobody’s quitting, and companies aren’t doing much hiring either. Attrition is down, and the post-COVID overhiring spree has left employers cautious. As a result, many job seekers are now facing long spells of unemployment, often without so much as an interview.

This stalling labor churn is showing up across metrics. Job openings are trending downward. The unemployment rate, which bottomed in 2023, is now drifting higher.

Some argue that recent reductions in illegal immigration might constrain labor supply and keep unemployment low. I’m pretty skeptical of this. High immigration didn’t prevent unemployment from falling in prior years, and reversing that doesn’t seem likely to change the macro labor picture significantly now.

All told, we expect the unemployment rate to continue creeping higher… slowly but surely.

Which brings us to the Fed.

Earlier this year I made the case that the Fed could resume cutting rates by June. That turned out to be a bit early, but I stand by the logic.

Inflation, by most measures, has been tamed, and barring new shocks, there’s little justification for policy rates to remain this high.

The Fed’s own framework for cutting last year (lower inflation = lower rates) still applies.

So why hasn’t the cutting cycle resumed?

In a word: tariffs.

Trump’s aggressive trade policy is injecting new uncertainty into the inflation outlook. The Fed doesn’t want to repeat the mistakes of the early 2020s… or worse, the ghost of Arthur Burns in the 1970s.

Ironically, the same Trump who wants lower rates is creating the very inflation optics that make Powell hesitant to cut. It’s a strange dynamic to say the least…

These concerns are somewhat misguided.

The inflationary effects of tariffs are likely to be mechanical and temporary, not sticky or systemic. Trump’s tariffs mostly apply to goods, not services, and the U.S. is a service-heavy, largely closed economy with limited exposure to imported goods. Even if we do see some goods inflation, it will likely be offset by continued services disinflation, especially in rent and shelter, which are driven by wage growth. And wage growth is already softening.

The call: (You heard it here first)

I expect Powell to open the window to rate cuts at the July FOMC. The updated dot plot may start showing a few members shifting their projections lower for year-end, even if the median dot stays unchanged for now. Once that signal is out there, markets will likely start pricing in an autumn cutting cycle.

Positioning for the Next Rotation: Dollar, Commodities, and Selective U.S. Strength

Read more

Before we get into the week ahead, a quick word to all the dads and father figures out there, Happy Father’s Day. Whether you’re leading a household, mentoring the next generation, or just trying to sneak in some quiet time before Monday’s open, you’re appreciated. Here's to a day of well-earned recognition.

Now, turning to what’s coming down the pipeline…

Over the next couple of weeks, we’ll be publishing two fresh research primers. The first focuses as a series intro to Robotics & Automation, and the second is a Healthcare Tech / Biotech update, an evolution of our original healthcare outlook from last year. Both themes are increasingly central to market structure and worth revisiting as catalysts continue to unfold.

A Look Back: Muted Markets, Loud Headlines

Markets meandered last week. The S&P 500 finished down about 36bps, a modest fade after trading more than 1% higher earlier in the week. Small caps fared worse, the Russell 2000 dropped 1.42% after an intraday peak nearly 2% higher. In other words, it was a week defined by reversal, not momentum.

What changed?

The big inflection came as geopolitical tensions spiked mid-week. Israel launched fresh strikes on Iranian territory, with some reports suggesting these weren’t just nuclear-targeted, but more broadly aimed at destabilizing key regime infrastructure. A planned U.S.-Iran meeting was swiftly cancelled, and markets quickly priced in the added risk premium.

This Week: Quieter Calendar, But Eyes on the Fed

Looking ahead, it's a short and relatively quiet week. U.S. markets are closed Thursday, but we do have a few key events to monitor:

• FOMC Meeting (Wednesday): While no major surprises are expected, tone and language will be scrutinized.

• Retail Sales: A decent read-through on the consumer.

• Jobless Claims: Still the cleanest weekly pulse check on labor trends.

Beyond that, the primary “event risk” remains the Middle East. The direction of headlines here may dominate intraday moves more than economic data.

Inflation: A Temporary Reprieve?

Last week’s CPI and PPI prints were encouraging:

• Headline CPI: In line at 2.4%, up slightly from 2.3%

• Core CPI: A beat, 2.8% vs. 2.9% expected

• PPI: Also slightly softer than forecast

It’s worth noting: these figures do not yet reflect the full impact of recent tariffs. That lag effect means we’ll likely see upward pressure filter into the next round of inflation reports (due in July, covering June data). For now, though, the inflation narrative got a breather.

U.S.-China: Deal on Paper, But Little Has Changed

Trade talks between the U.S. and China wrapped up in London with a loose agreement to implement terms originally set back in Geneva. Highlights:

• China to ease rare-earth export restrictions

• U.S. to relax certain tech export controls

• Existing tariffs remain

• Fentanyl-specific tariffs stay in place unless China shows progress

In short, this was more “maintenance of status quo” than a breakthrough.

One Thing That Didn’t Get Enough Attention...

Buried beneath all the noise was a staggering fiscal update:
The U.S. posted a record $316 billion deficit in May, pushing the fiscal year-to-date total to $1.365 trillion. That’s already pacing ahead of FY2024’s $1.202 trillion at this point last year.

Bessent made headlines by revising the administration’s fiscal target:

• New Deficit-to-GDP goal: <4%

• Original target (earlier this year): <3%

It’s a quiet concession that austerity is no longer on the table. In practice, the administration’s path forward looks more like this: grow fast, inflate nominal GDP, and hope that productivity outruns spending…

Your classic “run it hot” strategy.

The math doesn’t work any other way unless massive spending cuts suddenly become politically viable (spoiler: they won’t).

Index Check-In: Technical Levels, Reversals, and Geopolitical Pressure

S&P 500 (SPX / SPY)

Markets sold off into the latter part of the week as Middle East tensions ramped up, and while the S&P only finished the week down about 35bps, the internals tell a more nuanced story. Despite SPX being just 1% off recent highs, only 44% of stocks remain above their 20-day moving averages. That speaks to an underlying softness and shows the rally isn’t broadly overextended, more of a neutral backdrop than an outright overbought condition.

SPX remains above its 21-day, but bulls struggled repeatedly last week at the 6050 level. A sustained break above that threshold is likely needed for another leg higher. Conversely, if tensions overseas escalate and SPX continues to roll over, the 200-day moving average at 5800 becomes the line in the sand. A breakdown below would increase downside momentum and potentially lead to a full gap-fill, which interestingly coincides with the “China tariff pause” level.

Nasdaq-100 (QQQ)

The Qs had a relatively tame week on the surface, closing down a modest 50bps after being up over 1% early on. The reversal, like everything else, was triggered by the Israel-Iran conflict. Still, earlier in the week QQQ notched fresh local highs and came within striking distance (100bps) of new all-time highs before fading.

Support-wise, the 21-day sits just below and may offer a first line of defense. Beyond that, 500 remains the key level right around the 200 day moving average.

To the upside, 540 continues to be the big resistance zone, a ceiling that’s held since both the December and February pullbacks. If bulls can break above with conviction, we’ll likely see new highs, driven by the continued dominance of Mag-7 leaders like MSFT / NVDA / ORCL, all of whom reaffirmed the durability of the AI trade last week.

