Market Moves and Fiscal Fireworks

Ray Marce

Alright, welcome back to Equity Research, everyone. I’m Ray Marce, here with Mark Dalli. Mark, mate, what a week. The S&P 500 just wrapped up Q2 with an 11% gain—SPY’s up over 2% just this past week. Feels like the market’s got a bit of a spring in its step, doesn’t it?

Mark Dalli

Yeah, Ray, it’s been a proper rally. But, you know, it’s not all smooth sailing. July 1st was a bit of a reality check—tech stocks took a hit, Tesla especially, while the Dow actually outperformed. Reminds me of those odd days where the market’s up but your portfolio’s down because you’re heavy in the wrong sector. I think you’ve been there, right?

Ray Marce

Oh, absolutely. I mean, I remember back in 2019—tech had a rough patch, and I was, well, a bit too concentrated in growth names. I had to make some tough calls, trimming positions, rotating into more defensive stuff. It’s funny, you see the headlines—“market up!”—but if you’re in the wrong names, it doesn’t feel like a rally at all. This week, it’s the same story: Dow up nearly 1%, S&P and Nasdaq actually down a touch. Tesla dropped over 5% just on Musk’s comments about the new bill. It’s wild how one CEO’s feud can move the whole sector.

Mark Dalli

Yeah, and it’s not just Tesla. You had Williams Companies and Axon sliding, but then gaming stocks like Las Vegas Sands and Wynn Resorts were flying, thanks to Macau revenues. It’s a classic case of sector divergence. I think investors are just chasing whatever’s working, and the narrative shifts with every headline. One day it’s “rate cuts are coming,” next day it’s “tech’s in trouble.”

Ray Marce

Exactly. And I think sentiment’s so twitchy right now. You get a strong jobs report, but the market shrugs it off—maybe everyone’s already looking ahead to the next data point or the next bit of political drama. I mean, are there any sectors you’re watching that are leading or lagging, Mark?

Mark Dalli

Well, gaming and hospitality are definitely leading, at least this week. Tech’s lagging, obviously, and energy’s been quietly strong with oil ticking up. But honestly, it’s all about the headlines. If the news cycle turns, leadership can flip overnight. That’s why, as we’ve said in previous episodes, you can’t just chase what’s hot—you need to understand what’s driving the moves underneath.

Ray Marce

Yeah, and I think that’s the lesson. Don’t get whipsawed by every headline. But, speaking of headlines, the big one this week is the “One Big Beautiful Bill Act.”

Mark Dalli

Right, the OBBBA. Senate just passed it—50-50 split, VP Vance breaking the tie. Now it’s back to the House, and President Trump’s pushing for a July 4th deadline, though, you know, he’s left himself some wiggle room. The bill’s got tax cuts, spending reductions, and, well, a projected $2.4 trillion deficit impact over the next decade. That’s not pocket change.

Ray Marce

No, it’s not. And the public’s not exactly thrilled—59% oppose it, according to the latest poll. There’s pushback from both sides, legal challenges, and even some Republicans are grumbling about the Medicaid cuts. It’s a bit of a circus, honestly.

Mark Dalli

Yeah, and the market’s reaction has been mixed. You’d think tax cuts would send stocks flying, but there’s this undercurrent of worry about the deficit and inflation. Reminds me of the 2017 Tax Cuts and Jobs Act. Back then, we saw a short-term pop in equities, but the bond market got nervous—yields spiked, and there was a lot of debate about whether the growth would offset the debt. I remember sitting on the bank trading floor, watching the screens light up as the news broke. It’s déjà vu, really.

Ray Marce

Yeah, and I think the difference now is the scale. The CBO’s saying $2.4 trillion in new deficits, maybe $5 trillion if the temporary stuff gets extended. That’s massive. And with rates where they are, the bond market’s already showing some pressure—10-year yields up, 20-year hit 5.14% back in May after the House passed the first version. It’s not just an equity story, is it?

Mark Dalli

No, it’s not. And you’ve got legal challenges too—NAACP vs. U.S., for example, over the spending cuts. So even if the bill passes, there’s a lot of uncertainty about how it’ll play out. I think that’s why you’re seeing these sector rotations and this kind of cautious optimism. Investors want the upside from tax cuts, but they’re wary of the long-term risks.

Ray Marce

Yeah, and it’s not just the bill. There’s a trade negotiation deadline coming up July 9th, and everyone’s watching the economic data. It’s like, every week there’s a new “make or break” moment for the market.

Mark Dalli

Exactly. And while all this is going on, commodities are moving too—oil’s up, gold’s up, bond yields are creeping higher. It’s a bit of a mixed signal. Usually, you’d expect gold to fall if risk appetite’s high, but here we are. I think it just shows how nervous people are about inflation and geopolitical stuff, even as stocks rally.

Ray Marce

Yeah, and the sector story is fascinating. Gaming and hospitality are outperforming—Macau revenues are strong, so names like Wynn and Las Vegas Sands are getting a bid. Meanwhile, tech’s still volatile, especially with Tesla dragging things down. It’s not the broad-based rally you’d hope for, is it?

Mark Dalli

No, it’s not. And looking ahead, I think the next week is going to be all about three things: will the House pass the Senate’s version of the bill, what happens with the July 9 trade talks, and what do the economic data releases tell us? If the bill passes, you might see another pop in consumer and financials. If trade talks go well, maybe industrials catch a bid. But if there’s disappointment on any front, we could see a pullback, especially with valuations where they are.

Ray Marce

Yeah, and I’d add—watch the bond market. If yields keep rising, that could put pressure on equities, especially the high-multiple stuff. And, as we’ve seen in past episodes, these headline-driven moves can reverse quickly. So, stay nimble, keep your eyes on the data, and don’t get too caught up in the noise.

Mark Dalli

Couldn’t have said it better. Alright, that’s all from us for this episode. We’ll be back next week to break down whatever fireworks the market throws at us—fiscal or otherwise.

Ray Marce

Thanks for tuning in, everyone. Mark, always a pleasure. See you all next time on Equity Research.

Mark Dalli

Cheers, Ray. Take care, everyone.