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The most important charts and themes in markets and investing…
1) The Biggest IPO in History
SpaceX officially became the largest IPO in history, raising a total of $85.7 billion. That’s $60 billion more than the 2nd largest IPO, Saudi Aramco ($25.6 billion raised in 2019).
At an IPO price of $135 per share, SpaceX is valued at $1.75 trillion.
It opened for trading last Friday at $150 a share and this morning traded as high as $225.
This pushed its market capitalization to almost $3 trillion, surpassing Amazon and Microsoft to become the 4th largest company in the world.
Over the last 12 months:
-Amazon generated net income of $91 billion on sales of $743 billion.
-Microsoft generated net income of $125 billion on sales of $318 billion.
-SpaceX generated a net loss of $9 billion on sales of $19 billion.
SpaceX is undoubtedly a great company and will continue to do great things. But a few months from now we will probably look back on this moment as the peak of mania. Investors are pricing SpaceX stock as if its extraordinary future has already happened. Trading at over 150x sales, there is no margin for error in a world where things can always go wrong.
2) When Will SpaceX Be Included in a Major ETF?
The S&P Dow Jones Committee chose not to change its index inclusion rules to accelerate SpaceX ($SPCX) into the S&P 500. That means SpaceX would have to trade for 12 months, post 4 consecutive quarters of positive GAAP earnings, and meet strict float requirements before being eligible for inclusion.
So the three big ETFs that track the S&P 500 ($VOO, $IVV, and $SPY) won’t have SpaceX as a holding for at least 12 months.
But many other major index ETFs would hold SpaceX sooner:
-Total Stock Market ETFs ($VTI, $ITOT, $VT): 5 trading days.
-Growth ETF ($VUG, $IWF): 5 trading days.
-MSCI ETF ($ACWI): 10 trading days.
-Nasdaq 100 ETF ($QQQ): 15 trading days.
None of the major ETFs would hold SpaceX at its market cap weight, which would be close to 4% of the total US market given its $3 trillion market cap. Instead, they will make a free-float adjustment (less than 5% of the company’s shares are released). That means the index will reduce SpaceX’s weighting by up to 0.2% for total US market index funds and up to 0.6% for the Nasdaq 100 Index (they can multiply the free float weighting by up to 3x).
3) 1999-2000: The Only Remaining Comp
Here are the only times in history where the Semiconductor Index rose more than 230% in a 14 month span:
-December 1998 – February 2000
-April 2025 – Today
That’s the whole list.
Micron now trades at over 21x Sales, more than double its peak valuation during the dot-com bubble (10x).
In 2000, Micron was trading at a low multiple as its earnings neared the cycle’s peak.
Then DRAM prices plummeted, earnings evaporated, and shares lost more than 98%.
Currently, Micron once again looks cheap compared to expected earnings.
The key question: is the income cyclical or structural?
4) Technological Dominance Reaches New Levels
The Technology Sector ETF’s recent 28% performance against the S&P 500 in just 9 weeks is the best performance in the last 9 weeks, surpassing the parabolic move higher in late 1999 and early 2000.
This has pushed the Technology sector’s weighting in the S&P 500 to nearly 40%, a record high. In March 2000, the weight peaked at 35%.
5) The Turnaround Continues
Given the dominance of the US technology sector this year, it is remarkable that we have seen a reversal of all major equity market factors, with Value stocks outperforming Growth stocks, Small/Mid Cap stocks outperforming Large Caps, and Emerging/International stocks outperforming the S&P 500.
Perhaps even more remarkable is the fact that the Magnificent 7 ETF ($MAGS) is actually down this year and since the start of 2025, 5 of the 7 members of the Magnificent 7 have underperformed the S&P 500. Only Google and Nvidia have outperformed.
6) Rising Inflation and Decreasing Welfare
US CPI rose to 4.2% in May, the highest inflation rate since April 2023.
Over the last 5 years, Consumer Prices have increased by 4.5% per year and in total increased by more than 24%.
The following is a breakdown of the cumulative price increases over the last 5 years…
For the first time since 2023, we see prices in the US rising faster than wages, resulting in a decline in well-being for American workers.
7) What the Fed Will Do vs. What the Fed Should Do
The first FOMC meeting under new Fed chairman Kevin Warsh will be held tomorrow.
What will they do?
Keep interest rates at 3.50-3.75%.
What should they do?
Raise interest rates.
Why?
Inflation has averaged more than 4% per year since the start of 2020, more than double the Fed’s target of 2%.
Australia, Norway, Denmark, the ECB, and the Bank of Japan have started raising interest rates to attack higher prices.
With the inflation rate now 0.6% above the Fed Funds Rate, the Fed must also do the same. They are once again behind the curve.
8) Some Interesting Statistics…
a) Adobe is now down more than 70% from its peak, the largest share decline since 2002.
b) In May, the US Federal Government received $336 billion and spent $628 billion. Don’t try it at home.
c) US Public Debt Interest Expenses reached $1.3 trillion over the past 12 months, which is another record high. If it continues to increase at its current rate, it will soon become the largest item in the Federal budget, surpassing Social Security.
d) Spending on data centers and other AI infrastructure by Google, Amazon, Microsoft and Meta is expected to reach $670 billion this year. At 2.1% of GDP, it represents a higher share of the economy than the investment in America’s railroad expansion in the 1850s.
e) Apple is now trading at over 10x sales, the highest valuation level in the company’s history.
f) Dividend Yield on the S&P 500 ETF ($SPY) has moved below 1% and is quickly approaching its all-time low yield of 0.94% in 2000.
And that’s all for this week. Thanks for reading!
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Disclaimer: All information provided is for educational purposes only and does not constitute investment, legal or tax advice, or an offer to buy or sell any security. Read our full disclosure here.
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