"Space: the final frontier. These are the voyages of the starship Enterprise. Its five-year mission: to explore strange new worlds, to seek out new life and new civilizations, to boldly go where no man has gone before!" That's the introduction to Star Trek, the long-running TV series. On Friday, Elon Musk, the CEO of SpaceX, went where no man has gone before. He became the world's first trillionaire. The company's IPO went off without a hitch, raising $75 billion, with its shares rising 19% on their first day of trading. While it was the largest IPO ever, it was a drop in the bucket given that the Wilshire 5000 has a $74 trillion market cap (chart).
We congratulate Elon on his remarkable achievement. We do have some advice for him, however. First and foremost, there is absolutely no reason to go to Mars. There is nothing up there. Second, it makes much more sense to locate data centers on the ocean floor than in outer space. It will be much easier to install and repair them. They will get damaged by space debris if they are put in orbit. Third, we also suggest that Tesla offer a hybrid model to boost that company’s sales.
Providing some rocket fuel to the SpaceX launch on Friday was news that the US and Iran might sign a memorandum of understanding (MOU) on Sunday. It could turn out to be a memorandum of misunderstanding (MOMU). Nevertheless, the price of a barrel of Brent crude oil fell to $87.33 on Friday (chart). Iranian officials said today that they won’t be ready to sign on Sunday.
Contributing to the fall in oil prices was news that the US military is escorting ships carrying approximately 7 million barrels a day of crude oil and fuel products through the Strait of Hormuz. Energy Secretary Chris Wright said so Friday.
That news also lifted the S&P 500 and Nasdaq slightly on Friday. Both rebounded off their 50-day moving averages. The stock market has been rocketing on fabulous earnings momentum (FEMO). Analysts' consensus expected long-term earnings growth (LTEG) jumped again to 24.0% at an annual rate for the next five years during the week of June 12 (chart). That's a record high and twice as fast as the average of this series since 1985. It's also as unlikely to be achieved as colonizing Mars.
More realistic is the S&P 500 forward earnings per share, which rose to yet another record high last week. It is up to $366.92, which is a time-weighted average of the current analysts' consensus EPS estimates for 2026 and 2027, at $340.39 and $397.87 (chart). Those are also supercharged estimates compared to our current forecasts of $330 and $375.
In any case, FEMO is spreading. The forward earnings of both the S&P 400 MidCap and S&P 600 SmallCap have been rocketing to new highs, along with that of the S&P 500, in recent weeks (chart).
Notwithstanding our FEMO story, we've been predicting since June 3 a June Swoon that might present a good buying opportunity. It might have happened on June 5, when the S&P 500 fell 2.6% on a much better-than-expected May employment report. That increased the odds that the FOMC might pivot toward a tightening stance at Wednesday's meeting, which has been our contrarian view since early May.
The Magnificent-7 stocks certainly have swooned so far this month, especially compared to the rest of the S&P 500, a.k.a. the Impressive-493 (charts). One possible reason is that investors might have raised some cash to buy SpaceX by taking profits in the Mag-7. Investors might also be concerned that businesses are tightening their AI budgets, forcing the AI suppliers to lower their prices for "tokens."
So is the June Swoon over now that the SpaceX IPO has launched successfully? We see reasons to think so. A MOU between Iran and the US could push the stock market higher as it pushes oil prices still lower. The FOMC's doves could use such a development to push back against the committee's hawks.
We are still leaning toward a tightening pivot in the FOMC's Wednesday statement; however, we acknowledge that recent events increase the odds of a neutral stance as well as a resumption of the bull market to fresh record highs.
