Proflex Market Update - Wk 27

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S&P 500 Closes at Record High | Final Act of the Bull?

“VIX is collapsing, markets are euphoric—this looks like the last leg of the rally.”

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The S&P 500 capped June with a new all-time high at 6,205, driven by falling yields, dovish expectations, and AI-driven tech momentum. Volatility has cratered—VIX now trades at 16.66, down from 65.7 in April—marking one of the sharpest volatility compressions in recent memory.

This drop in volatility, combined with euphoric tech-led flows, suggests we may be entering the final act of the current bull run.
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With "buy the rumor, sell the news" behavior dominating price action, investors should prepare for a potential regime shift.
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​Key catalysts—rate cuts, disinflation, AI earnings—are largely priced in. The market could still push higher in a last burst of upside, but the risk-reward skew is turning unfavorable.

As bullish narratives peak, any disappointment—be it earnings, Fed clarity, or geopolitics—could trigger a pullback. We’re not calling a top, but caution is warranted: late-cycle rallies are powerful but fragile.

Insights from the Proflex Macro Call
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📌 Liquidity and the Dollar: The Invisible Bull Market Engine

One of the most overlooked drivers of this market rally is the combination of money supply expansion and dollar devaluation.

M2 money supply hit $22 trillion in April 2025—the fastest pace since 2022. This excess liquidity is finding its way into equities, especially speculative growth segments.

As foreign revenues convert back into weaker dollars, earnings look better—without any operational improvement.

As long as the monetary backdrop remains loose and the dollar stays soft, the market will have a hidden tailwind pushing it higher—even if the data doesn’t justify it.

You can watch recording of the full weekly discussion here:

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Key Drivers This Week
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🔹 Technical Breakout Confirms Rally Sustainability

Despite concerns over rapid recovery without time-based consolidation, US markets have decisively broken above all-time highs.

This rally mirrors the COVID recovery pattern where markets found support exactly at previous breakout points and resumed upward momentum without prolonged consolidation phases.
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🔹 Gold and Bitcoin Corrections Signal Healthy Risk-On Rotation

Gold's minor corrections from recent highs and Bitcoin's temporary dips below support zones represent normal asset rotation during risk-on environments, not trend reversals.

The corrections align with historical precedent where precious metals and crypto assets temporarily underperform as institutional money flows back into equities and growth assets during periods of restored market confidence.

🔹 Dollar Devaluation Fuels Earnings Optimism

Despite elevated P/E ratios in the 21-23 range raising valuation concerns, the continuous dollar weakening since Trump's inauguration has reached new lows, creating multiple positive catalysts for US equities.

The dollar's decline is offsetting tariff pressures while boosting foreign earnings translations, with technology leaders like NVIDIA maintaining 70-80% growth rates despite China-related headwinds.

🔹 Bond Rally Signals Fed Pivot Despite Sticky Core Inflation​
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Treasury markets delivered a powerful rally through June, with 10-year yields declining & signaling growing conviction that Fed rate cuts are imminent despite core inflation remaining above target levels.
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SOFR futures markets extended a decisive move, plunging deeper into negative territory and signaling growing conviction of a prolonged Fed easing cycle.

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Bond market behavior contradicts traditional inflation hedging, with longer-duration Treasuries rallying even as fiscal deficit concerns and tariff-related disruptions loom for the second half of 2025.

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Proflex Playbook – Ride the Final Wave, Prepare for Reversal

We're now entering a late-cycle bull market regime—where VIX compression signals diminishing fear, and "buy the rumor, sell the news" dynamics dominate price action.
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This is the time to capture remaining upside while preparing for regime shift & as always, we urge our community to:

✅ Stay hedged using structured options
✅ Use macro moves to rotate, not chase
✅ Allocate to core themes with long-term tailwinds: AI, gold, Bitcoin
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If you're in All-Access or Managed Portfolios, you've already seen how this playbook translated into capturing the technical breakout gains while building protective positions—maximizing the final bull phase while preparing for the inevitable risk-reward deterioration that follows peak optimism.

📣 Join the Macro WhatsApp Group for weekly calls, market insight, and real-time macro signals.

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Until next week,

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— The Proflex Team
​ Trusted Macro Insights. Calm Investing. Tactical Trades.

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