July's hottest trade is selling everything you bought in June · Daily Briefing

In 30 seconds: The Magnificent 7 and tech sector are underperforming as the market broadens, with top H1 winners down 25% in July, IBM suffering a historic single-day 25% drop, Apple trading at stretched valuations, and Energy remaining the top-performing sector for most of 2026. China is rapidly advancing across AI (Kimi K3), battery storage (90% global market share), brain-computer interfaces, and chip exports (+88.7% YoY), while the US responds with executive orders on critical minerals and lawmakers target Chinese-owned automakers, amid Xi Jinping's sweeping military purges. The US-Iran conflict and closure of the Strait of Hormuz has pushed Brent crude above $90 per barrel, disrupted tanker traffic, threatened Kazakh oil exports via the CPC pipeline, and prompted ADNOC to greenlight a $6B gas expansion project in the UAE. The Trump administration announced new 50% tariffs on select Canadian goods including milk, beer, hockey equipment, and plywood, raising concerns that even goods covered by existing trade deals are no longer protected.

S&P 500 cap-weighted index has not made a new high. The divergence between the index and its internals tells you something. Technology has been the best-performing sector on a year-to-date basis for only 2 trading days all year. Energy has held that title for 121 of the year's 136 trading days. Meanwhile, Technology sector XLK sits 4% below its 50-DMA, while Financials sector XLF trades 5.3% above its own. The reversal in momentum names has been violent. Space stocks have round-tripped 100%+ gains, right back to where they were trading in early April. Bitcoin IBIT and Nasdaq 100 QQQ have been moving in opposite directions lately. Then there is IBM stock, which fell 25% in a single trading day last week, the worst single-day decline for the 115-year-old company. Statistically, that qualifies as a 15-sigma event. Old-economy names are telling a different story: 3 million reported a triple play, its third such occurrence of the 2020s. Valuations remain stretched where it matters most. Apple P/E Ratio sits at 40x against a 10-year average of 26x. Apple EV/EBITDA Ratio is 31x versus 19x, and Apple Price to Sales Ratio is 11x versus 6x. The 'Rule of 20,' which says the S&P 500 is fairly valued when the sum of its P/E and CPI year-over-year equals 20, suggests the market is still quite expensive. One needs to ex out 'other income' generated by the hyperscalers that added 12 percentage points to Q1 earnings growth. The aggregate numbers look solid — forward earnings up 21%, equity margins at a cycle high of 16.0%, high yield spreads near cycle lows — but the question is which stocks are actually pricing those numbers in.

China's hardware dominance is just as striking: the world's top 10 battery-cell suppliers of energy-storage systems were all Chinese, and last year more than 90% of battery-storage systems installed in the US used Chinese cells. China's export value of integrated circuits rose 88.7% year-over-year in H1 2026. Beijing is now tightening the other end of the valve: as of 2026-01-01, it eliminated VAT rebates on battery exports, and its most recent revision in 2025 added lithium-ion battery manufacturing technologies to restricted exports list. On the frontier side, NeuroXess is building a factory in Jiangxi with annual production capacity of 10,000 sets, set to begin mass production later this year. President Trump signed an Executive Order on Monday, directing military contractors to shift away from Beijing-linked supply chains beginning in Jan 2027. A bipartisan Senate bill introduced in April would prohibit connected-vehicle sales by automakers more than 15% owned by Chinese entities. Senior military leaders purged by Xi Jinping: >100. Zhang Jinsong was sentenced to 16 years in prison for bribery, another high-profile conviction in Beijing's sweeping financial anti-graft campaign.

Brent crude: $90 per barrel. You may recall that the US invaded Iraq 23 years ago, and 23 years later the cumulative tab sits at $5 trillion+. So the track record on "short and inexpensive" is not great. The physical picture is straightforward: not a lot of tankers transiting Hormuz right now. If Kazakhstan stops CPC shipments, oil production cuts are expected to follow — and nothing comes close to replacing CPC as an export route. Damage to Iran: $270bn. ADNOC Group green-lighted a $6 billion project to increase natural gas and natural gas liquids production in the UAE — in the middle of the Strait of Hormuz closure. Natural Gas: $2.89.

The targeted products include milk, hockey equipment, beer and plywood, but not major resource imports. The move raises a pointed question: if even goods protected by Trump's own trade deal aren't necessarily protected anymore, what does any trade deal actually guarantee? Trump hit Canada with a new round of tariffs. The whole point of a trade deal is that it tells businesses what the rules are so they can plan investments, build supply chains, and generally operate as though the future will resemble the present. If the deal's own author can override it whenever the political mood shifts, the deal is less of a contract and more of a suggestion. You sign a lease for an apartment. The lease says your rent is a certain amount. Then your landlord shows up and says, actually, I've decided to charge you 50% more, because I feel like you haven't been appreciative enough of the building's amenities. You would point to the lease. The landlord would shrug.