Our Semiquincentennial Gilded Age
Doug Nolan
The Semiconductor Index (SOX) returned 88% during Q2, true to 2026’s “Expect the Unbelievable” theme.
Micron surged 242%, Intel 216%, and Advanced Micro Devices 186%.
Other SOX super winners included Astera Labs (341%), Marvell Technology (201%), Credo Technology Group (190%), ARM Holdings (134%), Applied Materials (112%), KLA (105%), and Lam Research (103%).
June 30 – Bloomberg (Ryan Vlastelica):
“Chip stocks posted their best quarter ever, extending an extraordinary start to the year driven by insatiable demand for artificial intelligence equipment...
‘The story of the past six months is the market going all-in on AI infrastructure, but now people are asking if this is sustainable and if we should be worried,’ said CJ Muse, senior managing director… at Cantor Fitzgerald.
The Philadelphia Stock Exchange Semiconductor Index jumped 3.9% on Tuesday to bring its second-quarter gain to 88%, its best quarter ever.
It soared 101% in the first half, putting it on track for its best year in its history.”
Historic loose conditions and a mania wouldn’t let a pesky war, Strait of Hormuz closing, inflation scare, and backup in bond yields interrupt the party.
The S&P500 returned 15.2% during the quarter, the Nasdaq100 27.7%, and the MAG7 Index 11.7%.
The small cap Russell 2000 returned 21.6%.
The KBW Bank Index returned 18.2%, with the Broker/Dealers returning 10.1%.
Indicative of late-cycle “blow off” market dislocation dynamics, the Goldman Sachs Most Short Index surged 35.4%.
After a moderate war-related tightening of financial conditions late in Q1, major loosening unfolded throughout Q2.
High yield spreads (to Treasuries) closed June at 2.70 percentage points, down from the March 30th high of 3.35 – and the five-year average of 3.44 (and only 17 bps above January’s multiyear low).
High yield CDS ended Q2 at 306 bps, down from March 30’s 406 bps (5yr avg. 378bps).
Loosening was a global phenomenon, as indicated by the drop in European bank CDS back to decade lows.
After trading to 206 bps on March 30th, EM CDS was back down to 141 bps by the end of Q2 (5yr avg. 198bps).
EM spreads to Treasuries narrowed to lows back to 2007.
After a six-week (ended April 29th) $230 billion pullback, money market fund assets surged $321 billion over the past nine weeks to a record $7.947 TN.
Liquidity overabundance was readily apparent in record debt issuance.
July 1 – Bloomberg (Michael Gambale):
“The pace of new bond sales has been torrid year-to-date, bolstered by the jumbo bond sales from Alphabet Inc., Amazon.com Inc., Meta Platforms Inc., Nvidia Corp. and SpaceX that are tied to AI and data center build outs.
Dealer forecasts for this month is teetering around $100 billion, which would handily exceed July 2025 when there was $81 billion in new debt sold…
The $1.176 billion in offerings during the first half of 2026 has handily beat previous 6-month start periods and is the same as the 2020 Covid year…
This year has been different with a steady stream of new bond sales that has seen two months issuance volume swell more than $200 billion, with June finishing at $199 billion…”
Issuance is booming almost across the board.
July 1 – Bloomberg:
“Goldman Sachs gained ground in underwriting US municipal bonds as the value of deals rose 6.8% year-to-date compared with the same period last year.
State and local governments sold $294.3 billion of munis through June vs. $275.6 billion a year ago…”
July 1 – Bloomberg (Ameya Karve):
“Total private-label CMBS issuance in June exceeded $16.5 billion, the month’s highest since at least 2016…, part of a roughly one-third surge for 1H to $96.6 billion.
US ABS issuance has jumped over 20% so far this year to nearly $213 billion…
Sales of new CLOs dropped 18% in 1H, with June’s $10.3 billion some 10% below the month’s average since 2016.”
June 28 – Bloomberg (Bailey Lipschultz and Anthony Hughes):
“Wall Street bankers are on a high after record-setting offerings from SpaceX and Google parent Alphabet Inc., lifting expectations for deal activity in the rest of 2026.
