By Liquiditrax ResearchPublished
Yesterday the two things that were threatening the rally both eased at once, and the market took the invitation.
The discount rate backed off. The 10-year Treasury yield fell 4 basis points to about 4.64%, pulling back from the highest level since January 2025 it hit Friday. That is the exact variable last week's research flagged as the invalidation, and it blinked lower instead of breaking out.
The energy tax got cut. WTI crude dropped 5% to $76.50 and Brent fell 4% to $80.25 on optimism about opening the Strait of Hormuz. Lower crude pulls at headline inflation and energy input costs, which reinforces the yield relief rather than fighting it.
So the tape ripped to records. The Dow rose 1.5% and added 750 points after a near-700-point Monday, pushing past its prior record close of 53,055.91 from July 6. Leadership widened beyond pure AI: Palantir jumped 18% on a beat and raised guidance, and Caterpillar climbed 10% to roughly $916 on record Q2 revenue of $20.54B, up 24% year over year. The chip tape firmed too after the SOX's worst month since 2008.
Why it matters (allocator lens): when rates and oil both relieve on the same day, the path of least resistance for risk is up, and the breadth into industrials like CAT says this is more than a handful of AI names carrying the index.
So-what for ABC: this is a risk-on tape and Beta earns its keep here, so stay invested through the index. But hold two tells. First, the dollar only steadied at 99.93 against the yen because of coordinated U.S.-Japan intervention after the yen touched a 40-year low, which is a reminder that FX stability is being managed, not given. Second, Apollo's Torsten Sløk is warning the 60/40 is broken with U.S. debt headed toward 175% of GDP, so the bond hedge behind your risk may be thinner than it looks. Lean risk-on, keep Cash as the hedge that bonds no longer fully are.
Takeaway: rates and oil gave the all-clear and the market took record highs. Ride it, but treat cash, not duration, as the shock absorber.
Analytics & education, not advice. DYOR.