In Europe, the major indices printed timid gains near ATHs as the benchmark 10-year EU yield fell for the fourth session, while in the US, technology appetite was mixed, with SpaceX exploding higher for a third day (+10% pre-market, nearly 5% at the end of the session and again up in after-hours trading). SpaceX now has a market capitalisation of more than $2.60 trillion. That’s more than Amazon and a notch below Microsoft’s!

As a result, SpaceX becomes – still with no profit outlook this year – the fifth-biggest company in the US. The fifth after Nvidia  with a 2025 net income of nearly $73bn, Alphabet ($132bn), Apple ($112bn) and Microsoft ($102bn).

SpaceX printed a $5bn loss during the same period. And there is no certainty that the space infrastructure plans are technically feasible and/or whether they will lead to any return on investment within a reasonable timeline – this is what SpaceX's own IPO documents cited.

The acquisition announcement of Cursor changes nothing in the maths. SpaceX can’t be worth $2.66 trillion. Full stop. So the bubble talk is growing by the minute – and for good reason. How can a loss-making company reach such a high valuation? How long could this continue?

SpaceX is perhaps the biggest red flag that today's technology rally is reaching a point where valuations no longer make sense. I remain cautious about calling it a bubble — after all, a bubble is only definitively identified once it bursts. But prices have reached levels that no longer reflect fundamentals, whether we are talking about actual or forward-looking values such as sales, revenue, earnings, or profits. The prices are hanging in the air. And in the absence of any reasonable anchor, a meaningful correction is a matter of when, not if.

In this environment, profit-taking, de-risking and rotation look smart, especially if the geopolitical and macroeconomic environment improves enough to soften hawkish central bank expectations, which could in turn direct capital toward cheaper pockets of the market where valuations make more sense. Look, both the tech-heavy S&P 500 and Nasdaq 100 fell yesterday while the Dow Jones advanced to a fresh ATH.

In Europe, most stocks are trading at an average PE ratio of around 16-20 today, versus the Nasdaq 100's PE ratio of 37, while SpaceX's price-to-last-year-sales ratio stands at 160 times last year's sales – not earnings, sales. Just for fun...

So yes, European equities may be boring and the growth prospects of the old continent may not be looking bright given the geopolitical unease, repeated periods of energy crisis and now a hawkish ECB policy.

But the good news is that the hawkish policy move from the European Central Bank (ECB) last week has not pressured European yields higher, as the latter softened alongside lower energy prices and softer inflation expectations as a result. The British FTSE 100 also benefited from softer yields.

Is it time to go out of tech? Maybe, and especially if the Fed remains soft.

All eyes on Warsh

Today, investors' attention will shift to the latest FOMC decision. The Federal Reserve (Fed) will announce its latest policy verdict, along with the new dot plot and Kevin Warsh's first post-decision press conference as Fed Chair.

Warsh is taking over an unusually divided Fed: at the latest FOMC meeting, three Fed members voted to hike rates against eight who opted for the status quo, as the former were more concerned by rising inflation than the latter, who wanted to support a weakening jobs market. Then there was Stephen Miran, who voted to cut rates (he was appointed by President Trump, who is actively pushing the Fed to cut rates).

From an economic perspective, looking at the numbers, US inflation spiked past the 4% mark last month due to rising energy prices and core inflation is hovering just below the 3% mark – significantly and persistently above the Fed's 2% policy target.

The jobs data, on the other hand, has been weakening, but the past three months of data pointed to improved figures, with close to 180K new nonfarm job additions on average, probably due to the World Cup and the massive AI buildout. But whatever the reason, the combination of hotter inflation and relatively strong jobs data suggests that the Fed should do all but cut rates.

Looking at market expectations, investors have gone from pricing in 2-3 Fed rate cuts this year to pricing no change and maybe even a late-year rate hike. Activity in Fed funds futures is presently pricing in a December rate hike with a 60% probability.

So investors will be seeking the answer to the following question today: what direction will the Fed take under Kevin Warsh? Is the Fed more likely to hold, cut or hike rates for the remainder of the year, and how will markets react?

We know that:

Therefore, I believe that there is a greater chance we see a dovish surprise at today's policy decision. In this scenario, we will likely see US yields move lower and equity valuations move higher. Ideally, we will see the non-tech pockets of the market catch up with their tech peers as black smoke is beginning to rise from the SpaceX trade. Because the speculative excess is becoming impossible to ignore, making the current situation look increasingly unsustainable.