US IPOs and share sales totaled a record $251 billion through June 26 this year, excluding blank-check companies and other investment vehicles…
That tops the high watermark for a half set during 2021’s issuance mania…
More deals are on the way, including a steady stream of initial public offerings in the coming weeks, and a potential mega-deal for Anthropic PBC as soon as October.”
June 28 – Wall Street Journal (Paul Hannon):
“Fierce competition will dominate artificial intelligence risks driving investment spending to excessive levels, threatening the profitability of leading firms and a sharp reversal that could tip some economies into recession, the Bank for International Settlements said…
‘The race to capture market share may have led to overinvestment,’ said Pablo Hernández de Cos, general manager of the BIS.
‘This could leave the sector more vulnerable if AI under delivers, possibly bringing the current investment boom to an abrupt end.’”
The precariousness of the AI arms race has the attention of global policymakers, with the Bank of International Settlements (BIS) directly addressing the issue in their 2026 Annual Report released this week.
“In the near term, the ongoing AI investment boom raises questions about the sustainability of the current economic expansion.
The five largest hyperscalers are set to spend over a trillion US dollars on AI-related capital expenditure from 2025 through 2026.
These commitments are outpacing earnings and the free cash flow of these firms, leading some to issue debt to raise additional financing.
This investment race may be partly driven by the perception that only a small number of players with superior technology will ultimately dominate the market shares.
The intense competition raises the risk of firms over-committing resources to investment projects with still uncertain returns, leaving all firms vulnerable to disappointments in AI payoffs.
Model analysis based on such contest motives highlights the downside risk of current AI exuberance.
As competitive pressure drives capex higher, the net economic surplus – the total payoff less investment costs – declines for the sector as a whole and could turn negative in adverse scenarios.
Disappointment in returns could trigger a sudden pullback in financing and turn the capex boom into a protracted investment bust, with potential knock-on effects on financial conditions.”
“Another risk is that the AI boom runs into a supply side roadblock.
The AI build-out has recently been facing growing bottlenecks in electricity, advanced semiconductors and grid equipment.
Fast-growing demand for computing power is already pressuring electricity prices and input costs, with potential spillovers to inflation.
Looking ahead, these temporary shortages may also amplify over-investment, as firms attempt to lock in future capacity through long-dated contracts that further expose them to any disappointments in demand.
Historical episodes of investment booms offer instructive parallels.
The canal mania of the 1830s, the British railway mania in the 1840s, the electrification exuberance of the late 1920s (roaring 20s) and the dotcom boom of the late 90s all shared one common trait: a genuine technological breakthrough that attracted capital in excess of what commercial returns could ultimately justify.
These episodes ended with an eventual reversal in investment, inducing economy-wide recessions.
The scale and pace of the current AI investment boom accompanied by expectations of large productivity payoffs bear resemblance to these precedents, highlighting potential downside risks in the near term.”
June 30 – Reuters (David Carnevali, Crystal Tse, Vinicy Chan, Michelle F. Davis and Ryan Gould):
“The year was tipped to be a potential blockbuster in deals and the first half delivered, setting a pace that is likely to continue in the closing months of 2026…
‘People have just accepted the volatility and are investing through it as opposed to waiting until it’s over,’ said Tom Miles, global co-head of mergers and acquisitions at Morgan Stanley.
Global transaction values were up around 30% year over year to $2.6 trillion in the first half…
That puts dealmakers on course to potentially pass the record haul they achieved in 2021.”
July 1 – Wall Street Journal (Joe Stonor):
“Global equity fundraising topped $729.4 billion in the first half of 2026, boosted by SpaceX’s record initial public offering, and marking the second-best start to a year on record, according to Mergermarket data…
Counting SpaceX as a technology company, tech deals accounted for around $302 billion of global issuance—an all-time record for the sector in the first six months of a year.
Tech companies have raised more than $100 billion in the first six months of a year only twice before—in 2000 and in 2021.
