Trump’s 38th Call for an "Imminent Deal" Triggers TACO-Style Surge in Global Stock Markets
- Core View: Trump's positive remarks regarding U.S.-Iran peace talks have spurred a rebound in global stock markets. However, the market widely views this rally as stemming from "headline-driven optimism." Amid an unclear war situation, deepening institutional bearishness, and capital absorption from the SpaceX IPO, investors should be wary of potential deep correction risks.
- Key Factors:
- Trump claimed that the U.S. and Iran are close to reaching a "phenomenal agreement," prompting positive pricing in financial markets. U.S. stocks and Japanese and South Korean markets saw significant rebounds, while oil prices fell 4.3% and gold prices rose 3.1%.
- The U.S. unadjusted CPI for May came in at 4.2% year-over-year, hitting a three-year high, but the core CPI monthly rate was below expectations. Market expectations for the Fed to maintain interest rates unchanged in June stand at 96.3%, significantly easing rate hike expectations.
- The Bank of Japan is expected to raise rates to 1.0% (the highest since 1995) by mid-June, which could tighten liquidity in Japan’s capital markets. Following a sharp sell-off in Japanese and South Korean stock markets, retail investors have started "borrowing to invest" to bottom-fish.
- Multiple institutions have issued bearish warnings: Barclays strategists believe the S&P 500 could face a 6%-7% correction; Bank of America notes that approximately 70% of bear market signals have been triggered with high valuation metrics; put option positions in the South Korean stock market are approaching historically warning levels.
- Retail subscription amounts for the SpaceX IPO have already surpassed $100 billion, with oversubscription nearing 4 times. Analysts believe this capital diversion effect is one reason for the recent weakness in U.S. stocks, as the market faces liquidity tests.
Original｜Odaily Planet Daily (@OdailyChina)
Author｜Wenser (@wenser2010 )
After the US military launched a surprise attack on Iran, Trump threatened to "take strong measures against Iran" and then canceled them again, Trump for the 38th time declared that a "final agreement is imminent", causing global financial markets, including the US stock market, to wake up as if from a dream and usher in another "TACO-style rally."
This morning, the three major US stock indexes closed higher collectively. The Dow rose 1.90%, the Nasdaq rose 3.42%, and the S&P 500 rose 1.73%. Crypto-related stocks also saw broad gains, with COIN rising 4.99% and HOOD rising 7.40% intraday. Japanese and South Korean stock markets opened higher. South Korea's KOSPI index opened up 519.25 points, or 6.69%, at 8283.2 points, triggering a circuit breaker at one point, with gains later expanding to 8%. Japan's Nikkei 225 index opened up 880.53 points, or 1.37%, at 65097.80 points. Possibly influenced by this news, oil prices fell sharply by 4.3%, while gold prices rebounded by 3.1%.
As the US-Israel-Iran conflict enters its fourth month, global financial markets, especially US stocks, are pricing in positive outcomes like the war's end, leading to a recent string of "news-driven rallies."
Macro Background: Trump's "Negotiation for Change," US CPI Hits a 3-Year High, Fed Rate Hike Expectations Fade
Overall, the macro background for today's stock market rally mainly includes a turning point for peace talks in the war situation, the release of the US CPI index, and fading expectations of Fed rate hikes.
Trump's Remarks Show "TACO Power" Again
According to the latest news from last night and this morning, Trump first canceled the originally planned strikes and bombing operations against Iran for that evening. Subsequently, he stated in a post that relevant consultations had been submitted to and approved by Iran's highest leadership. The final terms (both in overall concept and specific details) have been approved by all relevant parties, including the US, Israel, Saudi Arabia, the UAE, Qatar, Turkey, Pakistan, Bahrain, Kuwait, Jordan, and Egypt. Although Iran and Israel subsequently denied this, the market accepted it.
Furthermore, Trump stated regarding the Iran issue that "an excellent agreement has been reached" and claimed that the relevant documents are in their final drafting stage, expected to be finalized in the coming days and signed soon. He also indicated that the agreement might be signed in Europe, possibly this weekend, with US Vice President Vance attending. "Once Iran signs the agreement, the Strait of Hormuz will open." Although the negotiations with Iran have been "too lengthy," the financial markets have currently chosen to "trust first."
