Welcome back to Opening Bell Daily.

Looks like the GameStop stock saga is just getting started.

Late Sunday, after-hours trading for GameStop was halted after famed trader Roaring Kitty posted on Reddit for the first time in three years and revealed he owns $200 million in shares.

That includes a whopping $65 million in calls expiring on June 21.

It’s not everyday a meme legend turns out to be an investing whale.

Anyway — today we’re breaking down why the current market is oozing optimism.

The running of the bulls won’t stop

This year, the stock market has defied bearish bets and shrugged off high interest rates on its way to a string of records. 

While that momentum stalled on Friday — each of the major indexes finished the week lower — optimism remains high.

Wall Street firms including Morgan Stanley, UBS, BMO, and others have raised their S&P 500 price targets over recent weeks, and history suggests more gains to come.

Fundstrat, for one, told clients Sunday it’s time to “buy the dip.”

Seasonality alone could propel the S&P 500 to another 5% gain in June, in the firm’s view.

Historically, in non-recession years when stocks see a positive first quarter and negative April, June has been green for stocks 11 out of 11 times.

The presidential cycle shouldn’t hurt either. 

“June is a much stronger month in an election year than really any other month outside of November,” said Mark Newton, Fundstrat’s head of technical strategy.

Earnings, too, have proved robust. S&P 500 forward revenues and earnings per share both hit records in May.

That’s led economist Ed Yardeni to double-down on his outlook for a “Roaring 20s” scenario for stocks. 

In a note dated June 3, he said the latest data gives his team at Yardeni Research S&P 500 price targets as high as 5,400 this year, 6,000 in 2025, and 6,500 in 2026.

“By the end of the decade, we expect to see the S&P 500 at 8,000,” Yardeni said.

To be sure, the latest Bank of America fund manager survey is so bullish that it could actually be taken as a red flag.

Respondents say they have just 4% of their portfolios allocated to cash, the lowest in three months.

Typically, when cash levels dip below 4%, it’s time to sell equities, according to BofA.

Despite this, something unusual that bodes well for stocks is the huge amount of cash that investors have poured into money market funds.

With rates above 5%, it’s puzzling to see that volume climbing the same time stocks are rallying. 

Here’s what Apollo’s chief economist, Torsten Slok had to say: 

“The bottom line is that there is still a lot of money on the sidelines, with $6 trillion in money market funds that can be used to purchase public and private credit and public and private equity.”

Allocations aside, some strategists have pointed to the inverted yield curve, a longstanding recession indicator, as reason to expect a coming slump in equities. 

It’s been inverted since October 2022, yet neither a recession or deep sell-off has arrived. In fact, it may be a moot warning for equities, according to David Cervantes of Pinebrook Capital. 

“Post un-inversion equity losses are noisy historical coincidences without repeatable causal links and inconsistent broken clock timelines,” Cervantes wrote in a note Saturday. 

Over the last four decades, stocks have actually turned positive in two of the five times yields have inverted, he said, showing little pattern to draw from.

“We are in effect, in the middle of the soft landing,” Cervantes added. “Risk on.”

Are you leaning more bullish or bearish for your 3- and 6-month outlook? Hit reply to this email or let me know on X @philrosenn.

*At a glance:

Elsewhere:

• Elon Musk and Jamie Dimon are making peace. The two business moguls have been feuding for years. But a recent meeting between the two suggests the tide is turning. That could have wide-reaching implications for Tesla and JPMorgan. (WSJ)

• Nvidia made a surprise splash on Sunday. The company that’s taken the stock market by storm announced “Rubin,” the next generation of its AI processors. Rubin is the successor to its “Blackwell” chips for data centers. (FT)

• Inflation has slowed, but Biden remains on the hot seat. Americans care less about the rate of price changes than they do cumulative price changes, and the White House is having a hell of a time communicating the difference. Simply put, everything costs more today than four years ago. (Bloomberg)

Rapid-fire:

• Mexico is set to have its first ever female leader (Bloomberg)

• Donald Trump launched a TikTok account as Truth Social shares dipped (CNBC)

• OPEC+ agrees to extend production cuts to try and boost oil prices (WSJ)

• A boom in trading for penny stocks suggests market froth (FT)

• Cathie Wood’s ARK Invest missed out on $1 billion in returns by selling Nvidia too early (Business Insider)

Last thing:

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