James Brodie
Head of Learning & Development, Flux
S&P Reaches Highest Level On Record, Negotiations Break Down, Sulfur Prices Double
Stocks hit records on AI mania and crowded positioning, while oil, copper and refinery stress signal inflation risks.
The S&P 500 closes at its highest level on record, now on track for a 10-week win streak for the first time since 1985.
That's +$11.7 trillion in market cap since March 30th. While hedge funds bought US equities at the fastest pace in six months last week, according to Goldman Sachs
Risk management. U.S. equities are at all-time highs, and ‘the trend is your friend!’, but the S&P 500 Technology sector trades at a P/E of 45 on margins three times the historical norm - normalise those margins and the effective P/E exceeds 135. Ten companies now make up 40% of the S&P 500, and Bank of America's latest fund manager survey shows the largest single jump in equity exposure on record - the same crowding seen right before markets lost a third of their value in 2022. The script never changes late 1990s it was the internet, 2007 it was structured credit, today it is AI - each time the crowd convinces itself that valuations don't matter because the technology is transformational. Every single time, the math wins. (Chart: Bloomberg)
Meanwhile Micro jumps 6.6% rising above $1,000/share for the first time in history, now worth nearly $1.2 trillion. This stock was worth $60 billion just 13 months ago.
But strong economic news. ISM US Manufacturing clocked in at 54.0, marking five consecutive months of expansion - a clear regime shift that has 2026 shaping up as a fundamentally different macro backdrop than the malaise that defined the prior three years. (Chart: @Geiger_Capital)
While Trump predicts oil prices will fall "like a rock" soon. The U.S. Strategic Petroleum Reserve (SPR) is less than 10 days away from falling to its lowest level since August 1983- over 15,625 days ago- a level not seen since the SPR's initial fill-up that began in 1977.
Global oil inventories are draining at 280 million barrels per month, and even a return to a 1mb/d surplus - itself no longer guaranteed given Middle East infrastructure damage - means three months of war already requires over two years of rebuilding.
Iran has likely concluded that Trump lacks the resolve to use military force, so Tehran's strategy is to string along nuclear negotiations indefinitely - extracting concessions now while banking on Washington being forced to sweeten the deal over time. Meanwhile, global crude inventories are drawing down hard, and China is being squeezed into a corner: they can either drain strategic reserves (unsustainable) or return to the physical market in size and send oil prices sharply higher. The core macro takeaway is that when one party realizes it never has to blink, the negotiating dynamic completely breaks down - and that structural drag on crude is likely far more prolonged than the market is currently pricing in.
US refiners are running at effectively full capacity - around 95% utilization - and skipping routine maintenance to capitalize on strong margins and unrelenting fuel demand. Gasoline stockpiles are already sitting at multi-year seasonal lows heading into the summer driving season, meaning there is virtually no buffer if demand surprises to the upside or any unplanned outages hit. With refineries already maxed out and inventories lean, this summer is shaping up to be a very tight product market.
Sulfur prices have doubled within the year, hitting a record high, with orders booked through mid-to-late August. "When the price rose to 4,000 yuan/ton, it already exceeded market expectations; now breaking through 7,000 yuan/ton completely overturns industry cognition." said Zhao Na, a sulfur data analyst at Business Society. Sulfur prices doubling to record highs is a leading indicator of refinery stress and fertilizer cost inflation — tightening margins across the energy supply chain and adding another layer of cost pressure to an agricultural complex already stretched thin.
We are in the largest and fastest technological revolution ever. (Source: MichaelAArouet)
Goldman Sachs and Citi have lifted their copper price targets, with Goldman now seeing end-year prices at $13,735/ton - over 10% higher than its prior forecast - driven by weaker mine supply and tighter ex-U.S. market balances. The bullish revision reflects a structural supply story, not a demand surge, with import frontrunning into the U.S. adding further tightness to an already constrained global market.
Investors now perceive Nvidia to be as creditworthy as the US government. Nvidia's, 5-year credit default swap (CDS) is trading at ~38 basis points, slightly below the US sovereign CDS, at 40 basis points. In other words, markets consider the world's largest company to be less likely to default on its obligations than the US federal government.
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