US Core CPI Annual Rate Hits a 3-Year High
This Wednesday, the US May CPI data was released, showing:
- Seasonally adjusted CPI MoM: 0.5%, expected 0.50%, prior 0.60%.
- US May Seasonally Adjusted Core CPI MoM: 0.2%, expected 0.30%, prior 0.40%.
- US May Unadjusted CPI YoY: 4.2%, expected 4.20%, prior 3.80%, a new high since April 2023.
- US May Unadjusted Core CPI YoY: 2.9%, expected 2.90%, prior 2.80%, a new high since September 2025.
Some analysts believe that US inflation has returned to the "4% handle," and the peak of war-related inflation may be in the past. The third consecutive month of significant CPI increases highlights the growing spending pressure on households, as there are signs more consumers are dipping into savings to cover expenses. After the data release, the probability of the Fed maintaining interest rates unchanged in June reached 96.3%, greatly alleviating previous expectations of a Fed rate hike. Trump responded to this data by loudly stating, "I love inflation."
Expectations of a Fed Rate Hike This Year Eased Significantly
Following the CPI data release, the latest news indicates that the market no longer fully prices in a Fed rate hike this year.
Seema Shah, Chief Global Strategist at Principal Asset Management, stated, "US inflation remains uncomfortably high at 4%, but the core data coming in weaker than expected does relieve some pressure. With rising energy prices being the main driver and some easing in housing costs, we haven't yet seen clear signs of broader second-round effects, which should allow the Fed to remain patient."
Analyst Afonso Borges from Bank Julius Baer also pointed out that the modest rally led by short-term Treasuries following Wednesday's CPI report is "logical," as the better-than-expected inflation data should reduce the risk of a Fed rate hike later this year.
Japanese and Korean Markets: Retail Investors Borrow to Buy the Dip, Yen Continues to Weaken
Turning to the Japanese and Korean stock markets, after the market declines of the previous two days, they are currently in a phase of significant rebound.
On June 10, according to a Yonhap News Agency report, the Korea Composite Stock Price Index (KOSPI) experienced a sharp two-day correction, influenced by bearish US stock news and a plunge in semiconductor stocks. During this period, overdraft account balances at major commercial banks increased by over 600 billion Korean Won (approximately 2.67 billion RMB). Analysts believe this was because retail investors, anticipating a market rebound after the stock price crash, began using overdraft accounts for "margin investing."
According to a Nikkei report, the Bank of Japan (BoJ) is expected to raise its short-term policy rate from 0.75% to 1.0% at its monetary policy meeting on June 15-16, which would be the highest policy rate level since 1995. Possibly influenced by this news, the US Dollar against the Japanese Yen (USD/JPY) rose 0.2% intraday, with the current exchange rate at 160.168.
Overall, capital flows into Japanese and Korean stock markets continue to grow steadily, but the BoJ's rate hike could gradually tighten liquidity in the Japanese capital market. Bank of America analyst Shusuke Yamada stated that if the BoJ takes a hawkish stance and raises rates at next week's meeting, it is expected to support the Yen. He noted that the market has already priced in the rate hike expectations.
Looking Ahead: Unclear War Situation, Institutional Warnings of Deep Corrections, Stock Markets Face a Major Liquidity Test
Although stock markets rose globally today due to Trump's capricious "positive news," a closer look at various dynamic factors shows that market sentiment remains in a phase of cautious optimism and anticipation of a deep correction.
No Turning Point in US-Iran Situation Yet
Ali Akbar Dareini from the Center for Strategic Studies in Tehran stated that despite Trump announcing the cancellation of strikes against Iran, the situation hasn't changed at all. From Iran's perspective, before any negotiations begin and before Iran is ready to discuss nuclear issues, the US first needs to take confidence-building measures, which hasn't happened. The reality shows that the US hasn't taken any steps to de-escalate tensions. Iran's position is that it will not compromise under coercion.