Neither period augured well for the near-term performance of equity markets, however.”
July 2 – Bloomberg (Manuel Baigorri, Dong Cao, Pei Li, and Elffie Chew):
“The world has faced plenty of disruption this year, but that hasn’t derailed business in and out of the Asia Pacific, where the volume of deals such as mergers and acquisitions has already topped $750 billion in 2026.
The first-half figure is 30% higher than a year ago…
Dealmaking has been strong worldwide as well, despite geopolitical ructions and market volatility — global transaction values, at $2.6 trillion, are on course to pass a record haul from 2021…”
July 3 – Reuters (Anousha Sakoui):
“Goldman Sachs increased its share of mergers and acquisitions advisory work involving Europe, the Middle East and Africa in the first half of 2026, capturing the biggest slice of the market in the period for nearly a decade, LSEG data showed.
Dealmaking in the region totalled $676 billion during the first half of 2026, more than double 2025 levels and a 19-year high…”
June 30 – Bloomberg (Selcuk Gokoluk):
“Total sales of international bonds by emerging-market issuers hit a record in the first half of 2026 as sovereigns and corporations take advantage of the tightest spreads in almost two decades.
EM entities sold $450 billion in dollar- or euro-denominated bonds in international markets during the January-June period, up 15% from a year earlier…
Borrowers from six nations — Mexico, Saudi Arabia, South Korea, Poland, Turkey and Brazil — each raised more than $10 billion.
The boom comes as the extra yield on EM debt over US Treasuries fell to a post-2007 low of 154 bps in June.”
The BIS insightfully noted historical parallels to the 1830’s canal mania, the 1840’s British railway mania, “roaring twenties” electrification exuberance, and the dotcom boom.
Never, however, has the world experienced such synchronized Credit excess, highly leveraged speculative Bubbles, and investment booms.
A couple Friday Bloomberg headlines:
“US at 250 – Political Stress, Market Reality” and “250 Years Later, Democracy Needs Our Courage.”
The Washington Post: “A Toast to America at 250, Glowing and Decaying All at Once.”
NPR: “House Democrats Accuse Trump of ‘Hijacking’ America’s 250th Birthday for his Own Gain.”
From the Guardian: “‘The Wheels are Coming Off’: Readers Reflect on the 250th Anniversary of the American Experiment.”
CNN: “America has the Big Birthday Blahs.”
Hopefully, we can put politics and the blahs aside for a day to celebrate an incredible achievement.
I have fond memories of our nation’s Bicentennial Celebration.
Pride and excitement were in abundance over a period of months leading up to July 4, 1976.
I recall many school-related events, highlighted by the Freedom Train’s highly anticipated arrival to our community.
Being part of millions throughout the country to visit this enriching mobile museum of American history, we were inspired by the national wave of Bicentennial pride and enthusiasm.
Outstanding Treasury securities ended 1976 at $1.040 TN, or 55% of GDP.
Total Debt Securities reached $1.376 TN, or 73% of GDP, with Equities weighing in at 55% of GDP.
Total Securities of $2.41 TN tallied to 129% of GDP.
Almost five decades later, Treasuries have inflated to $30.642 TN, or 96% of GDP.
Equities have approached $120 TN, or almost 380% of GDP – with Total Securities nearing 560% of GDP.
After ending 1976 at $5.437 TN, or 344% of GDP, Household Net Worth finished Q1 at $183 TN, or 575% of GDP (Q2 will be meaningfully higher).
I’m reminded of Peter Warburton’s 2000 classic, “Debt and Delusion.”
Decades of inflationism have left our troubled nation with a legacy of unsustainable debt and delusion.
How do we celebrate 250 years of freedom and liberty while shackled in chains of debt and inflation dependency?
The harsh reality is that we celebrate our Semiquincentennial while in the throes of a most obscene Gilded Age.
“Thirty-eight percent (38%) of Likely U.S. Voters think the country is heading in the right direction, according to a new Rasmussen Reports national telephone and online survey for the week ending June 25, 2026.”
