Bankruptcies are climbing, options positioning is stretched, and leadership is rotating. Here’s a pragmatic game‑plan for the weeks ahead.
US corporate distress is accelerating: 446 filings year‑to‑date puts 2025 on a trajectory to eclipse 2020 on a like‑for‑like basis and potentially be one of the worst years since 2010. The pressure is most evident in industrials and consumer discretionary—two areas tightly linked to jobs and the health of the US consumer.
At the index level the uptrend remains intact, but breadth and positioning signal fragility. A call‑heavy options market, weakening software and semiconductors, and a firming US dollar all argue for tactically tighter risk management into Jackson Hole and early September’s payrolls.
- Bankruptcies: YTD pace ahead of 2020; potential worst since 2010.
- Profitless small caps: the share of Russell 2000 constituents with negative earnings is elevated (c.45%+ historically).
- Consumer stress: discretionary vs staples ratio has softened but not broken; effective tariff exposure near 17% with an estimated ~67% pass‑through to consumers likely to bite from October.
- Youth unemployment: rising unusually early in the cycle.
- Options positioning: record call activity; retail concentrated in popular tech names.
- Seasonality: choppy “kangaroo” market dynamics into Sep/Oct are consistent with prior post‑election, year‑three bull market patterns.
Leadership is rotating. Recent relative strength has favoured value and selected healthcare over mega‑cap tech after an extended run where the top cohort drove the bulk of index gains. Equal‑weight measures are holding up better than cap‑weight tech, and software (IGV) is showing a developing head‑and‑shoulders pattern—an early warning for momentum fatigue.
Historical context matters. Over the past 21 instances where the Nasdaq 100 fell six consecutive sessions but only ~3% in total, the index, on average, slipped a further ~1.7% over the subsequent weeks and took roughly 80 days to reclaim that initial 3%—a template for range‑bound chop rather than collapse.
Key equity levels to monitor: on the S&P 500, dealers’ positioning suggests negative gamma increases below ~6,375, with the largest put concentrations near ~6,290. A sustained break could open ~6,200 and, if momentum builds, the round‑number area near ~6,000—still consistent with a “healthy” pullback within a primary uptrend. In single names, Tesla’s notable put wall sits near ~320, while Nvidia continues to wrestle with supply in the ~170–185 zone (post‑split).
The US dollar, the market’s largest hedge, is carving an inverse head‑and‑shoulders base with scope towards ~101.6 on DXY. Despite a firmer dollar, gold remains coiled in a large pennant, reflecting a subtle drift from risk‑on to more defensive postures; silver’s macro pathfinder target in the low‑40s remains viable if the coil resolves higher.
Crypto fits the “bear‑trap” playbook common to halving cycles. Bitcoin is pressing a major area near ~112k; a textbook 20–30% reset would imply a probe below 100k before trend resumption. Ethereum remains relatively resilient but awaits stronger demand signals.
What could change the tone? Powell’s Jackson Hole speech (Friday 10:00 ET) and the early‑September non‑farm payrolls. Markets are primed for rate‑cut guidance, but a renewed focus on producer‑price “re‑inflation” risks would challenge that assumption and could trigger de‑risking. Conversely, a benign growth‑inflation mix would support the late‑year seasonality tailwind.
For Australian investors, the global signals above chiefly matter through risk sentiment, USD strength (AUD headwind), and sector leadership. Locally, watch defensives, miners’ sensitivity to China’s liquidity impulse, and healthcare’s improving relative trend as rotation broadens.
Putting it into practice
- Trim concentration risk: reduce outsized single‑name tech exposure; favour baskets (equal‑weight indices, value, or healthcare) while momentum resets.
- Define downside: consider staged hedges while the S&P 500 sits near key gamma pivots (~6,375/6,290). Protective puts or collars can be cost‑effective into event risk.
- Respect seasonality: plan for choppy ranges into Sep/Oct; scale entries and exits rather than “all‑at‑once” decisions.
- Monitor rotations: track equal‑weight vs cap‑weight, software (IGV) for confirmation of a topping formation, and semiconductors at major support.
- Currency lens: a stronger USD typically weighs on AUD and commodities ex‑gold. Hedge international equity exposure where appropriate; be selective with resource names.
- Gold and silver: await a decisive break from gold’s pennant before adding; maintain position sizing discipline. Silver targets require trend confirmation.
- Crypto risk budgeting: if Bitcoin loses ~112k, plan for the possibility of a 15–25% extension lower; use staggered levels for adds, not leverage.
- Data watchlist: Jackson Hole (policy tone), ISM, and NFP. Reassess positioning post‑data rather than pre‑empting.
Bottom line: the primary uptrend is still alive, but evidence of slowing momentum, crowded calls, and a firmer dollar argues for tighter risk controls and a balanced barbell—quality/value and selective growth—into a catalyst‑heavy fortnight.