Russell 2000 (IWM)

Small-caps took the worst of the damage last week, finishing down 1.42% after being up nearly 2% earlier on. The reversal was sharp, triggered by the geopolitical flare-up, a rally in crude (a headwind for small caps), and declining bond prices, another pain point for rate-sensitive sectors.

There’s also been some hand-wringing around the last few jobless claims reports, which showed elevated prints. But much of that appears to be seasonal… The underlying hard data hasn’t cracked, and even soft data is beginning to rebound. Throw in last week’s cooler CPI, and the near-term macro setup remains digestible. The real inflation pressure from tariffs likely won’t show up until July.

Technically, IWM gapped higher on CPI day and topped out right at the 200-day which it failed to hold, closing the week back down. This could shape up as a backtest of the breakout from a couple weeks ago. Going forward:

• To stay constructive: Bulls need to hold above 200. That range aligns with the late-May lows, 50-day, and 200-week, a high-confluence support zone.

• To break higher: Clear the 200-day and push into 223 (2025’s yearly open). Light positioning and seasonal tailwinds could help, especially if deregulation themes start to kick in during the back half of the year.

Macro Watch: Dollar, Bonds & the Shifting Safe-Haven Story

US Dollar: The Safe-Haven That Wasn’t

Last week was another telling moment for the U.S. dollar, and not in a good way. Despite escalating tensions in the Middle East, the dollar barely budged, closing Friday up just 30bps and struggling to hold above a 98-handle. Historically, this kind of geopolitical volatility would have sent DXY ripping higher. Not this time.

The key takeaway? The dollar’s safe-haven credibility continues to erode, and last week offered more evidence that the path of least resistance remains lower. In fact, DXY broke through its multi-year range now sits at a critical technical juncture.

Throw in softer-than-expected inflation data and a bump in rate-cut expectations (markets are now pricing in two cuts before year-end), and the case for further dollar weakness becomes even clearer. The once-reliable bid under the dollar is weakening and that may be by design.

A softer dollar helps narrow trade deficits, and frankly, this administration isn’t likely to stand in the way of that trend.

That said, if we do get a bounce, holding 100 is a critical level. Until then, expect pops to be faded. On any short-term dollar strength, the Yen remains the most likely underperformer.

Bonds: Whiplash Trading & Inflation Crosscurrents

Bonds had quite the ride last week. First, they rallied on softer CPI and strong auction results. Then, they gave it all back by week’s end, even with rising geopolitical tensions. That might seem counterintuitive, but here’s the key: war is inflationary.

Initial flight-to-safety bids were quickly replaced by inflation fears, especially as oil prices ticked higher. In a world already wrestling with tariff-driven price pressure, any conflict that tightens commodity supply chains only reinforces upside inflation risk.

Looking ahead to this week, FOMC takes center stage, and while no rate change is expected, the updated dot plot could stir markets. Powell may lean slightly dovish, especially if he frames recent inflation as a “one-time price shock” rather than a persistent trend (a narrative we’ve heard from some Fed officials recently). But unless labor data deteriorates or inflation plunges again, the Fed is likely to stick to its “wait and see” script.

Bond Market Range: Still Stuck, Still Emotional

Let’s zoom out. Despite all the noise, recession fears in April and inflation concerns now, bonds have been in a giant range for nearly three years. The recent action has been choppy but contained:

• Interim range: 4.20–4.25% on the low end, 4.65–4.70% on the high end

• Wider range: 3.65–3.80% to the downside, 4.75–5.00% to the upside

Right now, we’re in no-man’s land, not oversold, not overbought. That makes it a tough environment to take a directional stance unless something breaks out of that range.

And it’s worth noting: between fiscal overextension (last month’s $316B deficit), BBB-level credit pressures, sticky inflation risk heading into late 2025, and now Middle East volatility, the upside in bonds likely remains capped, unless we get a sharp deterioration in hard economic data.

Geopolitical Tensions, Energy Volatility & Opportunity in Shipping and Gold

Middle East Escalation: High Stakes, Measured Reactions

Tensions between Israel and Iran ratcheted higher last week as Israel launched strikes on Iranian sites. Though officially framed as attacks on nuclear infrastructure, the broader strategic goal appears to be regime destabilization. From Israel’s view, a nuclear-capable Iran is an existential threat, and they’re not just targeting centrifuges anymore…

Iran responded with a familiar threat: shutting down the Strait of Hormuz, which moves about 20% of global oil. But any serious follow-through would be self-defeating, Iran relies on the Strait for its own exports. Militarily, the U.S. would likely step in fast, and politically, such a move would damage ties with China and India, two of Iran’s biggest crude customers.

The U.S., for now, is holding back. A planned diplomatic meeting with Iran was cancelled, with the administration reiterating that denuclearization is the non-negotiable starting point. While the official stance is “hands-off,” it wouldn’t take much for that to change if the situation worsens.

One wrinkle? Trump voiced concerns last week over rising oil prices, which may create an incentive for future negotiations with Iran to de-escalate and push crude lower, especially heading into election season. That said, while tensions drive short-term spikes, it’s important to remember the oil market remains well supplied, making extended price surges harder to sustain.

Crude Oil: Watching the $80 Level Closely

We saw a technical breakout in crude last week. Futures topped out near $77.50, and heading into this week, price action will again hinge on weekend developments in the Middle East.

Despite the volatility, crude still trades below the January highs (~$80). That level remains a key pivot. A clean breakout above would suggest a new trend leg; otherwise, this may just be another headline-driven bounce.

Gold: A Testament to Trend Strength

Gold had a strong week, continuing it’s strength and benefiting from both geopolitical volatility and renewed concerns over U.S. fiscal credibility. May’s record $316 billion deficit added fuel to the fire. Even after tariff-related uncertainty was removed back in April, gold has held near highs, a powerful signal.

If gold can punch through $3,500, it opens the door to new highs. On a pullback, support should show up near $3,300. If those levels don’t hold, the next key support is down near $3,150.

Bottom line: as long as real yields remain capped and the U.S. credibility gap persists, dips in gold are likely to be bought.

Closing Thought:
We’re in a regime where headlines matter more than usual… and yet, beneath the noise, the market continues to favor structurally sound companies, steady macro data, and trend persistence. Stay tactical, stay selective, and stay tuned.

-BSR

Disclaimer:

Remember, this is not financial advice. You are fully responsible for your own decisions!

The information provided on this website/Substack is for informational purposes only. While it is believed to be reliable, Blackshore Research does not guarantee its completeness or accuracy. This content is not an offer or solicitation to buy any financial instrument. The information and terms on these pages can change without notice. Unauthorized use of Blackshore Research’s websites and systems is strictly prohibited. This includes data scraping, unauthorized access, password misuse, or improper use of posted information. Your eligibility for certain services will be determined by Blackshore Research and its affiliates. Investment services are not FDIC-insured and carry investment risks, including potential loss of principal. The proprietary information from Blackshore Research or third-party providers is for individual use only and must not be redistributed or transferred without prior written consent from Blackshore Research.

While major indices grind higher, dispersion is quietly expanding, and that’s creating high-conviction setups in overlooked names and under-positioned sectors.