“YouGov/Economist tracker: as of late June 2026, the weekly tracker showed 29% saying the country is headed in the right direction.”
June 30 – Wall Street Journal (Miriam Gottfried):
“America knows how to manufacture millionaires.
Over 440,000 people—or more than 1,200 a day—became millionaires in the U.S. in 2025, accounting for nearly half of the world’s new millionaires, according to… UBS…
The number of millionaires globally rose in 2025, reaching record levels in every market that UBS tracks.
More than 23.6 million Americans are now worth seven figures or more.
The fastest-growing segment globally, rising at a 7.3% clip over the past five years, were those with $50 million to $100 million in wealth.
The U.S. gains have come thanks in large part to surging financial markets.”
June 30 – Bloomberg (Myriam Balezou):
“The number of billionaires has jumped almost 13.1% to a record 3,302 in the past year, driven by substantial growth in the US and Asia, according to UBS Group AG.
Billionaires increased their total assets by 25% in the year to April 2026, out-pacing the overall rise in the world’s wealth…
The bank recorded 18 individuals with wealth situated between $50 and $100 billion and a further 19 with assets above $100 billion, 15 of which are based in the US.
The report showed that global personal wealth jumped 10.8% in 2025, its sharpest acceleration since 2017, eclipsing gains of 4.6% in 2024 and 4.3% in 2023.
There were nearly a million more millionaires created during the year, with growth across all markets tracked by UBS.”
June 29 – Los Angeles Times (Roger Vincent, Lily Wright, Laurence Darmiento):
“With SpaceX's historic initial public offering minting a small army of new millionaires overnight, the Southern California housing market is bracing for a big wave of buyers looking to upgrade their digs or perhaps snag a second home, potentially driving up prices in some in-demand neighborhoods…
At least 4,000 current and former SpaceX employees are expected to become millionaires, with about 400 of them earning $100 million or more, said Andrew Benson, chief executive of Hill.com…”
For the truly obscene:
June 30 – New York Times (Ben Protess, Andrea Fuller, Eric Lipton and David Yaffe-Bellany):
“President Trump reaped a stunning windfall in his first year back in the White House, including about $1.4 billion from his family’s cryptocurrency businesses, a new filing shows.
All told, the president pulled in at least $2.2 billion, a figure that includes other parts of his vast holdings, such as his real estate assets.
That compares to a minimum of $622 million his enterprises pulled in for all of 2024, before he returned to the presidency.
One of his biggest hauls in 2025 came when an investment firm tied to the United Arab Emirates bought nearly half of the Trump family’s main crypto company, World Liberty Financial, a transaction that blurred the line between foreign policy and private enterprise.”
July 1 – Wall Street Journal (Neil Mehta, John West, Sam Kessler and David Uberti):
“Unlike other presidents who generally have divested holdings or established blind trusts, Trump put many of his assets into a revocable trust overseen by Donald Trump Jr., who also co-heads the real estate and hospitality-focused Trump Organization with one of the president’s other sons, Eric Trump…
On Wednesday, Trump told reporters he didn’t talk to the people who managed his money and he was doing well because the stock market was hitting record highs.
‘You know why I’m profiting?
Because the stock market is going up,’ Trump said.
‘We’re all profiting, I’m profiting because I have a lot of money and a lot of cash.’”
It will be a heck of a challenge to explain this period to future generations.
Decades of inflation culminated in unmatched monetary disorder.
There is literally “money” sloshing everywhere (for the taking) – at home and abroad.
Credit is readily available to even the lowest quality borrowers.
Unprecedented speculative leverage fuels myriad Bubbles.
Easy money and asset inflation breed corruption.
And while there’s finally some discussion in policy circles, there are no meaningful efforts to restore monetary stability.
The quarter experienced history’s largest IPO, with SpaceX market capitalization spiking to a ridiculous $2.6 TN.
Morgan Stanley modeling SpaceX’s revenues to reach $3.4 trillion by 2040.
