Happy Friday, investors. Wall Street is wrapping up the week watching its biggest AI spenders go down while the picks-and-shovels name rally once again, a pattern that’s become familiar over the last six months.

Today we’re zooming out to figure out the macro reason stock prices won’t stop going up.

An increasingly recession-proof economy is just as good for asset prices as any AI boom.

Downturns that arrived every five years for most of the 20th century now show up barely once a decade, and that’s provided more of a boost to stock market valuations than any cyclical force.

“The belief in a nearly recession-proof economy, seemingly proven by historical experience, is a little-discussed driver of high price/earnings ratios just now,” said Nicholas Colas and Jessica Rabe, co-founders of DataTrek Research.

The US economy spent a fifth of the 1900s in a recession.

Compound that over a typical three-year holding period and the odds of owning stocks through an economic contraction were about a coin flip.

But there have only been three recessions since the turn of the century. That works out to a recession through 11 of the last 105 quarters.

In DataTrek's framework, the thinning cadence drops the odds of a downturn in any given year from 20% to 12%, and the probability over a three-year stretch from 49% to 32%.

Meanwhile, with just one recession since 2010 — during the pandemic — the notional annual odds fall to 7% while the three-year odds drop to 20%.

With ever-dwindling odds of recession, it’s no wonder the S&P 500 trades at 20.3x forward earnings, squarely above its 10-year average of 19.0x, according to FactSet data.

Indeed, services have dominated output and software has smoothed out inventory cycles that previously fueled contractions.

Plus, policymakers have shown their willingness to step in as a backstop to markets.

“This does not excuse high domestic equity valuations, but it does explain them,” Colas and Rabe said.

Each additional year the US avoids a recession, the implied odds shrink further and stock market valuations move higher.

That streak seems more steady and predictable than anything tied to AI.

SpaceX is public, trading on Nasdaq under SPCX.

Now there is a fund built for the daily move.

Meet SPCU, the Defiance Daily Target 2X Long SpaceX ETF (Cboe: SPCU). It seeks 200% of the daily performance of SpaceX stock.

SPCU is a leveraged single-stock ETF that resets daily, built for short-term tactical use, not buy and hold.

The wait is over.

🛢 Brent crude blew past $100 for the first time in months. Houthis attacked two Saudi oil tankers in the Red Sea do drive the sharpest one-day spike since May. The group said it would blockade Saudi vessels from leaving the sea. (CNBC)

📊 Initial jobless claims fell to 187,000 last week. That’s the lowest level in a year. Economists had expected 210,000. The surprise gives the Fed one more reason to hold rates on July 29. (Quartz)

📉 Tesla erased more than $140 billion in market cap after missing profit estimates by 30%. Adjusted EPS came in at $0.33 versus the $0.51 consensus, gross margin slid to 16.8% from 19.5% expected, and Elon Musk warned the company will spend more than $25 billion on capex this year. (Yahoo Finance)

I sat down with veteran investor Michael Gayed to unpack why he’s expecting a market correction, the risk of the Japan carry trade, the sectors he is betting on next, and why he is bullish on deregulation in the decade ahead.

Tune in on Spotify, Apple Podcasts or YouTube — and please leave a review if you find the episode valuable!

🗓 July 24, 2002: Federal agents arrested Adelphia Communications founder John Rigas and his two sons at their Manhattan apartment on charges of looting the cable company in one of the largest corporate frauds in US history. The family had hidden $2.3 billion in debt from shareholders

📩 Want to get in front of 207,000+ investors who get this newsletter and the 350,000 finance professionals who can access it on Bloomberg Terminals? Fill out this form and we will get in touch with you.