• U.S. stocks have soared, with the Wilshire 5000 market cap hitting a new all-time high of 212% of GDP, one of Warren Buffett’s key warning levels. Despite global indexes near record highs, we’re seeing mild sell-offs this morning. In addition, Goldman Sachs reported a high level of speculative trading activity.

The U.S. stock market has just blown through Warren Buffett’s favorite economic indicator, stock market cap to GDP, setting a new all-time high. The valuation of the Wilshire 5000—which hit a record high on July 23—is now somewhere north of 212% of U.S. GDP, the “Buffett Indicator” shows.

Chart via LongTermTrends.Net

Perhaps that’s one reason stocks are selling off globally this morning. While most indexes in Asia and Europe remain near their all-time highs, there is broad-based but mild selling in all of them.

Goldman’s froth indicator is high

There’s another sign the markets may be near their top: Goldman Sachs launched a new “Speculative Trading Indicator” that measures froth by gauging trade volumes in “unprofitable stocks, penny stocks, and stocks with elevated EV/sales multiples”—the kind of trades that only look good when the market is rising irrationally. Sadly, “The most actively traded stocks include most of the Magnificent 7 along with companies involved in digital assets and quantum computing, among others,” Ben Snider and his team told clients.

“The indicator now sits at its highest level on record outside of 1998-2001 and 2020-2021, although it remains well below the highs reached in those episodes,” they said.

S&P futures, by contrast, were flat this morning premarket—so who knows where the Americans are going today.

The Fed may delay

No one expects the Fed to lower interest rates next Friday, despite President Trump’s continued pressure on Chairman Jerome Powell. (The video of the face-off between the two yesterday, in which Trump humiliates Powell and Powell corrects a false assertion by Trump, is a cringey must-watch.)

So investors are focused on September, October, and December. Sixty percent of speculators in the Fed Funds futures market currently think Powell will cut interest rates by 0.25% to the 4% level in September—a move that would deliver new cheap money into equities.

The problem for Trump is that in order to deliver that cut, inflation needs to stay low and the jobs market needs to not get stronger. Currently, inflation is moving up and the jobs market is robust but not perfect. That combo might push a rate cut to October or December—which would explain why investors are taking profits today rather than staying in the market.

“The jobs market continues to hold up despite concerns about a cooling economy, while officials remain nervous about the effect of tariff-induced price hikes on inflation. We see no interest rate cut this month, but the Fed is expected to start laying the groundwork for a move, most likely in December,” ING’s James Knightley and Chris Turner said in a note this morning. “As long as the jobs picture holds up, firmer inflation may well delay the restart of the Fed easing cycle.”

Trump’s tariffs are starting to contribute to inflation, UBS’s Paul Donovan told clients. “Consumers in Europe, the UK, Mexico, and Canada are paying between 0.3% and 1.9% less for the consumer appliances they buy than was the case in March of this year. The US consumer, meanwhile, is paying (on average) 3.6% more for their appliances than they were before Trump’s trade taxes,” he said in an email.

The capex boost is coming

And then, according to Piper Sandler’s Nancy Lazar and her colleagues, there’s a secret weapon hidden inside Trump’s One Big Beautiful Bill which could supercharge GDP growth (and thus, by implication, deter the Fed from cutting): Capex. 

A provision within the OBBB halves the effective rate of corporate tax and incentivises capital expenditure by companies. “Capex’s GDP punch is triple that of housing. Upside capex shocks add 1%+ to GDP. And every related goods producing job creates 6 more – the multiplier. Our preliminary (very preliminary) forecast for 2026 real GDP is about 3%,” they told clients.

With robust growth and tariff inflation still very much in the picture, perhaps stock investors are sensing that Powell will dig his heels in and delay rate cuts even longer than the futures market is currently assuming.

Here’s a snapshot of the action prior to the opening bell in New York:

• S&P 500 futures were flat (+0.13%) this morning, premarket, after the index closed marginally up at a new all-time high of 6,363.35 yesterday. 
• Tesla declined 8.2% yesterday after a lousy earnings call. 
• STOXX Europe 600 was down 0.34% in early trading. 
• The U.K.’s FTSE 100 was down 0.39% in early trading. 
• Japan’s Nikkei 225 was down 0.88%. 
• China’s CSI 300 Index was down 0.53%. 
• The South Korea KOSPI was up 0.18%. 
• India’s Nifty 50 was down 0.86%. 
• Bitcoin fell 2.76% to $115K.

This story was originally featured on Fortune.com

© Elva Etienne via Getty Images

• Markets rallied as the U.S. moved closer to trade deals with Japan and the EU, bringing much-certainty after months of President Trump’s volatile tariff threats. The S&P 500 hit a new record and futures are up prior to the opening bell. Stocks rose across Europe and Asia this morning. With uncertainty easing, investor risk appetite has increased, according to Deutsche Bank and Goldman Sachs.

The S&P 500 delivered yet another new record high yesterday, closing up 0.8% at 6,358.91. S&P futures are calling for more gains this morning. Markets in Europe, Japan, and China are all up this morning.

Why the joy? Because the uncertainty caused by Trump’s tariff negotiations / threats / demands / letters is finally clearing away. Yesterday markets digested the proposed trade deal with Japan (15% tariffs plus some other stuff) and this morning there are reports that the EU is closing on a deal (again, 15% tariffs plus some other stuff). Those rates are half what Trump initially proposed.

The TACO trade (Trump Always Chickens Out) appears to be in full effect, for anyone who was long on stocks.

