“Space: the final frontier…” is the iconic opening narration of the long-running sci-fi series Star Trek, celebrating humanity’s drive to explore the unknown and venture beyond familiar boundaries.
On Friday, Elon Musk achieved a milestone that would have seemed equally futuristic: becoming the world’s first trillionaire. The IPO of SpaceX was a resounding success, raising $75 billion, with the stock surging 19% on its first day of trading. Despite being the largest IPO on record, it represented only a small fraction of the roughly $74 trillion market capitalization of the Wilshire 5000.
While congratulating Musk on this remarkable accomplishment, we would offer a few suggestions. First, the case for establishing a human presence on Mars remains debatable, given the immense costs and limited practical benefits currently on offer. Second, locating data centers beneath the ocean may prove more efficient than placing them in orbit, as installation, maintenance, and repairs would be significantly easier to manage. Orbital facilities would also face ongoing risks from space debris.
Finally, we would suggest that Tesla consider expanding its lineup with a hybrid vehicle, a move that could help strengthen demand and broaden its customer base.
Fueling the enthusiasm surrounding SpaceX’s blockbuster debut on Friday was growing optimism that the United States and Iran could soon reach a memorandum of understanding (MOU). Whether the agreement ultimately delivers meaningful progress remains uncertain, and skeptics may view it as a potential “memorandum of misunderstanding.” Even so, the prospect of easing geopolitical tensions helped push Brent crude prices lower, with the global benchmark settling at $87.33 per barrel on Friday. Iranian officials, however, indicated today that they would not be ready to sign the agreement on Sunday as previously anticipated.
Additional downward pressure on oil prices came from reports that the US military is escorting vessels carrying roughly 7 million barrels per day of crude oil and refined fuel products through the Strait of Hormuz. According to Chris Wright, the operation is intended to ensure the uninterrupted flow of energy supplies through one of the world’s most critical maritime chokepoints. This development has eased concerns about potential supply disruptions and contributed to the recent decline in crude prices.
The prospect of easing tensions in the Middle East also provided a modest boost to Wall Street on Friday, helping both the S&P 500 and Nasdaq edge higher. Importantly, each index found support at its respective 50-day moving average, reinforcing the resilience of the broader uptrend.
The market’s powerful advance continues to be driven by what might be called fabulous earnings momentum (FEMO). Analysts have become increasingly optimistic about corporate profitability, with consensus forecasts for long-term earnings growth (LTEG) climbing to an annualized 24.0% over the next five years during the week ending June 12.
That figure marks a new record high and stands at roughly double the historical average since 1985. Such expectations reflect extraordinary confidence in the earnings outlook, fueled by themes such as artificial intelligence, automation, and productivity gains.
Yet there is also reason for caution. Sustaining earnings growth at that pace for five consecutive years would be an exceptional achievement by historical standards. In that sense, the forecast may prove almost as ambitious as Elon Musk’s vision of establishing a human colony on Mars. Investors are currently pricing in a remarkably optimistic future, one that leaves little room for disappointment if corporate earnings fail to keep pace with expectations.
A more grounded measure of the market’s earnings outlook is the S&P 500 forward earnings per share (EPS), which climbed to another record high last week. The forward EPS estimate now stands at $366.92, representing a time-weighted blend of analysts’ current consensus forecasts for 2026 EPS of $340.39 and 2027 EPS of $397.87.
While these projections are less ambitious than the market’s lofty long-term earnings growth expectations, they still imply a notably strong profit outlook for corporate America. Indeed, the consensus forecasts remain well above our own estimates of $330 for 2026 and $375 for 2027, suggesting that Wall Street analysts continue to anticipate robust earnings expansion over the next two years.
The gap between consensus estimates and more conservative forecasts highlights the degree of optimism currently embedded in equity valuations. As long as earnings continue to surprise to the upside, investors may remain willing to support elevated stock prices. However, the higher expectations rise, the greater the risk of disappointment if corporate profit growth fails to match the market’s bullish assumptions.
In any case, fabulous earnings momentum (FEMO) is no longer confined to large-cap stocks. The trend is spreading across the broader market, with forward earnings estimates for the S&P 500, S&P MidCap 400, and S&P SmallCap 600 all surging to fresh record highs in recent weeks.
This broad-based improvement in earnings expectations is an encouraging sign for equity bulls, as it suggests that profit growth is expanding beyond a handful of mega-cap companies. Instead, analysts are becoming increasingly optimistic about the earnings prospects of mid-sized and smaller firms as well, indicating a healthier and more inclusive corporate profit cycle.
The widening participation in earnings growth helps reinforce the market’s resilience and provides a stronger fundamental foundation for the ongoing rally. However, it also means that elevated expectations are becoming embedded across a larger segment of the market. As a result, companies will need to continue delivering robust results to justify current valuations and sustain investor enthusiasm in the months ahead.
Despite our Fabulous Earnings Momentum (FEMO) thesis remaining intact, we have maintained since June 3 that the market was vulnerable to a “June Swoon”—a temporary pullback that could ultimately create an attractive buying opportunity. Arguably, that correction may have already occurred on June 5, when the S&P 500 dropped 2.6% following a much stronger-than-expected May employment report.
The surprisingly robust labor data raised the possibility that the Federal Open Market Committee could adopt a more hawkish tone at its upcoming meeting on Wednesday, a scenario we have viewed as a contrarian risk since early May. Strong economic data tends to reduce the urgency for monetary easing and can lead investors to reassess interest-rate expectations.
The pullback has been particularly noticeable among the Magnificent Seven, which have underperformed the rest of the market so far this month. In contrast, the remaining members of the S&P 500—the so-called “Impressive 493”—have held up relatively well.
One explanation may be portfolio rebalancing. Investors looking to participate in the highly anticipated SpaceX IPO may have funded purchases by taking profits in large-cap technology names that had delivered substantial gains. Another possibility is growing concern that corporate customers are becoming more disciplined with artificial intelligence spending. If businesses begin tightening AI budgets, suppliers of AI infrastructure and services could face increased pricing pressure, particularly in the market for AI computing and token-based services.
As a result, while enthusiasm for AI remains strong, investors appear to be questioning whether the extraordinary growth expectations embedded in leading technology stocks can continue to be met at the same pace.
So, has the June Swoon already run its course now that the highly anticipated SpaceX IPO has been successfully completed? There are several reasons to believe that may be the case.
A potential memorandum of understanding between the United States and Iran could provide an additional tailwind for equities by easing geopolitical tensions and putting further downward pressure on oil prices. Lower energy costs would help improve the inflation outlook, potentially creating a more supportive backdrop for risk assets.
Such a development could also strengthen the position of the more dovish members of the Federal Open Market Committee, giving them greater scope to argue against a more restrictive policy stance. Falling oil prices and reduced inflation risks would lessen the need for additional tightening measures.
That said, we continue to lean toward the view that the FOMC may signal a modest hawkish shift in Wednesday’s policy statement. However, recent geopolitical and market developments have increased the likelihood that policymakers adopt a more neutral tone instead.
If that proves to be the case, the recent pullback could ultimately be remembered as a brief correction rather than the start of a deeper downturn. Combined with strong earnings momentum, easing energy prices, and improving investor sentiment, a neutral Fed stance could provide the foundation for the broader bull market to resume its advance toward fresh record highs.
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