Whether it’s a short squeeze brewing in small-caps, rotation into quantum tech, or strategic positioning around fiscal tailwinds and geopolitical pivots, we’re entering a stretch where nimble, thematic trades may outperform passive exposure.

Now let’s dive in…

This past week felt like a bit of a whirlwind. Geopolitics, economic data, and policy headlines all jostled for investor attention, yet markets took it in stride. Let's break it down and chart a clear course into the week ahead.

From Drone Strikes to Diplomatic Détente

Markets opened the week with a sharp dip following a drone strike in Russia linked to Ukraine, but true to form, the pullback was swiftly bought. The risk-off sentiment didn’t last long.

As the week progressed, sentiment improved, thanks in large part to a surprisingly cordial phone call between Trump and Xi Jinping. The conversation signaled further thawing in U.S.-China relations and helped ease geopolitical jitters.

But things didn’t stay calm for long… by midweek, headlines turned toward the brewing spat between Trump and Elon Musk. The disagreement? Trump wants to push forward his “Big Beautiful Bill,” while Elon is lobbying for a leaner, more fiscally conservative package. Politics aside, markets seemed unfazed.

To close out the week, Non-Farm Payrolls came in better than feared. That print helped power a late-week rally, with small caps leading the charge. The Russell 2000 (IWM) jumped +3%, with the Dow Jones, albeit more modestly, up 1.6%.

What’s on Deck: CPI + China Talks

Looking ahead, the calendar is relatively light, but what is on tap could move markets.

• Monday: U.S. and China resume trade talks in London. Given the recent positive tone from both sides, this meeting could offer another signal that tensions are easing.

• Wednesday: The main event, CPI data. Both headline and core inflation are expected to tick slightly higher compared to the previous month. While not dramatic, any upside surprise could shake the current “goldilocks” vibe.

Beyond that, expect summer trading conditions to kick in, lighter volumes and a possible volatility drift lower unless a macro shock intervenes.

Also worth noting: Trump confirmed that China will resume its rare earth mineral exports to the U.S., another sign that behind-the-scenes negotiations are progressing.

SPX Outlook: Technical Breakout or Fakeout?

The S&P 500 finally broke out of its month-long consolidation, closing just above the 6,000 level on Friday. The index struggled to hold that level during the session, but closed strong thanks to a cooler-than-feared jobs report.

Volume was light (as expected for this time of year), and that’ll likely continue into summer. But if CPI comes in tame and U.S.-China talks don’t derail, there's not much in the way of SPX grinding up toward the all-time high of 6,147.

The market’s thesis? The administration is shifting toward “running it hot”, a clear pivot toward fiscal stimulus and deregulation heading into the second half of 2025. As long as inflation remains manageable, this stance should continue to support risk assets.

That said, if 6,000 turns into firm resistance and the breakout fails, bears will be watching the yearly open of 5,900 level closely. That area has been a key support as it coincides with:

• The EU-delay “bull gap”

• The China tariff pause gap

• The 200-day moving average

A break below 5,900 would likely open the door to a deeper pullback, but until then, the bulls remain in control.

Tech Tape: QQQ and the AI Trade

Let’s start with the Nasdaq 100 (QQQ).

Coming into last week, there were some nerves around a potential “news failure” after Nvidia’s stellar earnings the week prior failed to spark sustained upside. The initial rally in both Nvidia and the Qs faded quickly, but that hesitation didn’t last long. Instead of rolling over, the Qs regrouped and marched to new local highs, invalidating that weakness entirely.

Even the late-week political drama between Trump and Elon Musk, which briefly weighed on sentiment in the tech space, couldn’t derail the rally. By Friday, QQQ had reversed again, closing the week at the highs. In short: every perceived negative headline is getting bought, and that’s not bearish price action.

QQQ Technical Outlook

We’re now seeing the classic “summer drift” (slow, low-volume grind higher). The Qs are hovering just below the 530 level, which has become a stubborn resistance zone. A clean breakout above would open the door to 537, which marks the prior all-time highs from December and February.

On the downside, 515 is the key level to watch. That area was created by the EU bull-gap a few weeks ago and lines up with the rising 21-day moving average, adding technical confluence. If 515 holds, bulls remain in control.

Bigger picture, the long-term support zone sits around 500, near the China tariff-pause bull gap and the 200-day MA. As long as the Qs can base and build above that 496–501 range, the larger uptrend remains intact and dips are likely to stay shallow and buyable.

Risk Rotation: Small-Caps and the Return of Industrial Strength

Last week brought confirmation of something we’ve been watching closely: small-caps are waking up.

IWM: Small-Cap Rally Breaks Out

The Russell 2000 (IWM) was the best-performing major index last week, closing up just over 3%. What’s driving it? Two key forces:

1. Resilient hard data. The economy continues to beat expectations, and that’s fueling optimism under the surface.

2. Extremely light positioning. Allocations to small-caps are still hovering near their 2022 bear market lows, despite improving conditions.

Now combine that with tame inflation (so far), and what do you get? Goldilocks. That’s a sweet spot for small-cap outperformance. Sprinkle in the coming deregulation push from the administration into 2H '25 and ‘26, and the setup becomes even stronger.

IWM Technical Setup

Last week, IWM finally broke out of the downtrend it had been trapped in since late 2023. If that breakout holds, the index has a clear magnet up toward the 200-day moving average near 216, which will likely act as the next resistance.

If CPI comes in tame this week and soft data continues to rebound from April’s lows, we could see a catch-up rally toward 225 over the summer, especially as shorts unwind and small-caps play catch-up with large caps.

But if this breakout fails? Watch 200 as key support. That range aligns with 2024’s yearly open. A break below that level would signal fading momentum, but it likely requires a real shock: either a scorching-hot CPI print, weak economic data, or a sudden resurgence of tariff headlines.

As of now, the burden of proof is on the bears.

DIA: Industrials Wake Up

The Dow Jones (DIA) closed out the week up 1.6%, breaking out of a multi-week range and reclaiming the 200-day moving average. It also printed new local highs, a sign that the cyclical trade may be catching a second wind as hard data continues to hold up.

As long as this breakout sustains, there’s a clean path toward the all-time high at 450, which formed in March before the major pullback into April. That area should present initial resistance, but if cleared, new highs are in play.

On the flip side, if DIA loses 413 (recent local highs), the 50-day MA could offer support. IMO a downside case likely only plays out if economic data turns, or if tariff risks resurface ahead of the July deadline.

Macro Pulse: The Dollar, Inflation, and the Bond Market Crossroads

Jobs, CPI, and the Dollar: A Balancing Act

The U.S. dollar traded relatively flat last week, but the story under the surface was more interesting. To close out the week, Non-Farm Payrolls came in slightly better than expected:

• +139K jobs added (vs. +125K est.)

• Unemployment rate at 4.2% (in line)

One standout stat: for the first time in over two years, native-born workers accounted for all net job gains, a shift largely driven by the administration’s tightening of immigration policy. This reduced labor supply may keep unemployment anchored even if payroll growth slows, which is a structural shift worth monitoring into year-end.

In response to the data, the DXY (Dollar Index) posted a modest bounce on Friday but still closed the week flat.

