The G2 Meeting That Changed Market Psychology
President Trump visited Beijing this week, the first sitting US president to do so in nearly a decade. He met Xi Jinping and stated that US-China relations will be better than ever before. Xi responded that achieving Chinese national rejuvenation and making America great again can be done in parallel, are mutually beneficial, and serve the benefit of the world.
On Thursday morning, European and Asian markets opened higher. US markets carried on the uptrend in the evening session. Putin’s spokesperson confirmed that President Putin will visit China soon, with a date to be announced. The G2 meeting removed a layer of geopolitical uncertainty that had been weighing on sentiment since February.
PPI at a Three-Year High, and the Market Shrugged
US Producer Price Index Final Demand for April 2026 came in at 6.0% year-over-year, the highest reading since January 2023. The consensus forecast was 4.9%. Monthly PPI rose 1.4%, nearly triple the expected 0.5%. Core PPI rose 1.0% on the month. Both headline and core now sit at three-year highs.
In a normal environment, that print would have triggered selling. The Federal Reserve has not moved. PPI at 6% with no rate response is a contradiction the market has chosen to absorb. The G2 result gave investors enough confidence to look past the inflation shock. For now, that trade is working.
Three Records in One Session
S&P 500 closed at 7,500.07. By the end of 2025, most people expected this level to arrive at some point within 2026. It arrived in May. DJIA crossed 50,000, the second major world index after Nikkei to do so. DJIA is the traditional safe haven of the three, composed of stable, legacy components. NASDAQ closed at 26,628 and continues to lead all three indexes.
Morgan Stanley just raised its S&P year-end target to 8,300. Daniel Yue’s own target remains 7,900. Reaching 8,000 will be difficult. There are still no symptoms of adjustment.
NVDA, TSLA, and the Summer Awakening
Since May, both NVDA and TSLA have woken from hibernation and moved sharply higher. NVDA closed at 234.79, up 3.97% in a single session. PHLX Semiconductor Index stands at 12,090, up 77.25% over the past six months. Wolfe Research raised earnings forecasts for both NVDA and Broadcom, naming NVDA its top pick ahead of earnings season.
Under the AI trend, going against NVDA is not a strategy. It is a mistake. Whether this represents a bubble or overestimation is a secondary question. Following the trend is wiser than fighting it. The AI wave has not broken.
The Golden Pit of 2026
Earlier this year, all three major indexes and NVDA simultaneously penetrated the 250-day SMA and rebounded sharply. That is the golden pit of 2026. The lesson of 2025 conditioned investors to buy on bad news. The Iranian War began February 28. By March 30, more than a month had passed with no resolution. The market was frustrated. But there were no two large black candlesticks, no prominent selling signal.
The result: the market has risen without meaningful adjustment from that low. The trend is now supported by the 10-SMA in both S&P and NASDAQ. The peculiarity of the US market is that when a record high appears, a series of record highs follow. It is quite hard to guess the top. Do not try.
What Investors Should Do Now
- Fear and Greed: 66 (Greed) — up from 47 one month ago; sentiment has shifted decisively, consistent with record-high behavior
- No short selling — when buying up, profit is unlimited and loss is limited to zero; when selling short, profit is limited to zero and loss is unlimited
- ETF ratio — if individual picks are lagging the market, index with various ETFs at 3 parts NASDAQ, 2 parts S&P, 1 part DJIA; DIA pays monthly dividends, QQQ and VOO pay quarterly
- NASDAQ Golden China Index — returned -0.95% over the past year versus 20%+ for US markets; this is why Daniel Yue seldom discusses it
- Index rebalancing — the three major indexes remove sluggish stocks and add rising ones every quarter; this structural mechanism is one reason the market trends upward continuously over time
Key Takeaway: S&P hit 7,500, DJIA hit 50,000, NVDA added 4%, PPI printed at a three-year high, and the market went up anyway — stay long, do not short, do not guess the top.
Related reading: Record High Strategy · 250-SMA Golden Pit · Short Selling Concept · Various ETFs · NVDA Analysis
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