CWS Market Review – June 16, 2026

(This is the free version of CWS Market Review. If you like what you see, then please sign up for the premium newsletter for $20 per month or $200 for the whole year. If you sign up today, you can see our two reports, “Your Handy Guide to Stock Orders” and “How Not to Get Screwed on Your Mortgage.”)

On Sunday evening, President Trump announced that Iran and the United States had reached a deal to end hostilities in the Middle East. I’m certainly no geopolitical expert so I won’t judge the deal. I am, however, a realist, and I understand there’s a long way between an announcement and real peace, especially in Middle East.

At least for now, there’s no more fighting. On Monday, the stock market celebrated the news and stocks soared. The Dow closed at an all-time high of 51,671.03.

The S&P 500 gained more than 1.6% and it’s not far from a new all-time high. The Nasdaq was up over 3% and semiconductor stocks were particularly strong. The SMH ETF was up 4.4%. At the other end, defense/aerospace and energy stocks lagged the most. Bitcoin rallied and, most importantly, oil prices dropped. The S&P 500 High Beta ETF was up more than 3.5% while the Low Vol ETF was down by 0.4%.

The stock market was a lot calmer on Tuesday. Some of the big tech names pulled back some, but nothing too alarming (outside of semiconductors). After Monday’s rally, a little bit of profit-taking is to be expected. The Dow closed at another high on Tuesday. It performed more than 120 basis points better than the S&P 500.

SpaceX (SPCX) had another good day on Tuesday. At one point, the shares broke above $225. That’s a 67% jump from last week’s IPO price of $135 per share. The valuation reached $2.85 trillion. That made it more valuable than Amazon and Microsoft.

Here’s a thought exercise. Imagine a company that had sales last year of $50,000. The company posted an annual loss of $13,200. You’re looking to buy the company, so you ask the owner, how much? He tells you it’s all yours for just $7.5 million.

You might think the owner had lost his marbles, but those numbers are pretty much in line with what SpaceX is really doing, just at a much lower scale.

My little thought exercise is to show you how the market is looking at SpaceX. Using ROE or the P/E Ratio won’t help you much with SpaceX. With an unconventional company, you’ll need an unconventional analysis. Doubting Elon Musk has not been a terribly successful strategy.

The retail sales report is out tomorrow. The report for May showed the eighth consecutive monthly increase in a row, but the big news tomorrow will be the Federal Reserve meeting.

It’s highly doubtful that the Fed will make any changes to interest rates. However, what could be newsworthy would be any more dissenting votes at the FOMC. This will also be the Fed’s first meeting under the leadership of Kevin Warsh.

At the Fed’s last meeting in April, there were four dissenting votes. That was the most in 34 years. One vote wanted to lower rates immediately while three other votes did “not support inclusion of an easing bias in the statement at this time.” I’ll be curious to see how Jerome Powell votes.

What to Expect from the Q2 Earnings Season

We’re less than a month away from the start of the second-quarter earnings season. Of course, we don’t have the numbers just yet, but it’s looking like it will be a very good season. Wall Street currently expects year over year earnings to hit 21.9%. If that’s correct, then it will mark the second quarter in a row in which earnings growth topped 20%.

For Q2, the estimated (year-over-year) earnings growth rate for the S&P 500 is 21.9%. That’s a big revision. At the start of Q2, Wall Street had been expecting growth of 18.7%. If 21.9% is the actual growth rate for the quarter, it will mark the second-straight quarter of earnings growth above 20% for the index.

For Q2, 47 S&P 500 companies have issued negative EPS guidance, and 62 S&P 500 companies have issued positive guidance. The forward P/E ratio for the S&P 500 currently is 20.1. This P/E ratio is above both the 5-year and 10-year averages.

Since the start of Q2, analysts have increased their estimates for Q2 earnings from $78.85 to $81.01 per share. This is unusual. Typically, analysts pare back their estimates as earnings season gets close. It’s no secret that companies try to dampen expectations so that when earnings day finally comes, they can announce “better than expected” news. At bottom, Wall Street is a game of expecting expectations.

Researchers at FactSet found that the term “inflation” was used on 220 earnings calls. That’s up 11% over Q4. Overall, the term “inflation” was cited on 220 earnings calls conducted by S&P 500 companies during this period. It’s also the third quarter in a row in which inflation mentions have increased.

FactSet also noticed something interesting. On earnings calls, companies have been mentioning AI at the fastest pace ever. From March 15 through June 11, the term “AI” was cited on 337 earnings calls. That’s far above the five-year average of 164. The previous was 334, which occurred in Q4.

Earlier today, we got the report on housing starts, and it was ugly. The report said that housing starts last month fell by 15.4% to an annualized rate of 1.18 million. That’s the lowest since April 2020. This means we’re back to Covid levels. The report said that single family homes fell by 1.9% and multifamily starts dropped by 40.2%.

What appears to be happening is that homebuilders are trying to work off supply before they ramp up new production. A lot of young people have been priced out of the market, especially with higher interest rates. If potential buyers are waiting for mortgage rates to go lower, I don’t think they’re going to get it anytime soon.

Last month, building permits dropped by 0.7% to an annualized rate of 1.41 million. Last year, President Trump criticized home builders for sitting on empty lots in an attempt to boost home prices.

Stock Focus: Gorman-Rupp (GRC)

Shares of Gorman Rupp (GRC) hit another new high today. The stock is another example of a little-known company that’s done very well over the years.

First, though, what do they do? The company describes itself as “a leading designer, manufacturer and international marketer of pumps and pump systems for use in diverse water, wastewater, construction, dewatering, industrial, petroleum, original equipment, agriculture, fire suppression, heating, ventilating and air conditioning (HVAC), military and other liquid-handling applications.”

Since 1992, GRC is up over 4,000% including dividends. It’s nearly doubled over the last year. Despite this success, the stock is barely followed on Wall Street. GRC has a market value of more than $2.2 billion yet it’s only followed by three Wall Street analysts.

In April, GRC reported Q1 earnings of 68 cents per share. That beat estimates (if you consider so few analysts to be a consensus) of 53 cents per share. Net sales rose by 7.7% to $176.6 million.

Scott King, the president and CEO, noted that last quarter, GRC had strong operating cash flow and reduced its debt.

Four years ago, GRC bought Fill-Rite from Tuthill Corporation for $525 million. I’m always a little skeptical of big acquisitions. For a company of GRC’s size, this was a very big deal. I’m pleased to see that it’s been well integrated well. Also, the financing debt has been paid down. Interest expense dropped substantially from 2024 to 2025.

Wall Street expects GRC to earn $2.63 per share this year, and $2.99 per share in 2027. If that’s right, it would mean that GRC has tripled its earnings in five years.

The company has increased its dividend for 53 years in a row. That’s one of the longest for any publicly traded company.

If you’re looking for a conservative addition to your portfolio, Gorman-Rupp is a good choice. GRC isn’t a bargain, but it’s poised for long-term growth.

That’s all for now. Remember that the stock market will be closed on Friday in honor of Juneteenth. I’ll have more for you in the next issue of CWS Market Review.

– Eddy

Posted by on June 16th, 2026 at 7:10 pm


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.