Latest / Bull Market Conversations with Fexingo: Rallies, Momentum, and Riding Market Strength / How Bull Markets Are Fueling the Cybersecurity Arms Race in July 2026
Transcript
- Lucas: CrowdStrike is up eight point six percent in the last five days. The Nasdaq just closed above 26,000 for the first time in its history. Those two numbers are related, but maybe not in the way most people assume. Luna: I was looking at that same chart. A lot of people would just say 'bull market lifting all boats' but CrowdStrike is lifting a lot faster than the rest. Lucas: Right. The S&P 500 is up about 0.8 percent over the same stretch. CrowdStrike is running ten times that pace. And it's not alone. Cloudflare is up four percent. Datadog is up two and a half percent. There's a pattern here. Luna: So what's the trigger? Because CrowdStrike didn't report earnings this week. No major product launch that I saw. Lucas: No, the trigger is actually macro. On Monday, Fed Chairman Kevin Warsh testified to the House Financial Services Committee. He used the phrase 'regime change' to describe the Fed's new approach to inflation. Markets interpreted that as a signal that rates are staying flat through the fall, and that the soft landing narrative is intact. Luna: And in a soft landing, you want growth that's resilient but not speculative. Cybersecurity fits that profile perfectly. Lucas: Exactly. The Fed funds rate is at 3.63 percent — effectively flat since June. The ten-year Treasury is hovering around 4.1 percent. That's an environment where bond yields aren't stealing flows from equities, but you also can't just buy any growth stock and expect it to work. There's a premium on growth that's both visible and durable. Luna: And cybersecurity has that visibility. Every company, every government agency, every school district — they all have to spend on it. It's not discretionary anymore. Lucas: There's a specific data point that I think explains the move better than any macro theory. On May 21st, a ransomware attack hit a major US healthcare network — I won't name it because the situation is still developing — but the estimated cost to that single organization is already above $100 million. That breach became a case study for corporate boards everywhere. Luna: I remember that. It was the kind of event that makes every CISO's job easier when they go to request budget. 'See this? It could be us.' Lucas: Exactly. And that's the structural force. The breach re-priced the perceived probability of a cyber event for every large organization. Insurers raised premiums. Regulators tightened disclosure requirements. And the result is that demand for endpoint detection, for identity protection, for cloud security — it's accelerating. Luna: So CrowdStrike's eight percent move is basically the market repricing the entire sector's revenue visibility higher. It's not about this quarter's earnings. It's about the next three years. Lucas: That's the argument. And if you look at CrowdStrike's subscription backlog, or what they call remaining performance obligations, those numbers have been compounding at over fifty percent year-over-year. The market is finally starting to pay up for that compounding. Luna: I want to push back on that a little, because I remember the same arguments about CrowdStrike at $300 a share a few years ago. And then it dropped to $120. So what's different this time? Lucas: The macro setup is different. Back in 2022, rates were rising fast. Growth stocks with high multiples got crushed because the discount rate went up. Today, we're in a stable rate environment. The Fed is committed to holding. And the business itself is more mature — CrowdStrike is now generating meaningful free cash flow. It's not a story stock anymore. Luna: So the valuation argument shifts from 'this is priced for perfection' to 'this is priced for durable compounding.' And that's a much easier story to sell to institutional allocators. Lucas: Right. And that shift is visible in the flows. The iShares S&P 500 Growth ETF, ticker i w f, is up 1.2 percent in the last five days. The Vanguard Growth ETF, V-U-G, up 1.1 percent. But those are broad. The pure cybersecurity ETFs are up more. The market is making a specific bet, not just a general one. Luna: It's interesting because we've talked on this show before about how bull markets create their own momentum traps — where money flows into a sector just because it's going up. But here, the flows seem to be following a real fundamental shift. Lucas: That's the distinction between a cyclical bull market and a structural one. Cyclical rallies are about economic recovery. Structural rallies are about permanent changes in spending patterns. Cybersecurity is structural. The threat landscape isn't going to shrink. If anything, it grows with every