Institutional Bulls Turn Cautious, Warn of Deep Correction
Alex Altmann, Head of Global Equity Strategy at Barclays, who has previously called for "holding stocks" during market volatility and accurately timed rebounds, has recently issued a rare prudent warning. In his latest market analysis, he stated that driven by technical overbought conditions, overheated sentiment, and macro-environmental pressures, he has turned bearish on the short-term outlook for US stocks. He believes that US stocks are currently in the "middle of the mountain" of a structural correction, and the biggest underlying concern is the significant disconnect between retail sentiment and macroeconomic reality. He even bluntly stated, "The S&P 500 index could face a total deep correction of 6%-7%."
Recent data from the American Association of Individual Investors (AAII) sentiment survey shows that the bearish proportion among investors skyrocketed to 47.7% in the past week, approaching the year's high of 52% (March 18), and far exceeding the historical average of 31%.
Additionally, several institutions have recently expressed bearish views. Previously, BofA Securities stated that investors should remain cautious about US stocks, as increasing bear market signals suggest the market is nearing a top.
A team of strategists led by Savita Subramanian wrote in a report dated June 5 that currently about 70% of bear market signals have been triggered, consistent with the average level at historical market tops. The S&P 500 shows statistically significant overvaluation in 17 out of 20 valuation metrics, with 8 metrics exceeding levels seen during the tech bubble. Furthermore, high-P/E stocks have significantly outperformed low-P/E stocks, which strategists consider a sign of excessive speculation. Within the tech sector, the gap between the best and worst performing quintiles has widened to its highest level since February 2000.
Of course, this view was openly opposed by the "new stock god" Serenity, who believes that Bank of America's bearish rhetoric should be viewed cautiously, as a flood of negative news often appears because institutions need liquidity.
Regarding the South Korean stock market, on June 10, the open interest in put options on the Korea Kospi 200 index has recently surged relative to call options, now approaching levels that have historically preceded market declines. As of the close of the last trading day, the ratio of protective put options (used to hedge against downside) to speculative call options neared 2.5 times, the highest level in five years. This indicator has only hit this threshold a few times before. It's worth noting that South Korean retail investors sold over 1 trillion won in overseas stocks in the first week of June, which might indicate investors are returning to their domestic stock market.
SpaceX IPO Approaches, US Stock Market Faces a Liquidity Test
The latest news states that retail subscription demand for the SpaceX US IPO has exceeded $100 billion. Combined with earlier news that "SpaceX plans to raise $75 billion, with 30% of shares offered to individual investors," current retail subscriptions have already oversubscribed by more than 4 times.
US investment manager Jim Chanos stated that investors are pricing in grand narratives rather than realistic profit prospects, and SpaceX's valuation multiple has far exceeded that of Tesla (TSLA.O). Additionally, institutions like Franklin Templeton, and sovereign wealth funds from Saudi Arabia and Kuwait have joined the IPO subscription wave. According to foreign media reports, multiple institutional investors have each placed orders subscribing to around $10 billion or more worth of shares. Two days ago, the SpaceX IPO had already attracted over $250 billion in investment demand, higher than its planned $75 billion fundraising, with oversubscription nearing 4 times. Based on market trends, the oversubscription ratio could climb to 10 times by its official listing this Friday.
"Wall Street Oracle" and Bitmine Board Chairman Tom Lee commented that at this stage, US stock investors are actively selling their existing stock holdings to gather cash for participating in this blockbuster IPO. This capital diversion effect continues to ferment and could be the primary culprit for the recent weakness in US stocks. Christophe Boucher, Chief Investment Officer at ABN Amro Investment Solutions, also stated that participating in the SpaceX IPO is akin to buying cryptocurrencies about 15 years ago; you either risk losing your entire principal or potentially achieve exponential returns.
Although the SpaceX IPO has raised concerns about liquidity shortages in the market, according to market sources, S&P Dow Jones Indices believes SpaceX is eligible to be quickly included in certain indices. If so, SpaceX could become a "phenomenal giant" in the US stock market.
In summary, global stock markets will continue to face influences from factors like fund liquidity, domestic market policies, and global geopolitical changes such as the US-Israel-Iran conflict. In the short term, be wary of Trump's potential market manipulation tactics, swinging between "threatening bearishness" and "TACO-style bullishness."
