Why I'm Still a Buyer at All-Time Highs — Three Macro Drivers Justify the Top

TL;DR The market is at all-time highs, but easing 2-year yields, a PPI surprise, and strong jobs data are making the macro backdrop better, not worse. If short-term sentiment heat triggers a pullback, I'm positioned to scale into Russell 2000 at its 38.2% retracement and Nasdaq on a retest of prior highs. No all-in, no chasing.

The S&P 500 closed up five consecutive sessions. Backtest data says five-session up streaks tend to produce below-average one-month forward returns. And yet I'm still a buyer.

That sounds strange. Buying at all-time highs? It contradicts common advice. But the macro indicators I'm tracking right now justify this high. Short-term overheating exists, but I don't see the structural conditions for a deeper breakdown.

Let me unpack why.

The 2-Year Yield Is Finally Easing

The 2-year Treasury yield is the cleanest read on how the market expects the Fed to behave. It's more sensitive than the 10-year to policy expectations, and it tells you where the Fed is going before the Fed itself moves.

Last week, the 2-year meaningfully declined. This isn't a one-day blip — there's the start of downward momentum. The market is beginning to price back in the possibility of one to two Fed cuts by year-end.

Rate cut expectations are the single most direct tailwind for equities. Lower discount rates lift the present value of future cash flows, especially for growth stocks. This is part of why the Nasdaq and semiconductors moved first.

PPI and Jobs Data Are Both Surprising in the Right Direction

PPI (the producer price index) came in lower than expected. That's an upstream inflation signal — it's the pressure in the system before it reaches consumers. A cooling PPI means less cost pressure that firms can pass through.

At the same time, jobs data is strong. Nonfarm payrolls beat. Unemployment, jobless claims, and ADP were all constructive. A few months ago the big worry was a cooling labor market. That worry has faded.

This combination is the key. Strong labor + cooling inflation = disinflation without recession. It's the Fed's dream scenario.

Oil and the Dollar Both Have Limited Downside

Geopolitical risk hasn't gone away. The Strait of Hormuz is reportedly closed again. Iran disputes the US administration's framing of the negotiations. In this environment, oil isn't going to fall dramatically.

But conditions for oil to surge further from here are also limited. Oil was already basing out near the lower end of its range before the war. There's no obvious short-term demand catalyst to create a reversal.

The dollar story looks similar. Cooling inflation is a dollar-negative factor, but strong employment and growth are dollar-positive. The two forces roughly offset, and the Dollar Index (DXY) will likely stay within the range it has defined over the past year.

Both oil and the dollar give off a neutral signal — "neither major downside nor major upside." For equities, that's a constructive backdrop.

So What Am I Targeting — Russell 2000 and Nasdaq

The Russell 2000 (IWM) was one of my best trades of the first half. I took the position at the January open, trailed out via stop, and haven't touched it since. I've been watching.

Russell likes two things: rate cuts and a holding-up economy. Both are being assembled right now. Small caps have higher debt sensitivity and heavier domestic exposure than large caps, so they react most to rate moves and US growth.

If a pullback brings Russell 2000 to its 38.2% Fibonacci retracement, that's my scale-in zone. IWM for equity traders, or RTY futures for those who prefer that route.

Nasdaq I'd consider on a retest of its prior all-time high, with a small stab. Either way, no chasing. The pullback has to come to me.

What Could Break This Picture

For honesty, let me look at the other side.

First, if oil surges further from here, inflation expectations re-ignite and the 2-year yield reverses higher. That scenario is negative for equities.

Second, software stocks keep breaking down. The IGV ETF is significantly off its highs while semiconductors ran +29%, leading the market. The core worry is that AI is structurally eroding legacy software business models. If that spreads, it hits financials (XLF), which have loans to many of these companies.

Third — and most relevant right now — is sentiment overheating. AAII and put/call are both leaning bullish in the short term. When everyone's on the same side of the boat, the boat flips.

My position is "mildly bullish + patient." The macro is supportive enough that I'm not fully on the sidelines, but it doesn't justify chasing. Wait for a pullback, scale in gradually. Right now that's the best risk/reward approach I can see.