The world’s first trillionaire, who happens to be a political operative and (unsuccessful) “DOGE” mastermind.
July 2 – New York Post (Lauren Elkies Schram):
“Leave it to the ultra-wealthy to secretly drop $125 million on a building just to demolish it. Hedge fund billionaire Ken Griffin spent three years using a web of anonymous LLCs to quietly buy up all 138 units, plus the ground-floor retail space, of the Solaris condominium in Miami…
The 22-story tower in Miami’s Brickell financial district was one of the final roadblocks in Griffin’s quest to build a multi-billion-dollar corporate campus.”
July 2 – Forbest (Mary Whitfill Roeloffs):
“Based on interviews with a half-dozen luxury event planning sources estimating everything from securing the iconic venue to elaborate florals and tight security, Forbes estimates the Swift-Kelce festivities will cost at least $20 million—on par with the lavish Venice nuptials of billionaire Jeff Bezos and Lauren Sanchez that captured the world last summer.”
The thermometer reached about 82 degrees in Washington DC for the July 4, 1976, Bicentennial celebration.
Hundreds of thousands packed the National Mall to watch a spectacular fireworks display, with some one million visiting our nation’s capital for a special day of activities.
Saturday’s forecast calls for temperatures 20 degrees higher (102f).
It’s sadly fitting for the President’s lavish 250 party and monster fireworks display to languish in furnace suffocation.
People across our nation, throughout Europe and the world, do not share the view of climate change as a “hoax” or “the greatest con job ever perpetrated on the world.”
History will be unforgiving.
“Communism is the Greatest Threat to our Country since World War I, World War II, Pearl Harbor, or 9/11!
President DONALD J. TRUMP.”
Truth Social, June 28, 2026
“Stop this horrible threat of cancer that’s permeating our country called communism.”
“The greatest threat to our country since its founding”
“These ruthless communists will attack all religions, but in particular Christianity.
They always do.”
"You can be a communist, or you can be a patriot, you cannot be both."
“McCarthyism.”
“The Road to Serfdom.”
Four crazy, likely unbelievable, months until the midterms.
Rather than villainize the young far-left “democratic socialists”, it might be more productive to try to understand the impetus behind this movement.
Loose financial conditions and late-cycle blow-off excess continue to mask major social and economic upheaval.
Today’s Gilded Age has turned toxic for large sections of our population.
It may not yet be obvious, but we’ve neglected safeguarding Capitalism from dangerous malfunction.
Contemporary finance has failed us.
Fiscal policy is completely out of control, while monetary management negligently fostered inflationism, market dysfunction, and unprecedented monetary disorder.
The younger generation has good reason to feel cheated by my generation.
Of course they will eventually revolt against a system of egregious wealth inequality - one they perceive as offering limited opportunity.
Of course they will revolt against a system they, understandably, see as corrupt.
It’s sad, especially at our nation’s 250-year anniversary, to see growing numbers of young Americans rebuff Capitalism in favor of the alluring promise of fairness and equality.
But labeling these fellow Americans “ruthless communists” and a “horrible threat of cancer” is as absurd as stating that the immigrant population are murders that eat the dogs and cats.
I was unfamiliar with Melat Kiros, the 29-year-old democratic socialist, who took down longtime Colorado Rep. Diana DeGette.
Kiros:
“We have to root out the corruption and get money out of our politics.
It’s about political will — and that means we have to vote out any of the incumbents that are standing in our way by taking that kind of corporate PAC money.
I’m dead serious about this issue.
We have to start setting a standard now.”
Listening to Ms. Kiros’ post-election comments, I was struck by her eloquence in conveying an anti-corruption message.
I expect “anticorruption” to resonate almost as much as “affordability” – for the midterms and beyond.
And just wait until Bubbles starts bursting.
If the President has a sincere interest in protecting our nation from “the communists,” we would all be well-served by a shift in his focus on corruption and reining in conspicuous Bubble excess.
Much like Saturday’s DC parade and festivities, things are surely too hot for that.
Wishing for a cooler and happier fourth.
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