CPI Ahead: Tariffs Begin to Show Up

This week, the spotlight turns to inflation. Wednesday’s CPI print is the first where we’ll likely start seeing tariffs filter into the data. Expectations:

• Headline CPI: 2.5% (vs. 2.3% prior)

• Core CPI: 2.9% (vs. 2.8% prior)

With year-over-year comps getting tougher, we believe inflation is likely bottoming, and the risk moving forward is a gradual reacceleration into late 2025 and 2026.

That said, most Fed officials have downplayed this risk, suggesting they’ll look through any short-term rise as a "one-time price shock." The Fed still has two cuts priced in for 2025, starting as early as September. But if CPI comes in soft again and growth data wobbles, the odds of a July cut could creep toward 50/50.

Dollar Outlook: Cautious Bull or Broken Trend?

The base case remains bearish over the longer term, as structural headwinds continue to weigh:

• Fiscal dominance and deficit spending

• Eroding U.S. trade leverage

• Loss of credibility in global markets

• The administration’s comfort with a weaker dollar (as long as it’s orderly)

Bottom line: the dollar is still in a downtrend, but a near-term bounce wouldn’t surprise me.

Bond Market: Rangebound, Reactive, and Getting Jittery

The bond market had a rollercoaster week and this coming week will likely provide another test.

Rates initially stayed bid, continuing a trend that began after Japan’s Ministry of Finance signaled a shift in issuance strategy, and the BOJ followed up by announcing plans to taper QT next year. These international developments provided relief as JGB volatility had been pressuring global yields.

But the stronger-than-expected jobs report on Friday changed the narrative again. As recession fears faded, yields popped and 10-year Treasuries rose back above 4.5%, retracing much of the week’s earlier bid.

Big Picture: Inflation Still the Sticking Point

As we’ve argued for weeks, hard data continues to beat the doom-and-gloom narrative and inflation is increasingly showing signs of entrenchment above 2%. Without a recession or serious austerity, it’s hard to envision the Fed fully nailing its 2% target.

• Fiscal policy remains expansionary

• The U.S. is running recession-level deficits during growth

• The administration is explicitly pivoting to “run it hot”

That doesn’t mean inflation is about to explode, but it likely won’t vanish either.

Commodities Watch: Crude Oil Rises, Gold Pauses, and Inflation Risks Stir

Crude Oil: Building the Case for a Tighter Market

Oil finally showed some upward movement last week and while the big-picture structure hasn’t radically shifted, the foundation for a bullish thesis is quietly strengthening.

Earlier this year, WTI crude found support around the 2018 and 2020 highs, and that historical resistance has since turned into reliable support, helping to drive the current rebound off the mid-$50s.

What Changed This Week?

The big catalyst came from the supply side:

• Baker Hughes rig count dropped sharply, now at its lowest level since 2021.

• This collapse in rig activity suggests tightening U.S. supply is underway.

• Combine that with capital discipline and OPEC+ maintaining production quotas, and the market may finally be shaking off the persistent Saudi-driven oversupply narrative.

TL;DR:

• Falling rig count = falling future supply

• If global demand holds or rises (summer travel, EM growth), oil has room to move higher

• Add disciplined OPEC+ output, and you’ve got the makings of a tighter second-half market

Technical View: A Potential Base is Forming

• Support Zone: $55–$57

• Upside Range: $67.50–$72

• Breakdown Risk: If economic growth slows or recession fears spike, a retest of $52–$51.50 could come into play

Gold: Tail Risks Fade, But Long-Term Support Still Holds

Gold saw some modest selling pressure last week as geopolitical tail risk eased, particularly after Trump’s positive phone call with Xi and progress in U.S.-China relations. As a result, the uncertainty premium faded, and we saw some rotation into other metals notably Platinum and Silver (which we flagged weeks ago).

That said, despite the consolidation, gold has held up remarkably well.

What’s Supporting Gold?

• The U.S. still has a massive fiscal deficit

• Inflation may not be dead, just dormant

Even as some of the panic bid deflates, gold’s macro case remains intact. I continue to believe dips will be bought, especially as fiscal spending ramps and the global monetary system looks increasingly fragile.

Wrapping It Up: Eyes Forward, Feet Grounded

Markets continue to climb a wall of disbelief.

Despite tariff noise, political drama, and a constantly shifting macro narrative, the hard data keeps holding, inflation remains mostly contained (for now), and price action refuses to break down. That tells us something: the market is running on resilience, not euphoria.

Positioning is still light, breadth is improving, and major indices are pressing through key resistance levels. Under the surface, small-caps are perking up, tech remains dominant (but rotational), and the commodities complex is stirring all against a backdrop of light summer volume and a global economy that’s refusing to roll over.

Here’s what matters right now:

• CPI this week is the next test. It’s the first real read with tariffs filtering through, and comps are getting tougher. Inflation bottoming? Very possible. But as long as it’s controlled, the Fed seems willing to look through short-term spikes.

• U.S.-China relations are warming. That removes tail risk and helps unlock upside in names that benefit from de-escalation and rerates some defensive trades like gold and the dollar.

• Rate cut bets remain intact. September is still the baseline, but soft CPI + weak data could bring July into the conversation. Either way, the path forward still favors liquidity support.

• Fiscal tailwinds are building. Trump’s “run it hot” pivot into deregulation, infrastructure, and stimulus will continue to underpin risk appetite especially heading into 2H ‘25 and beyond.

So yes… there are risks. There always are. But in this market, the pain trade is still up, not down. Dips continue to get bought. And while consensus stares at the ceiling, the market may just sneak out the window.

Stay tactical, stay adaptive, and above all stay ready.

-BSR

Disclaimer:

Remember, this is not financial advice. You are fully responsible for your own decisions!

The information provided on this website/Substack is for informational purposes only. While it is believed to be reliable, Blackshore Research does not guarantee its completeness or accuracy. This content is not an offer or solicitation to buy any financial instrument. The information and terms on these pages can change without notice. Unauthorized use of Blackshore Research’s websites and systems is strictly prohibited. This includes data scraping, unauthorized access, password misuse, or improper use of posted information. Your eligibility for certain services will be determined by Blackshore Research and its affiliates. Investment services are not FDIC-insured and carry investment risks, including potential loss of principal. The proprietary information from Blackshore Research or third-party providers is for individual use only and must not be redistributed or transferred without prior written consent from Blackshore Research.

RFK and the growing MAHA movement have only added fuel to the fire. But with disruption comes opportunity, and we believe this chaotic backdrop has created some of the most compelling setups in years.

Healthcare policy is uniquely susceptible to headline distortion, where perception often outruns reality. But this isn’t a bug… it’s a feature for active investors.

“Politics introduces bias, bias creates dislocation, and dislocation is where alpha is born.”

- BSR

Policy chatter has been loud, but mostly off-key. Washington’s latest rule changes landed with the usual fireworks, yet national health-spending is still projected to grow 5 %+ into 2025, hardly the apocalypse the headlines suggest.

So instead of trading on tweets, we follow the cash flows. Each supposedly “toxic” narrative (drug-pricing reform, election-year brinkmanship, even the AI-doctor hype cycle) contains a seam of opportunity once you strip away the fear-premium. Several of our top performers were born precisely where consensus shouted “avoid.”

And to sum it all up, we take a look at a mispriced sub-sector that looks, to me, like biotech circa 2012…

Volatile on the surface, but compounding for those willing to stomach the drama.

