To The Moon

Record Highs, Then a Pause

After a week of record, breaking momentum, markets finally cooled off on Thursday. The $S&P 500(.SPX)$ fell 0.3%, the $NASDAQ(.IXIC)$ slipped 0.1%, and the Dow Jones Industrial Average dropped 0.5%. Both the S&P and Nasdaq hit all-time intraday highs before fading into the close.

Early optimism following upbeat results from PepsiCo and Delta Air Lines wasn’t enough to offset broader caution. Investor enthusiasm remains high, but so do concerns about frothy valuations and crowded trades in AI and meme-linked stocks $NVIDIA(NVDA)$ $Broadcom(AVGO)$ $Palantir Technologies Inc.(PLTR)$ .

Stocks

Bulls rising to 57.7% and Bears at their lowest since summer 2024, sentiment would now the current optimism a potential contrarian warning signal…

According to the AAII survey, nearly 46% of investors are bullish on stocks over the next six months, versus 36% bearish, a spread wide enough to raise eyebrows among sentiment-watchers.

Airlines Lift Off, Then Stall

Delta Air Lines kicked off earnings season on a high note, reporting Q3 adjusted EPS of $1.71 on $15.2 billion in revenue, both beating estimates. The carrier also tightened full-year guidance to around $6 per share, above Wall Street’s expectations.

Corporate and premium travel continue to drive growth, with corporate sales up 8% and premium revenue up 9%. Analysts called it a “very positive report across the board,” suggesting strength across the broader travel sector.

However, enthusiasm faded later in the session: the U.S. Global Jets ETF, initially up 3.5%, closed down 0.3% as American Airlines and United gave back early gains. Despite improving fundamentals, investors appear hesitant to sustain rallies in cyclical sectors amid broader market overextension.

Sentiment vs. Reality

Investor exuberance has now reached levels that typically precede consolidation. The market continues to climb a wall of worry, but with valuations stretched, contrarians are urging caution.

As Warren Buffett famously put it: “Be fearful when others are greedy.”

For now, there’s little in the data, or the shutdown-disrupted news cycle, to shake market confidence. Yet the growing gap between bullish sentiment and muted consumer confidence may soon demand reconciliation.

Looking Ahead

• Friday: University of Michigan Consumer Sentiment Survey (expected: 54.5 vs. 55.1 prior)

• Next Week: Major banks kick off Q3 earnings season; markets will shift focus from sentiment to fundamentals.

The Bottom Line

Markets are catching their breath after a record-setting run, but optimism remains high. While history suggests buying at highs isn’t inherently unwise, elevated sentiment and narrow leadership warrant discipline. As one strategist put it, “the best strategy for passive investors is not to overthink things”, but the best for active ones may be to stay alert…

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This summary is for informational purposes only and does not constitute financial advice. Investors should conduct their own research before making investment decisions.