The market’s teflon march: When momentum becomes religion

There are rallies built on hope, and there are rallies built on hard cash — this one’s both. The S&P 500 and Nasdaq didn’t just notch new records; they strutted through them like generals returning from a long campaign, medals gleaming, boots still dusty from battle. The AI troops, briefly scattered by Oracle’s profit-margin misfire, have regrouped with the precision of a disciplined army — Mag7 flags raised, valuations steady, and that familiar rhythm of buy-the-dip drumming once again through trading floors from New York to Tokyo.

This isn’t the manic fever of 1999. The current tech charge is less dot-com hysteria, more industrial renaissance — capital expenditures with pulse, profit margins with bone, and balance sheets that could fund small nations. The skeptics mutter about bubbles; the optimists see cash flow engines humming at full capacity. When Nvidia’s Jensen Huang speaks about “substantially higher demand,” it isn’t speculative froth — it’s the sound of global compute hunger echoing through data centers stacked to the rafters. You can call it AI hype, but it’s a hype that’s cash-settled and margin-protected.

And still, the irony: the longer the government stays shuttered, the more the market feels open. Washington’s impasse hasn’t dented risk appetite — if anything, it’s numbed any risk-off pulse. Traders know the game: political paralysis means no new taxes, no new regulations, no new tier one data and a Fed that’s all but pre-committed to “insurance cuts.” The tape knows it, too.

The S&P 500 has now nearly doubled since the October 2022 lows — a three-year climb that began in fear, was fed by liquidity, and is now sustained by FOMO. A bull born from crisis, nourished by stimulus, and maturing into momentum.

It’s not lost on veterans that this is the sixth time since 1950 that markets have advanced this far, this fast. But what’s different today is who’s holding the reins. Hedge funds and retail players may believe they’re leading the parade, but it’s the mega-cap generals — Nvidia, Apple, Microsoft, Amazon — who set the drumbeat. They have become the central banks of sentiment, each earnings call a mini-FOMC meeting, each guidance update a macro signal. The S&P 493 can rally, but only when the Magnificent Seven choose to march.

Even gold, that eternal cynic of paper wealth, is caught up in the fervor. It’s now trading above $4,000 — its best run since 1973 — proving that inflation hedges and equity euphoria can coexist when liquidity flows like wine. The dollar, too, is flexing, which tells you something deeper: this isn’t a collapse in faith, it’s a consolidation of dominance. In this phase of the cycle, everything can rally — equities, commodities, crypto, even the greenback — as long as liquidity and belief move in the same direction. The only thing falling is the yen, a casualty of Japan’s new “controlled reflation,” which looks a lot like old-fashioned currency engineering with better PR.

Still, beneath the smooth surface, traders sense the undercurrents. Bond volatility is quietly stirring even as equity vol sinks — a reminder that the gods of duration haven’t gone to sleep, only paused to observe. A $39 billion Treasury sale came up light; that’s not panic, but it’s a whisper. Convexity traders smell a turn. Long-vol desks are beginning to stir, not because they see collapse, but because they see compression — and compression always precedes expansion. The next great trade might not be directional; it might be convex.

The Fed, meanwhile, has receded from center stage. Markets have become their own policymakers, setting rates through flows, not decrees. “Data-dependency” is now a euphemism for waiting to see how equity markets react. Even inside the Fed minutes, AI has become a macro variable — not for productivity, but for employment displacement. The central bank of the world is now running a thought experiment about robots taking jobs while traders chase the companies making those robots richer by the minute. You couldn’t script a better modern contradiction.

And what of inflation? Forget the official CPI — inflation is a matter of baskets, not percentages. The market’s basket is priced in hockey sticks: gold, copper, palladium, bitcoin. The move is exponential because belief itself has become parabolic. Those left behind — workers, savers, the uninvested — are the ones holding yesterday’s basket in a market trading tomorrow’s prices. For them, this isn’t prosperity; it’s erosion. But for traders, it’s momentum nirvana. You don’t short faith; you surf it.

Three years into this bull, the moral is simple: the game isn’t about valuation, it’s about velocity. The players who tried to fade AI got flattened. Those who bought the “bubble” became rich. The tape has turned into a psychological mirror — it rewards the believer, punishes the skeptic, and tests the discipline of everyone in between. As one seasoned trader once said, “When I see a bubble, I buy it.” It’s not arrogance; it’s adaptation.

So, yes — the market may look overextended, the narratives repetitive, and the charts vertical. But momentum has its own gravity. It doesn’t stop because it’s overbought; it stops when conviction cracks. For now, the conviction is unbroken.

The Teflon march continues. Every dip gets bought, every warning fades. The music hasn’t stopped — and until it does, traders will keep dancing, eyes wide, stops tight, and hearts racing to the rhythm of the fastest horses on earth.