Read more

June contract 57 call, sold 64 call

Disclaimer:

Remember, this is not financial advice. You are fully responsible for your own decisions!

The information provided on this website/Substack is for info…

Read more

It was a week packed with noise, but the market had other plans…

Mid-week jitters over a weak GDP print sent indices down… only for stocks to reverse and close green by day’s end. Then came Microsoft’s blowout earnings, which sent the S&P on an extended rally, culminating in a 9-day win streak, something we haven’t seen in over 20 years.

While the Nasdaq (QQQ) led the charge, thanks to a Mag-7 melt-up, the S&P 500 (SPX) despite being the worst performing major index still finished up just over 2.9% on the week. That says a lot about the strength of this move.

Why This Rally Isn’t a Surprise

We’ve been flagging for weeks that:

• Positioning was historically light

• Hedge funds were underweight (UW) equities

• The 90-day tariff delay and softer China rhetoric would spark a chase

That’s exactly what happened. This rally has become a classic pain trade, with underexposed funds forced to chase strength. Microsoft’s results only added fuel to the fire, especially with Mag-7 positioning near multi-year lows.

On the Docket: FOMC + China

The biggest event on deck? FOMC Wednesday.

• The Fed is expected to hold rates steady

• Markets are pricing in 3 cuts for 2025, starting in July

• The key debate:
  → Will Powell double down on tariff-induced inflation persistence?
  → Or call it a one-time price shock?

Last time Powell spoke, his tone was hawkish. But since then:

• PCE data dropped off sharply

• Hard data held up better than expected

• Inflation is drifting toward the Fed’s target

Still, the real effects of uncertainty-driven policy shocks may not fully show up until later this summer.

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First of all before we start I encourage everyone to read our latest thematic equity thesis on Energy which can be found here:

As always you can find our most current holdings and current performance at the link below:

While the calendar was light on economic data last week, volatility didn’t take the week off. The ongoing trade-war saga delivered another round of tit-for-tat moves between the U.S. and China, keeping markets on edge.

The week started on a positive note after the U.S. announced that semiconductors and electronics would be exempt from the 145% China tariffs, instead facing a reduced 20% rate, offering a clear signal of easing on key sectors. But optimism didn’t last. Midweek, China struck back by banning rare earth exports to the U.S. and halting Boeing purchases. In response, Trump moved to block Nvidia’s H20 chips from being sold to China.

Markets reacted swiftly. The Nasdaq-100 (QQQ), which was up nearly 1.5% early in the week, reversed sharply to close down 2.3%. Small-caps ended up as the only major index in the green, while the Dow lagged, weighed down by a surprise earnings miss from UNH.

📅 Upcoming Economic Data: Quiet, But Watch the Headlines

This coming week looks relatively quiet from a data perspective. We’ve got:

• A few Treasury auctions

• Some Fed speakers

• The usual jobless claims report on Thursday

• A handful of sentiment surveys

But let’s be honest… the real driver remains the trade war.

Despite the 90-day delay announced the week prior, we’ve yet to see a formal trade agreement materialize. Comments this weekend from Hassett hint at a “flurry of action on trade next week,” so we’ll see if the talk turns into traction. There's also a growing diplomatic push for a Russia–Ukraine ceasefire, with Zelenskyy signaling openness and Putin reportedly in agreement. Another geopolitical wildcard to track.

SPX: Higher Low or False Hope?

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Trade Tensions Explode... Then Ease

Markets opened last week on shaky footing. Over the weekend, no progress was made on tariff negotiations, leaving a cloud of uncertainty hanging over Monday’s open. By midweek, the situation worsened: the U.S. officially hiked tariffs on China to 104%, prompting a swift retaliation—China slapped U.S. imports with an 84% tariff of their own.

Then came Tuesday night. A bond market “flash crash” unfolded, with U.S. bond prices dropping over 10% in two days—an unprecedented move that began bleeding into credit markets. The panic was enough to make the administration blink.

On Wednesday morning, in response to mounting pressure, the U.S. government enacted a 90-day delay on new tariffs for all countries except China, whose rate was lifted further to 125% (technically 145% when you include the original 20%). Other nations saw their tariff hikes paused at 10%.

The stated reason?

A time extension to negotiate with 70+ countries willing to talk and make a deal..

📈 Markets Soar on Delay

The shift in tone set off a historic rally. The Nasdaq-100 (QQQ) surged 12% on Wednesday alone. For the full week, QQQ led all indices, closing up 600bps, while small-caps (Russell 2000) lagged, gaining just 150bps. It was a ferocious snapback, catalyzed by political backpedaling and some carefully timed headlines.

🔍 Economic Data This Week: Light, but Don’t Sleep on It

Looking ahead, it’s a quieter calendar:

• Retail Sales (Tuesday)

• Fed Chair Powell Speaks (Wednesday)

• Jobless Claims (Thursday)

• Markets Closed for Good Friday

But make no mistake—trade headlines will dominate. With the White House signaling a softer tone and actively buying time to negotiate, last week may mark “peak escalation.” If so, we’re entering a phase where policy volatility declines, and markets could find some footing.

Where We Stand: Oversold Reversal, Sentiment Still Skeptical

Let’s put the bounce in context:

• Only 14.06% of stocks are currently trading above their 50-day moving average—a signal of just how oversold we were.

• The 200-day average sits higher, with 22% of stocks above it—still historically low.

So while the rally was powerful, it wasn’t built on strength—more like a coiled spring finally uncoiling. A single good headline was all it took.

Positioning remains light too. According to Deutsche Bank, institutional exposure is historically low. Hedge funds have de-grossed longs while maintaining gross leverage—code for unwinding bullish bets while holding onto their shorts. That’s not exactly a vote of confidence in the rally.

Technical Check-In: S&P 500 (SPX)

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In an increasingly fragmented energy landscape, there’s no single bet that captures the full story. That’s why our new basket is built around a two-speed thesis: on one side, reliable exposure to the cash-generating core of today’s energy markets—producers, pipelines, and liquefied natural gas exporters. On the other, a calculated lean into the next frontier—nuclear technologies, infrastructure enablers, and national security tailwinds.

The first component focuses on the now: upstream names riding the wave of tight supply, geopolitical risk, and favorable pricing dynamics; midstream assets delivering yield, stability, and throughput optionality. It’s the classic energy trade—battle-tested and cash-flow positive.

But energy is no longer just hydrocarbons. The second component recognizes the slow but undeniable pivot toward durable energy infrastructure, clean baseload generation, and geopolitically sensitive supply chains. This is where names like LEU, BWXT, and FLS come into play—each representing a niche, underappreciated angle on the broader transition.

Together, this basket is designed to capture both the immediate opportunity and the longer-duration structural shifts—a balanced, high-conviction view of where global energy is today and where it’s going tomorrow.

Initiating Coverage: New Energy Infrastructure

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If you’ve been following along, you already know we’ve just wrapped our Q1 Performance Review + Commentary, along with a Current Holdings Update for those keeping tabs. If you missed those, give them a read—especially if you like charts, conviction, and the occasional unsolicited opinion on macro stupidity.

Now, with Q2 knocking and markets behaving like a caffeinated squirrel dodging traffic, we shift focus to the week ahead—a battlefield of tariff tweets, AI tears, and small-caps on the brink of either greatness or gravity.

