03.07.25 - “Extreme Greed” level

In a shortened trading session ahead of Independence Day, US equity markets surged to fresh record highs — marking the fastest recovery in history since the April lows, even surpassing the pace of the 1998 rebound. That year, incidentally, also marked the start of my first market experiences.

What Drove Markets Today:

1. Strong Labor Market Data:
Latest figures once again confirmed the resilience of the US job market:

• Unemployment rate: 4.1% (vs. 4.2% expected)

• Nonfarm payrolls: 147k (vs. 110k expected)

• Initial jobless claims: 233k (vs. 240k expected)

2. Political Momentum:
The much-discussed tax and spending proposal, dubbed the “Big Beautiful Bill”, featuring tax cuts, immigration funding, and the rollback of Biden-era green energy incentives, appears to be clearing its final legislative hurdles as the news just dropped in this moment that the house passed it.

3. Sentiment & Speculation:
Momentum and optimism dominate the current phase. The ongoing “TACO trade” (Trump Always Chickens Out) in combination with retail-driven flows overpowering cautious institutional positioning has pushed the CNN Fear & Greed Index back into “Extreme Greed” territory, a level briefly reached last October.

Source: CNN.com - 03.07.2025

Markets: US indices closed at all-time highs, while the US dollar and bond yields saw a modest bounce heading into the holiday.

My view: As I’ve outlined in previous blog posts and Market Insights, extreme sentiment levels can serve as powerful contrarian signals. When the market enters “Extreme Greed,” the probability of a pullback or consolidation increases. While speculative phases can stretch further than expected, these moments often mark a good time to consider taking some profits.

With the trade deal deadline just a few days away, investors may soon face a reality check: the underlying macro picture is not as flawless as current index levels suggest.

How I’m Aligning the Portfolio to Current Market Conditions
For positions that have performed well recently, I’ve set stop levels to protect gains in case the market turns, adjusting levels up on a regular basis.

At the same time, I’ve taken measures in recent weeks to benefit from a potential correction, increasing short positions and adding long exposure to volatility.

Stay tuned to ETFMandate. I’ll continue to keep you informed with sharp, timely updates on what truly matters for your investment decisions and your portfolio.

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