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This Week on Wall Street
Week of June 29, 2026
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Market Commentary
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Last week the market's leadership flipped. The technology and AI names driving the recent rally pulled back hard, while money rotated into defensives such as health care and consumer staples. The other live thread is the war with Iran, where the fragile ceasefire frayed again over the weekend. The U.S. struck Iranian military sites and Iran fired drones and missiles at American facilities in Bahrain and Kuwait, with each side accusing the other of breaking the deal. Crude had fallen back to its lowest since the war began as shipping through the Strait of Hormuz resumed, but it edged up this morning. Talks are set to resume in Doha on Tuesday, but the weekend was a reminder that the two remain far apart, and that the cheaper energy underpinning the mood can reverse quickly.
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The week ahead is built around the labor market, with a run of jobs data squeezed into four days before markets close Friday for the holiday. Job openings (JOLTS) arrive Tuesday and the ADP estimate of private hiring lands Wednesday, setting the tone for Thursday's June employment report, which is being released a day early. The payrolls figure counts how many jobs employers added during the month, and it remains the cleanest single read on whether hiring is holding up. Consensus looks for a clear step down from May's 172,000, with forecasts clustered near 100,000 to 130,000 and the unemployment rate holding around 4.3%. What the headline can miss is the kind of labor market behind it: one that has settled into a low-fire, low-hire pattern, where layoffs stay contained but employers are slow to add. With unease about AI and a tougher competitive landscape building, many workers are choosing to stay put rather than test the market, so conditions can feel stickier than a steady payroll number suggests. That backdrop shapes the rate outlook too. With inflation still at a multiyear high, markets have moved to expect hikes this year rather than cuts, which leaves even a softer print unlikely to shift the Fed's course.
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Beneath last week's wobble sits a question that gets harder to answer at record highs: how expensive is the market? No single number settles it, so investors tend to triangulate across several lenses. Forward price-to-earnings compares price to expected profits. The cyclically adjusted CAPE smooths earnings over a decade to strip out the business cycle. Price-to-book weighs price against the value of company assets. Each can mislead on its own, so the useful signal comes when they agree, and right now most of them do, sitting near the top of their historical ranges. That backdrop is part of why last week's tech pullback felt sharper than the news alone suggested. When valuations are stretched, there is less cushion, and a jolt to the AI story that has powered this rally can set off the kind of fast rotation we just saw. Rich valuations are a poor timing tool, and they say more about the returns investors might expect over the next several years than about next week's direction. Still, when this many gauges line up at once, it is a backdrop worth keeping in view.
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Chart of the Week
Valuations Are Stretched on Nearly Every Measure
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Each box shows the typical range for a valuation gauge over the past century, with the diamond marking where it stands today. On almost every measure, from trailing and trend P/E to price-to-book and the inverse of the dividend yield, the latest reading sits near or above two standard deviations above its long-run average. Implied earnings growth is the one gauge still near its historical middle, around one standard deviation.
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| Source: The Daily Shot |
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On the Calendar
Economic Releases This Week
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Monday None
Tuesday JOLTS Job Openings, Consumer Confidence
Wednesday ADP Employment, ISM Manufacturing PMI
Thursday Jobs Report (Nonfarm Payrolls, Unemployment Rate)
Initial Jobless Claims
Friday None (markets closed for the Independence Day holiday)
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Worth Reading
Stories to Start the Week
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| What is Newton? |
▼ 0–8
▬ 9–13
▲ 14–20
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Our Newton model determines the highest probability of future price direction using advanced algorithmic and high-order mathematical techniques on the current market environment. It scores securities over multiple time periods on a 0–20 scale (0 worst, 20 best). Trend and level both matter. A name moving from 18 to 16 still signals a strong level, with slight exhaustion in the trend.
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| Equities |
TREND |
THIS WK |
LAST WK |
| Small Cap | ▲ | 18 | 13 |
| Mid Cap | ▬ | 12 | 13 |
| Emerging Markets | ▬ | 9 | 15 |
| Large Cap | ▼ | 7 | 12 |
| Foreign Developed | ▼ | 5 | 7 |
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| Fixed Income |
TREND |
THIS WK |
LAST WK |
| Floating Rate Bond | ▲ | 16 | 14 |
| Short Term Bond | ▬ | 12 | 9 |
| Corporate Bond | ▬ | 11 | 9 |
| Intermediate Term Bond | ▬ | 11 | 9 |
| Long-Term Bond | ▬ | 11 | 7 |
| High Yield Bond | ▼ | 8 | 8 |
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| Sectors |
TREND |
THIS WK |
LAST WK |
| Industrials | ▬ | 12 | 13 |
| Utilities | ▬ | 12 | 9 |
| Technology | ▬ | 10 | 15 |
| Energy | ▬ | 10 | 10 |
| Consumer Cyclical | ▼ | 8 | 9 |
| Real Estate | ▼ | 8 | 8 |
| Health Care | ▼ | 8 | 6 |
| Financials | ▼ | 7 | 12 |
| Materials | ▼ | 6 | 8 |
| Consumer Defensive | ▼ | 5 | 9 |
| Communications | ▼ | 3 | 9 |
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| Market Segments |
TREND |
THIS WK |
LAST WK |
| Small Growth | ▲ | 16 | 14 |
| Mid-Cap Value | ▬ | 13 | 12 |
| Small Value | ▬ | 12 | 10 |
| Large Growth | ▬ | 10 | 13 |
| Mid-Cap Growth | ▬ | 10 | 11 |
| Large Value | ▼ | 8 | 9 |
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Notable Newton Moves This Week: The rotation out of large-cap technology shows up clearly. Technology fell out of the leaders (15 to 10), Communications dropped sharply (9 to 3), and Large Cap slid into the red (12 to 7), while Small Cap jumped to the top of the equity group (13 to 18). Financials and Emerging Markets also cooled hard (12 to 7 and 15 to 9). On the steadier side, the bond complex firmed as yields fell, led by Long-Term Bond (7 to 11), with Floating Rate Bond holding the only green read in fixed income.
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Technical trading models are mathematically driven based upon historical data and trends of domestic and foreign market trading activity, including various industry and sector trading statistics within such markets. Technical trading models, through mathematical algorithms, attempt to identify when markets are likely to increase or decrease and identify appropriate entry and exit points. The primary risk of technical trading models is that historical trends and past performance cannot predict future trends and there is no assurance that the mathematical algorithms employed are designed properly, updated with new data, and can accurately predict future market, industry and sector performance.
Disclosure: Investing involves risk, including the possible loss of principal and fluctuation of value. Past performance is no guarantee of future results. This newsletter is not intended to be relied upon as forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of the date noted and may change as subsequent conditions vary. The information and opinions contained in this letter are derived from proprietary and nonproprietary sources deemed by Waterloo Capital to be reliable. The letter may contain "forward-looking" information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecast made will materialize. Reliance upon information in this letter is at sole discretion of the reader. Please consult with a Waterloo Capital financial advisor to ensure that any contemplated transaction in any securities or investment strategy mentioned in this newsletter aligns with your overall investment goals, objectives and tolerance for risk. Additional information about Waterloo Capital is available in its current disclosure documents, Form ADV, Form ADV Part 2A Brochure, and Client Relationship Summary report which are accessible online via the SEC's Investment Adviser Public Disclosure (IAPD) database at www.adviserinfo.sec.gov, using SEC # 133705. Waterloo Capital is neither an attorney nor an accountant, and no portion of this content should be interpreted as legal, accounting or tax advice.
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