Let’s get into it….

Weekly Roadmap: A Storm of AI Angst, Tariff Tension, and Economic Crosswinds

Last week came in quieter on the economic data front—but don’t mistake silence for serenity. Under the surface, things were shifting. The real story? A sharp unwind in the AI/Semiconductor complex that sent the Nasdaq (the Q’s) into a tailspin. TD Cowen dropped some bearish remarks on AI infrastructure, Goldman followed up with a downgrade on the whole complex, and Alibaba’s CEO called the data center euphoria a bubble. A triple-punch to the gut. Tech stocks took it on the chin, with the Q’s limping in as the worst-performing index. The Dow, by comparison, was the least-worst—down just under 85 basis points.

We started the week with a gap up—thanks to some vaguely dovish headlines ahead of the much-anticipated “Liberation Day” on April 2nd. Markets cheered at first, sensing a walk-back in tone from the administration. But as is often the case these days, optimism was short-lived.

Come Wednesday, the AI parade got rained on. TD Cowen recycled a bearish note eerily similar to February’s (Microsoft denied those claims back then, too), and yet here we are again—market in “shoot first, ask questions later” mode. Meanwhile, Alibaba’s top brass throwing cold water on the AI excitement didn’t help. Cue the unwind: semiconductors, AI infrastructure plays, and anything in that vicinity got hit hard. That weakness rippled outward, dragging the rest of the market with it.

Then Trump grabbed the mic.

He declared 25% tariffs on all foreign-made cars, plus new levies on pharmaceuticals and lumber. The tariffs are set to kick in April 2nd, with collections starting the next day. Markets didn’t panic—maybe because Trump tempered the blow in classic fashion:

“We’re going to make it all countries, and going to make it very lenient... less than the tariff that they've been charging us for decades.”

In other words, reciprocal tariffs… but not really. A soft bark, perhaps, rather than a bite. The “reciprocal” rhetoric has been revised to sound less retaliatory and more... negotiable. The market took this as a potential olive branch rather than a flamethrower.

Still, this is a diplomatic game of chicken…

If Canada and the EU retaliate, we could spiral into a tit-for-tat trade war redux. By week’s end, Canada’s Carney made conciliatory remarks, and reports out of Europe suggest the EU is preparing concessions to hash out a deal before April 2nd.

On the economic front, we wrapped the week with the PCE inflation print. Headline PCE held steady at 2.5%, but Core ticked slightly higher—enough to keep the Fed sweating. The real concern? Inflation progress has flatlined over the past year. Throw in weakening consumer spending, and the market suddenly cared more about growth fears than inflation, bidding up bonds and shifting attention toward slowdown and recession risk.

Friday sealed the mood. Consumer sentiment data dropped—ugly stuff. Sentiment is now back near 2022 lows. Inflation expectations jumped too, but let’s be honest: these surveys are increasingly political and disconnected from reality. Even Powell has called the UMich surveys “outliers.” Hard data continues to beat expectations, while soft data—like sentiment—just keeps sagging. Noisy signals, not flashing alarms.

Looking ahead, we’re staring down a busy week of jobs data, which matters more than usual. Recession odds for 2025 have climbed to 40%, and any hiccup in labor market strength will only fan those flames. Meanwhile, all eyes remain on Liberation Day (Tariff Day, if you prefer)—which will either clear the fog on trade policy or deepen the haze.

Market Data for the Week:

SPY & QQQ: Bull Gaps, Bear Traps, and the Battle for Market Direction

Monday opened strong on the heels of a Wall Street Journal piece that sounded—well—almost diplomatic on the tariff front. The result? A nice little bull-gap. But the market, true to its current mood, decided not to trust good news for long. That early optimism evaporated by midweek, as the AI/Semiconductor trade got body-slammed.

SPX bore the brunt of that unwind. The sharp reversal began Wednesday after TD Cowen dropped a bearish note, and Goldman poured gasoline on the fire with a downgrade of the AI complex. You know the story by now.

So now what?

It’s all eyes on April 2nd: Liberation Day. This is either going to be the clarifying policy moment markets are desperately craving—or just another messy chapter in the tariff saga. Add to that a steady drip of better-than-expected hard data (so far defying all those Q1 slowdown forecasts), and SPX sits at a classic inflection point.

If bulls want to reclaim the narrative, SPX needs to build a higher low, push above the 21-day EMA (call it 5600–5650), and retake the 200-day. That would reestablish momentum and set up a run at the next leg higher.

But if we lose the recent March lows? The next likely target is a gap-fill around 5340. That’s the “ouch” zone. And it wouldn’t take much—an escalation in tariff tensions, a bad print on jobs, or a surprisingly weak earnings season could do the trick.

Keep this in mind: Liberation Day has been telegraphed for weeks. Expectations are sky-high. If there’s no surprise, no catalyst, no twist in the plot? We may just see an unwind of protective hedges and some short-term relief. In that case, higher lows could form, and a countertrend rally may resume.

QQQ: On the Edge of a Cliff, or Just Catching Its Breath?

The Q’s are dangling on the edge—literally clinging to the bottom rail of an upward-sloping parallel channel that’s been intact since late 2022. This past week didn’t help. The AI/Semiconductor complex unraveled, dragging the entire tech-heavy index down with it.

Are we at peak pessimism? Possibly. The market’s clearly worried about the “E” in P/E ratios. It’s not just about valuation—it’s about the risk that earnings (especially for AI darlings like Nvidia) may not deliver. Cheap P/Es don’t matter if the “E” starts shrinking.

This next earnings season is going to separate the real contenders from the pretenders.

A push above 477 is key. Reclaim that, and we’ve got a shot at retesting the 200-day moving average. But if the Q’s break lower and lose that support line, we could be revisiting last September’s lows around 450. That path likely involves weak earnings, more tariff chaos, and renewed fears of a slowdown.

IWM: The Small-Cap Stress Test

The small-caps are doing what small-caps do best—keeping us on edge.

Right now, IWM is backtesting what’s arguably the most important technical breakout in the last two years. This is the level that launched the 2024 rally. And just beneath it? The 200-week and 100-week moving averages—solid support structures.

Last week, like all major indices, IWM kicked off with a strong open. By Friday’s close, every index, IWM included, had not only given back the gains but closed on the lows of the week.

So the setup is simple but pivotal: will small-caps form a higher low off this test of support… or will the market deliver another leg down?

If support holds, and we see even a hint of clarity around tariffs—not to mention continued resilience in hard economic data—IWM could catch a bid. From there, the roadmap is pretty clear: reclaim 204–206, break back into recent highs, and then march toward the 209–212 zone. That would fill the gap left behind in March and signal that small-caps are ready to play ball again.

A breakdown here likely means softening economic data, intensifying recession chatter, and, of course, more tariff drama with zero resolution in sight.

DIA: The Dow’s Island Disappears

Last week, DIA came out swinging, up over 2% early on and looking like the most stable of the major indices. It held its bull-gap… until it didn’t.

By Friday, it had given it all back. The bull-gap was filled. The 200-day moving average was lost. It closed below where it started, off about 80bps on the week. Not catastrophic—but a clear momentum fade.

