Proflex Market Update - Wk 29
​
Money Supply Rises | Hard Assets Rally, Equities on Pause

Markets are holding near all-time highs, yet the tone feels uncertain. The S&P 500 closed last week near 6,280—just below record levels—but sentiment cooled as investors braced for Q2 earnings. Valuations stay lofty at ~22x forward earnings (vs. a 10Yr Avg of ~18x), and the week ended on a lower note.

Adding to the unease, President Trump has agreed to supply additional weapons to Ukraine, reigniting fears of an escalation in the Russia–Ukraine conflict. With geopolitical tensions resurfacing alongside trade risks and stretched valuations, investors are finding fewer reasons to chase the rally at these levels.

In contrast, Bitcoin, gold, and silver have decisively broken out. These aren't isolated trades—they’re clear signals of a monetary regime shift, powered by rising M2 money supply, declining real yields, and a weakening dollar (DXY -5.9% YoY).

So what’s next? The market is bifurcated:

• Crypto and commodities are already pricing in monetary expansion.
• Equities are holding fire—waiting for earnings to justify the move.

​
Insights from the Proflex Macro Call

"Short-Term Drops Are Often Leverage, Not Macro."

One of the sharpest takeaways from this week’s Proflex macro discussion: most 20–25% market drops aren’t caused by fundamentals—but by leverage, crowded trades, and forced liquidations.

From hedge funds blowing up (like Yen carry trade unwind scenarios) to shock events like tariff escalations or sudden Deepseek downgrades on names like Nvidia—the market overreacts when too many positions are stacked on the same side.

The bond market remains the real signal to watch. If long-term yields rise consistently, that’s institutional money pulling away—not just fast money unwinding.

But as of now, M2 remains elevated and policy remains loose, suggesting the structural bull case stays intact—unless the core AI trend itself were to collapse (a low-probability tail risk).

You can watch the recording of the full weekly discussion here:

​

Key Drivers This Week

​

📈 Equities at Peak Valuations — But Earnings Now Take the Driver’s Seat

The S&P 500 and Dow Jones remain near all-time highs, yet both ended slightly lower last week—marking the first signs of fatigue. The broader market is now watching whether Q2 results validate the optimism.

This week kicks off the earnings calendar:

• July 15: JPMorgan (JPM), Citigroup (C), Wells Fargo (WFC)
• July 16: Bank of America (BAC)
• July 17: U.S. Bancorp (USB)

Consensus expects ~5% YoY earnings growth for Q2—down from 13.7% in Q1. For a market trading at a 22x forward multiple, that bar is high. If results disappoint or guidance weakens, even small misses could spark outsized reactions.

💵 M2 Re-Expansion is Repricing Everything—Except Equities (For Now)

The Fed may not be cutting yet, but markets are already easing through expectations:

• 2Y Treasury yield: Flat at 3.90%
• M2 Money Supply: Now at a record $21.94T
• Dollar Index (DXY): Down nearly 6% YoY

This is a classic early-liquidity signal—but playing out across late-cycle asset pricing. And while equities await confirmation, gold, silver, and Bitcoin are already leading the repricing.

Bitcoin: Conviction Trade Playing Out Above $120K

Bitcoin has entered blue sky territory, closing the week at $121,723, up 2.9% week-on-week and over 100% YoY.

We raised allocations to BTC during the Q1–Q2 consolidation phase, capitalizing on structural demand from ETFs and institutions. In Q1 alone, spot ETF flows and public buyers absorbed 57%+ of all BTC mined—tightening supply and setting the stage for breakout.

👉 Want to learn how to invest in BTC with hedged upside exposure and controlled risk?

Gold and Silver Ride the Monetary Repricing Wave
​​
Just like BTC, gold and silver are breaking out—not because of war or fear—but because of liquidity expansion and weakening fiat value.

When the M2 supply expands + dollar weakens, hard assets reprice first. We saw this in 2009, 2020, and now again in 2025.

The message?

🌍 Tariff Tensions Rise – Trump’s Trade Hammer Broadens

President Trump has announced a fresh wave of tariffs across 30+ economies, with many rates escalating sharply after July 7. The new deadline for implementation is August 1, 2025, replacing the earlier July 9 trigger.

​

🔶 What’s changed?

• Tariff scope has widened dramatically—from major trading partners like Japan and South Korea to emerging markets like Myanmar and Bangladesh
  ​
• Tariff rates now range from 20% to 50%, with countries like Brazil (50%), Thailand (49%), and Laos (48%) at the top end
  ​
• Many countries saw sudden increases post-July 7, suggesting an aggressive bargaining posture from the U.S.

🧠 Strategic Takeaway:

🧭 Proflex Playbook – Liquidity is Here, Earnings Are Next

We are clearly in a reflationary environment. M2 is rising. The dollar is falling. And non-equity assets are responding. But equities remain hesitant—for now.

So what do we do?

Our stance stays anchored in the data:
✅ Allocate to long-term tailwinds — Bitcoin, gold, and silver, they’ve broken out ahead of earnings risk
✅ Keep equity exposure tactical — use earnings as a trigger, not a trap
✅ Deploy hedged option strategies — protect gains, position for upside post-pullback

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.

​

Until next week,

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

​
​

​