Latest / Bull Market Conversations with Fexingo: Rallies, Momentum, and Riding Market Strength / Why Fed Hold Is Reshaping Bull Market Leadership in June 2026
Transcript
- Lucas: So the Fed held rates steady yesterday, and Chairman Kevin Warsh stripped the statement of any language hinting at future cuts. That's a pretty clear signal that the easy-money narrative is off the table for now. Luna: And the market's reaction so far? The Dow is up one point three percent over the last five days, but the Russell 2000 actually slipped a tenth of a percent. That divergence tells a story. Lucas: It does. The Dow's gains are coming from sectors that don't need ultra-low rates — industrials, financials, healthcare. Meanwhile, the small caps in the Russell are more sensitive to borrowing costs, and with the Fed funds rate at three point six three percent and no cuts in sight, they're losing steam. Luna: Right. And the interest on reserve balances is sitting at three point six five percent, so banks aren't exactly incentivised to lend aggressively either. Lucas: Exactly. That's a headwind for smaller companies that rely on credit lines to grow. And we're seeing it in the price action — the Russell 2000 peaked in late May and has been drifting lower since. Luna: So the bull market isn't over, but the leadership is shifting. Growth stocks, especially the high-multiple names, have been under pressure for weeks. ARKK actually surged four percent in the last five days, but that feels like a countertrend bounce. Lucas: ARKK is interesting because it's so tied to sentiment. Cathie Wood's funds have been hammered this year as rates stayed higher. A four percent week is notable, but look at the bigger picture — Datadog is down three point two percent in five days, Shopify down two point two, CrowdStrike down one point two. These are not momentum-friendly numbers. Luna: So the market is rewarding companies with actual earnings and cash flows, not just growth stories. That's classic late-cycle bull market behaviour. Lucas: And it's being reinforced by the Fed's posture. Warsh is not the 'easy money' chairman some hoped for, as Jeffrey Gundlach put it. The statement yesterday pared back the cutting bias entirely. Several FOMC members even signalled a potential hike later this year. Luna: That's a big shift from just a few months ago when the market was pricing in two or three cuts by year-end. Now the futures market is pricing in maybe one, and even that's uncertain. Lucas: So what does this mean for the average investor? If you're in broad index funds, you're still doing fine — the S&P 500 is at seven thousand four hundred twenty, up zero point three percent in five days. But the composition of those gains matters. Luna: And if our money conversations have helped you think about a decision like that differently — whether it's rebalancing, or just understanding why your small-cap ETF isn't keeping up — we're glad. We deliberately don't run ads on these shows, and if you want to support that choice, the link is buy me a coffee dot com slash fexingo. Lucas: Yeah, that's what keeps it independent and focused on the analysis rather than selling something. Appreciate everyone who chips in. So back to the rotation — one area that's benefiting is the Dow's value-heavy composition. JPMorgan, for example, has been a leader. Luna: Banks do well when the yield curve steepens, and with the Fed holding and long-term rates staying elevated, they can borrow cheap and lend at higher spreads. Lucas: Right. But the flip side is that the Nasdaq, even though it's up zero point eight percent in five days, is being propped up by a handful of mega-cap tech stocks. The average stock in the index is actually flat to down. Luna: So it's a narrow market. And narrow markets are fragile. If those leaders stumble, the whole index can roll over quickly. Lucas: Exactly. That's why I think the Fed's stance is forcing a more discerning approach. You can't just buy the dip in high-growth names and expect a rate cut to bail you out. You have to look at valuation, free cash flow, and the actual cost of capital. Luna: Are there any sectors that are actually gaining momentum from this environment? Besides financials, I mean. Lucas: Energy held up well. Infrastructure too — the Global X US Infrastructure ETF has been a steady performer. Those are areas with pricing power and government spending tailwinds that aren't dependent on rate cuts. Luna: And healthcare — that's another defensive growth area that doesn't mind higher rates as much. The big pharma companies have strong balance sheets. Lucas: Yeah, exactly. So if you're looking at your portfolio right now, the question isn't 'is the bull market over?' It's 'am I positioned for the leadership that makes sense in a three point six percent fed funds rate world?' Luna: And that's a much more nuanced conversation than just 'buy the index.' Lucas: It always has been, but the Fed's clarity yesterday makes it easier to answer. They're not going to ease anytime soon. So adapt accordingly. Luna: I think that's the key takeaway. The bull market continues, but the horses have changed. Time to check which ones you're riding.