The market’s reaction to the firm PCE inflation data was also telling. Normally, higher Core PCE might spook investors—but not this time. Bonds caught a bid, which tells you the real concern isn’t inflation—it’s growth. Consumer spending is softening, and that’s what spooked the tape.

So, the path forward?

If DIA holds support around 409—the summer 2024 highs—it could form a higher low. From there, reclaiming 422–425 would put the 200-day back in play and set the stage for a run at 432–439. That’s the bull scenario, but it needs cooperation: tariff resolution, decent jobs data, and no nasty surprises in earnings.

Dollar, Bonds, and Oil: Markets Beneath the Surface

The Dollar Dips (Despite the Drama)

You’d think that with tariff headlines flying and risk-off vibes in equities, the dollar would’ve flexed its muscles a bit. But instead, the greenback… sagged. Not much, but enough to raise an eyebrow.

Why the weakness? The key lies in Trump’s new and improved messaging around reciprocal tariffs. While April 2nd was previously hyped as a scorched-earth tariff blitz, he’s recently softened the tone—emphasizing “leniency” and hinting that tariffs might be lower than what the U.S. has endured from others for decades. That walk-back, or perhaps “soft pivot,” allowed foreign currencies (especially the euro) to breathe easier.

On Friday, the EU dropped a particularly interesting note—they’re preparing a terms sheet to negotiate the partial removal of existing U.S. tariffs. That’s a meaningful olive branch, and if this thing gains traction, the euro could see more upside. Technically, a clean break above the 200-week would likely catapult EUR/USD back to 1.11–1.12. Keep an eye on it—especially with the still underappreciated German stimulus in the mix.

Canada and Mexico? Mostly quiet. But Mexico keeps impressing with its diplomatic agility, and Trump’s latest conversations with Canada (via Carney) were reportedly “cordial.” Post-election talks are already on the books for April 28. Looks like Trudeau might’ve been the sticking point all along.

Japan, however, remains in the crosshairs of the auto-tariff issue. That triggered a brief spike in USD/JPY above 151. But as U.S. equities stumbled, the yen did what it does best—snapped back in a classic flight-to-safety move.

The Bid That Shouldn't Have Been (But Was)

Bonds continue to chop like a squirrel on Red Bull. But Friday gave us something interesting. Despite a firm PCE print—headline steady, core ticking higher—bonds rallied. Why? Because consumer spending fell off a cliff. The market isn’t worried about inflation right now—it’s worried about growth.

The University of Michigan sentiment survey didn’t help either. Sentiment cratered, flirting with 2022 lows. And inflation expectations? All over the place. Democrats now expect 6.5% inflation next year, which is higher than what they expected during the peak of actual inflation in 2022. Powell himself has dismissed these surveys as political noise, but the market still reacted—maybe too much.

Even so, the 10Y yield remains annoyingly sticky above 4.2%. Bonds are red on the month, and the rally everyone from Trump to Scott Bessent hoped for hasn’t materialized. Not yet.

Here’s a wild card: what if tariffs are quietly used as leverage to generate bond demand? Imagine this—“Buy our bonds, and we’ll go easy on your exports.” It’s not official policy, of course. But geopolitics loves a backroom deal, and this kind of quid pro quo would kill two birds with one stone.

Looking ahead, the path for the 10Y is likely tied to economic softness. If hard data finally cracks—especially the jobs numbers this week—the 10Y could break down and slide toward 4.1%, maybe even 4.0%. If clarity around tariffs fails to show up, that breakdown gets more likely.

Oil Holds Strong Amid the Storm

And then there’s crude—resilient, surprisingly so.

Despite a broad market swoon and rising recession chatter, oil held firm. That’s telling. Price remains comfortably supported at the lower end of a 3-year range, and after breaking out from a downtrend a few weeks ago, crude has climbed back from $65 to $70 in short order.

If we continue to see support hold above $67.50, a push to $72–72.80 is likely, targeting a backtest of the 200-day. The real trigger to watch is $70—clear that level, and the countertrend rally likely gets extended.

Still, don’t expect fireworks unless we get a geopolitical jolt. The U.S. administration remains focused on energy price suppression, and Saudi Arabia’s been pumping. Macro’s still mixed: China and Europe are stimulating, the U.S. is policy-gridlocked, and recession fears remain front and center.

Interestingly, speculative positioning in crude is still light. Only recently have we started to see net length added back in. If U.S. hard data keeps beating expectations, crude could surprise to the upside—especially with pessimism still baked into broader economic sentiment. Right now, recession odds for 2025 are hovering around 40%. If that gets revised lower, oil could pop.

That wraps up this week’s roadmap.

Markets are in a pressure cooker—narratives are fragile, positioning is twitchy, and volatility is only one headline away. Liberation Day (April 2nd) could provide answers… or just more questions. We’ll be watching closely.

As always, I’ll drop any timely updates in chat as the week unfolds.

Thanks for reading,

— BSR

Disclaimer:

Remember, this is not financial advice. You are fully responsible for your own decisions!

The information provided on this website/Substack is for informational purposes only. While it is believed to be reliable, Blackshore Research does not guarantee its completeness or accuracy. This content is not an offer or solicitation to buy any financial instrument. The information and terms on these pages can change without notice. Unauthorized use of Blackshore Research’s websites and systems is strictly prohibited. This includes data scraping, unauthorized access, password misuse, or improper use of posted information. Your eligibility for certain services will be determined by Blackshore Research and its affiliates. Investment services are not FDIC-insured and carry investment risks, including potential loss of principal. The proprietary information from Blackshore Research or third-party providers is for individual use only and must not be redistributed or transferred without prior written consent from Blackshore Research.

Before reading I encourage you to take a look at our current holdings (as of 03/31/2025) which you can find under the “Current Holdings” tab at:

Blackshore Research

There is also a link at the end of this article if you make it that far ;)

Vindication, Volatility, and What Comes Next

Well, well, well. After a perfectly respectable stint of looking completely wrong, our bearish call for the first half of 2025 has landed right on target. SPX 5600—tagged. Chalk one up for patience, conviction, and a willingness to be early (which, as you know, often just feels like being stupid… until it doesn’t).

But price targets aside, thematically, things are getting interesting. For months—no, years—AI has been the black hole sucking up all the oxygen in thematic equity. And within AI, the U.S. has been the sun around which everything orbited. But tides are shifting. Volatility cracks open the surface, and through it we’re starting to see fresh, weird, beautiful themes bubbling up—especially in the Rest of World versus U.S. dynamic.

U.S. equities have suddenly leapt toward pricing in a recession. Bonds? Still lounging poolside, unbothered. This kind of asset class schizophrenia usually doesn’t last long, but it’s telling. It signals confusion. And confusion, for us, is fertile ground.

So, what now?

We’re using this moment to recalibrate and share an updated snapshot across our active thematic coverage and watchlists. The U.S. economy, in our view, isn’t falling apart—it’s just trying to find its footing in the fog of policy misfires and political drama. Our stance? Cautious. Alert. Ready. A “wait-and-see” posture, but not asleep at the wheel. There are macro risks worth monitoring—and opportunities that only show up when the world gets weird.