connected device. Luna: And that might be worth pausing on, because this is actually why we can have conversations like this without any ad breaks or sponsored segments. The model is simple: if you find that our take on market structure helps you think about your own portfolio differently, you can support the show at buy me a coffee dot com slash fexingo. It's a small gesture that keeps these episodes free and independent. Lucas: And we mean independent. No one is whispering in our ear about which stocks to hype. That matters especially when we're talking about a sector like cybersecurity, where some companies have very aggressive sales compensation structures that can distort the numbers. Luna: Exactly. So back to the structural argument — I want to look at what happens next. CrowdStrike reports earnings in late August. If they beat and raise, does the stock gap up another ten percent? Lucas: I think it depends on the magnitude of the raise. The bar is high. Analysts have been increasing estimates steadily. But the real catalyst might not be the earnings number itself — it might be the outlook for fiscal 2028. If management signals that the subscription backlog acceleration is sustainable, the stock could re-rate again. Luna: And what about valuation? CrowdStrike trades at about 22 times next year's sales. That's not cheap by any standard. Lucas: It's not, but in a world where the ten-year Treasury is at 4.1 percent, a company growing revenue at 30 percent with expanding margins and a net retention rate above 120 percent — that's a premium a lot of investors are willing to pay. The question is whether the growth can justify the multiple over a three- to five-year horizon. Luna: And the answer depends on whether the structural demand I mentioned is real or just a narrative. One data point I'm watching: the number of cybersecurity job postings is up 40 percent year-over-year. That's a real-time signal that companies are staffing up, not just budgeting. Lucas: That's a great point. Hiring is a lagging indicator of commitment. If you're hiring security engineers at that pace, you're not planning to cut the budget next quarter. And that creates a floor under revenue growth for the entire sector. Luna: So CrowdStrike might be the most visible name, but is it the best? Or are there smaller companies in the space that could see even bigger moves if the structural thesis plays out? Lucas: That's the micro-cap angle we touched on a few episodes ago. There are companies in the identity security and cloud security sub-sectors that are growing faster than CrowdStrike from a smaller base. But they come with more execution risk — less free cash flow, shorter track records. For a portfolio, the question is whether you want the safety of the leader or the optionality of the challenger. Luna: And that's a question every allocator is asking right now. The bull market has been so concentrated in mega-cap tech that a lot of mid-cap and small-cap growth stocks are still trading at reasonable multiples. You can buy a cybersecurity company growing 25 percent at 8 times sales. That's a different risk profile. Lucas: It is. And the dispersion in valuations between the top and the bottom of the sector is actually wider than it's been in two years. That suggests the market is pricing in a winner take most dynamic. If you believe the structural thesis, you might want to spread your bets across a few names rather than pick one. Luna: We should note that the broader market is also giving us a tailwind. The small-cap index, the Russell 2000, is up 0.4 percent in the last five days. It's not surging, but it's holding. And if rates stay flat, there's a case that money rotates out of the mega-caps into smaller growth names. Lucas: That rotation would be a huge catalyst for cybersecurity mid-caps. Because right now, institutional investors are still overweight the S&P 500. The moment they start diversifying, the flows into ETFs and active funds that focus on mid-cap growth could be significant. Luna: Let's zoom out for a second. We're sitting here on July 14, 2026, with the Nasdaq at 26,123. The bull market is entering its fourth year. And we're seeing a sector that's being driven by both macro stability and micro necessity. That's a rare combination. Lucas: It is. And I think that's why the eight percent move in CrowdStrike isn't just a flash in the pan. It's the market saying: 'We see the structural shift. We're pricing it in. And we're going to keep pricing it in as long as the data supports it.' Luna: The next test will be earnings season. If other cybersecurity companies report similar momentum, the thesis gets stronger. If they stumble, the rally could stall. Lucas: Agreed. But for now, the data is on the side of the bulls. And that's always a good place to start.