Japan and Europe are two of the U.S.’s largest trading partners and now that the markets have some certainty around trade, it’s back to “risk-on” for investors, according to Jim Reid’s team at Deutsche Bank.

“The risk-on tone has continued over the last 24 hours, with the S&P 500 (+0.78%) at a fresh record thanks to growing optimism that more trade deals would be reached before August 1. The initial catalyst was the US-Japan deal we woke up to this time yesterday, with both European and US risk assets rallying as they caught up to the news. But around the time that European markets were going home, an FT headline said that the EU and the US were closing in on a similar deal that would also put 15% tariffs in place,” he wrote. 

“If a 15% total rate inclusive of existing tariffs is agreed as suggested, this would mark only a marginal increase compared to the 10% additional tariffs that EU exports to the US have faced since Liberation Day but with certainty about the future.”

The key word there is “certainty”. It’s what the markets want. The other uncertain issue that’s now in the rearview mirror is Trump’s fiscal spending/debt bill. “The passage of the ‘One Big Beautiful Bill’ removes one major source of policy uncertainty by extending key expiring provisions of the Tax Cuts and Jobs Act (TCJA), thereby averting a fiscal cliff worth 1% of GDP in 2026–27,” Gregory Daco at Parthenon-EY told clients.

With certainty back on the table, “risk appetite is up,” according to Christian Mueller-Glissmann and Andrea Ferrario at Goldman Sachs. The bank’s proprietary “Risk Appetite Indicator” had been floundering below -1 on the scale for much of the year but has now poked its head back into positive territory.

Here’s a snapshot of the action prior to the opening bell in New York:

• S&P 500 futures were flat this morning, premarket, after the index closed up 0.78% yesterday.
• STOXX Europe 600 was up 0.58% in early trading.
• The UK’s FTSE 100 was up 0.85% in early trading.
• Japan’s Nikkei 225 was up 1.59%.
• China’s CSI 300 Index was up 0.7%.
• India’s Nifty 50 was down 0.51%.

This story was originally featured on Fortune.com

© Marcin Golba—NurPhoto via Getty Images

• President Trump’s GENIUS Act legalizes stablecoins and requires them to be backed by U.S. dollars or Treasuries. That’s going to increase demand for dollar-backed assets and, maybe, cement the dollar’s reserve currency status. Bitcoin and Ether have both risen as a result, alongside a modest recovery in the U.S. dollar.

Bitcoin is up. Ether is up. And the dollar is up—a little. These things might be related if you believe, as many in the cryptocurrency world do, that the Trump Administration’s regulatory support for crypto will revolutionize digital payments.

Bitcoin was up 1.27% this morning at just under $119K per coin. ETH rose sharply by nearly 12% over the last five days. These gains came as President Trump signed the GENIUS Act, which legalizes stablecoins. Stablecoins are cryptocurrencies that maintain their value at 1:1 with fiat currency, usually the U.S. dollar.

The GENIUS Act specifically requires that stablecoins in the U.S. be backed by dollars or U.S. Treasuries. That will lock in demand for dollars and short-term U.S. bonds from stablecoin issuers, and that in turn will support both the dollar and the price of bonds.

Lo and behold, the U.S. dollar, which had been down by 10.8% year-to-date at the beginning of the month, has picked itself up and is now down only 9.39%. 

The act “formalizes stablecoin issuers’ role as quasi money market funds, supporting US short-term debt markets and channeling non-USD liquidity into dollars,” Deutsche Bank analysts Marion Laboure and Camilla Siazon told clients in a note seen by Fortune. “At a time when US dollar hegemony is under question, this has been seen as a win by the Trump administration. On Friday, Trump affirmed that the GENIUS Act would ‘secure the dollar’s status as the world reserve currency,’ and followed that if the US were to lose its reserve status, it would be akin to the US ‘losing a world war.’”

It’s not yet clear whether the crypto market is big enough to push up the price of the dollar. But it might be, Laboure and Siazon say. “Tether alone holds over ~$120bn in treasury bills as of Q1 2025 and ranks amongst the top holders of US treasuries.”

“The US treasury predicts that T-bills held by stablecoin issuers (excluding interest-bearing stablecoins) will grow to ~$1trn by 2028,” they said.

The act also bans stablecoin issuers from offering “yield” to holders. (In cryptoworld, yield is a stream of payments that looks a lot like interest given to anyone who offers their crypto holdings as a loan to borrowers on a crypto exchange.) Because stablecoins will not be able to offer payments to holders, it looks as if crypto investors are piling into ETH, which has long offered yield payments to anyone willing to “stake” their coins as a security on the Etherium blockchain. (Staking involves punishing anyone who approves a false transaction on the blockchain but rewarding anyone with new ETH if they approve a true transaction.)

“This perhaps explains why we are also seeing a rise in Ether (+25%) last week, as expectations for diminished stablecoin yields are driving interest towards Ethereum as the primary alternative for yield generation in decentralized finance,” the pair said.

Here’s a snapshot of the action prior to the opening bell in New York:

• S&P 500 futures were up 0.24% this morning. The index closed flat at 6,296.79 on Friday. 
• China’s SSE Composite was up 0.72%. 
• The STOXX Europe 600 was down 0.17% in early trading. 
• The UK FTSE 100 was down 0.18% in early trading.
• The Nikkei 225 was down 0.21%. 
• Bitcoin was up 1.27%, at just under $119K.

This story was originally featured on Fortune.com

© Al Drago—Bloomberg via Getty Images