I. Executive Summary

Timeframe: January 1, 2025 – March 31, 2025
Core Portfolio Return: 22.14%
Benchmark Comparison: S&P 500 (-5.19%)

Key Highlights:

• Top Performer: Healthcare/Med-Tech — up 18.75%%

• Worst Performer: Ai (aka high beta tech) — down 7.10%

• Portfolio Skew: Aggressively hedged

II. Basket Performance

This review is part performance check-in, part reflection. We’re looking at both lifetime performance since inception (November 10, 2023) and how things have evolved more recently, especially over the past quarter. It’s been a wild ride, but the goal here isn’t celebration—it’s calibration.

Let’s start with the obvious: performance has been strong. Since launch, the BSR Core Portfolio has outpaced the S&P 500 by roughly 4x. That’s not a chest-thump—it’s a byproduct of being early on the right themes, staying nimble, and knowing when to hit the brakes.

Take our networks and infrastructure basket, for example. It’s gotten smaller and leaner since August—and that’s been a good thing. The reduction isn’t due to dead weight, but rather a series of exits from positions that worked. We trimmed strength, took gains, and let winners rotate off the board. Sometimes less is more, especially when it means locking in success and freeing up room for future plays.

Below you will find both the lifetime and Q1 performance of each basket…

Artificial Intelligence Basket

Lifetime Performance: +30.39%

Q1 performance: -7.10%

Healthcare / Med-tech Basket

Lifetime Performance: +35.76%

Q1 Performance: +18.75%

Networks Infrastructure Basket

Lifetime Performance: +36.60%

Q1 Performance: -0.80%

III. The Turn: Hedging and Taking Chips Off

Right after the inauguration, we made a conscious shift. If you’ve been reading along, you’ll remember we started taking chips off the table.

Link here:

Growth and innovation had a massive run, and it felt like the market was starting to front-run uncertainty.

So we rebalanced. We added TLT, built up our cash, and hedged core exposure with SPX and QQQ puts. It wasn’t about fear—it was about protecting gains and staying mentally flexible in a policy-driven tape. In hindsight, that move helped create stability during what’s become a more uneven stretch for markets.

Hedging Activity: +52.92%

As outlined in our recent Market commentary we monetized our initial SPX puts and rolled into further OTM puts in SPX and QQQ while increasing out TLT holdings to 21.17%

IV. Trade Commentary & Insights

Coming into last year, our plan was to lean into high-beta tech and growth, particularly in sectors like healthcare and infrastructure, which aligned with our broader thematic frameworks. And for the first stretch of 2024, that worked well. These were the "places to be"—until they weren't.

We began advising a gradual unwind of those positions shortly after the election. Not because we abandoned the AI or innovation thesis—it’s still intact—but because momentum began to wane, and macro uncertainty started creeping in from the edges. It made sense to de-risk and get liquid.

As of now, we’re in a wait-and-see posture. That’s not code for paralysis—it’s intentional. We’re sitting on cash, still holding our TLT exposure, and keeping hedges in place. The monthly candle structure suggests downside risk remains, and breadth indicators—like the percentage of stocks above their 200-day—still have room to deteriorate if selling picks up again.

So for now, we keep it simple. Take profits where it makes sense. Hold cash. Stay hedged. That approach has served us well—not because we’re trying to outsmart the market at every turn, but because we’re focused on managing risk, staying curious, and preparing for what comes next.

V. Top Gainers

TSM - Taiwan Semiconductor Manufacturing Co. (Ai) +63.38%

APPS - Digital Turbine (Ai) +16.13% (Should’ve taken more profit…)

NET - Cloudflare (Ai) +42.57%

UI - Ubiquiti (Networks/Infra) +93.24%

SMTC - Semtech (Networks/Infra) +94.00%

LITE - Lumentum (Networks/Infra) +117.40%

STIM - Neuronetics (HC/Med-Tech) +104.81% (Trade is still open, one of my highest conviction longs…)

HIMS - Hims & Hers Health (HC/Med-Tech) +246.10%

GRAL - GRAIL (HC/Med-Tech) +207.67%

VI. Looking Ahead…

As we move forward, the focus remains on staying patient, hedged, and opportunistic. We’re not forcing trades—we’re preparing for the next leg of thematic rotation. A few things to keep on your radar:

1. We’re entering what I call “AI Phase 3”, where the hype gives way to real enterprise adoption and second-order effects.

2. I’m also deep into a new energy thesis that ties together policy, electrification, and commodity dislocations.

3. And finally, keep an eye out for a developing framework around space and military defense stocks—a corner of the market that’s quietly aligning with some of the biggest geopolitical currents we’ve seen in years.

Check out our current holdings below…

Stay tuned. More soon.

-BSR

VII. Current Portfolio Holdings (as of March 31)

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What’s on Deck This Week?

The spotlight this week is on Friday’s PCE inflation report — the Fed’s preferred inflation gauge. Markets are bracing for headline PCE to hold steady at 2.5% YoY, while Core PCE is expected to tick up to 2.7% from 2.6% the prior month.

Aside from that, investors will be sifting through a mix of economic data: PMIs, jobless claims, GDP revisions, and a handful of smaller data points scattered across the week. In short, this week won’t be light on catalysts — even if it’s not all fireworks.

A Quick Recap: Last Week’s Highlights

While headlines were few and far between, we did get one surprise out of D.C. late in the week:

Trump: "There will be flexibility on tariffs. Basically, it’s reciprocal."

That’s a noticeable softening in tone ahead of the much-discussed April 2nd “Liberation Day”, when the U.S. is expected to enact reciprocal tariffs. Trump’s comments leave room for negotiation and suggest the administration isn’t looking to escalate — at least not yet. If the market’s biggest fear is uncertainty, this gave a hint of potential clarity.

Economically, last Monday’s retail sales report came in slightly below expectations — but one important component, the control group, jumped by 100bps, which feeds directly into GDP. That datapoint was a quiet positive.

And then, of course, we had the FOMC meeting.

No shockers on the rate front: the Fed kept its outlook at two cuts for 2025, resisting earlier speculation that a third might sneak in. The more notable surprise came in the balance sheet: Quantitative Tightening (QT) was dialed back from $25B to just $5B, signaling a near-pause.

Chair Powell played a dovish hand, contrasting slightly with a FOMC statement and dot plot that leaned mildly hawkish. The Fed revised growth expectations lower, nudged inflation projections up slightly, and cited tariffs as a growing uncertainty. Despite that, Powell doubled down on long-term inflation expectations being “well-anchored.”

He also took direct aim at the recent UMich survey, which showed a spike in 1-year inflation expectations. Powell dismissed it as an outlier, highlighting how disconnected survey-based expectations have become from actual data. A subtle but important signal: the Fed is still trusting the data over the noise.

Eyes Back on PCE and Tariff Clarity

With the Fed in the rearview, all eyes turn to Friday’s PCE report. As mentioned earlier, expectations are for headline PCE to hold steady at 2.5%, while core edges up to 2.7%. Recent CPI and PPI prints came in hot — and since components of those reports bleed into PCE, expectations have already been revised higher.

Meanwhile, “Liberation Day” looms. With Trump now signaling flexibility on tariffs, markets are starting to game out a best-case scenario: if tensions ease and policy clarity emerges, equities could catch a tailwind.

SPX Technicals: Bear-Gap Battle Continues

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