At the end of the day, however, the Stoxx 600 pared gains and closed just 0.19% higher, while the major tech-heavy US indices outperformed, with a 1.65% rise in the S&P 500 and a 3% rally in the Nasdaq 100.

SpaceX rallied another 20%, and even more in after-hours trading, pushing the company's valuation to $2.5+ trillion — just a touch below Amazon's. The only difference is that SpaceX is burning cash, as revenue from Starlink has been unable to counter heavy space exploration spending, whereas Amazon generated more than $700bn in revenue last year.

So yes, it is a probably speculative bubble (though in theory, it is not a bubble until it bursts). But we can say with certainty that this valuation makes absolutely no sense today. People are buying SpaceX in the expectation that others will buy too and push the price higher — that's speculation. The risk is that one day, someone will say, "Hey, the Emperor is naked," and on that day, the company's fundamentals won't be there to stop the selloff. A smart thing to do is to make sure you set your stop-loss and stick to your risk-management strategy when trading this stock, which promises to be extremely volatile — hence fun, but also risky.

A big, big meme stock

Meme stocks have been around for years, and they have attracted massive retail investor attention, sending companies like GameStop or AMC to incredible levels simply because people wanted them to. The fundamentals, of course, caught up. GameStop is down by more than 80% today compared to its January 2021 peak, and AMC is down by around 99% — because movie theatres are almost empty today - and it was foreseeable when the stock traded near $400 per share back in May 2021. Today, one AMD share worth around $2 a share.

I don't expect SpaceX to share a similar destiny, as it still has Starlink and a few xAI data centres that it could lease out to generate decent revenue. I am thinking of the nearly $1bn a month worth of computing power that it contracted with Google recently for 32 months. But at the end of the day, whoever is buying as if there is no tomorrow will eventually understand that space exploration dreams come at a cost, and SpaceX shareholders will be paying that cost before seeing the colour of return.

But there is a big problem with SpaceX – which, to me, is a meme stock: SpaceX will be included in major US indices like the Nasdaq and Russell indices. That's what worries me the most. A company with little fundamental justification to its enormous valuation will be bought by these indices and the ETFs that track them, meaning that this meme stock will become part of everyone's portfolios — and not a small part. If included in the Nasdaq 100 today, SpaceX would make up more than 6% of the index.

So, if you hold any of these indices or ETFs that track them, it is important to understand the ingredients and probably to DIVERSIFY — diversify towards indices that have healthier — admittedly more boring, but healthier — ingredients.

Remember, we need less sugar for a longer and healthier life.

Rotation?

If the war in Iran comes to an end — bringing energy prices sustainably lower — the non-technology pockets of the market should see some capital rotation, as they have become relatively cheaper compared to their tech peers during the Iran war, and a healthy and durable rally should be based on more than a single pillar. Eh oui!

The main challenge is that central banks have only just started reacting to rising inflation, just as the war potentially ends, meaning that higher borrowing costs may jinx part of the optimism surrounding lower energy costs.

The European Central Bank (ECB) last week raised its interest rates for the first time in almost three years. The Bank of Japan (BoJ) also went ahead and raised its policy rate by 25bp to 1%.

The rest of the week is not expected to bring any further rate hikes from major central banks. The Federal Reserve (Fed), the Bank of England (BoE) and the Swiss National Bank (SNB) are expected to hold fire at this week's meetings and could eventually get away without raising rates if inflation falls as quickly as it rose. I also believe that the ECB could eventually reverse its latest decision. But for that, again, inflation would need to prove temporary enough.

When does inflation become sticky? When it spills over from energy into other prices and, more importantly, when it shows up in wage negotiations: when workers ask for higher pay to counter the loss of purchasing power caused by higher prices. And when they obtain pay rises, they can spend more, which in turn fuels inflation. That's called a wage-price spiral. It's the nightmare of central banks. So in the coming days and months, wage growth will be closely watched to understand how entrenched the latest rise in inflation has become. Today's wage data from the eurozone, for example, should provide some clues.

The thinking is that if wage growth remains relatively soft, ideally close to inflation, inflationary pressures will remain manageable, allowing a softer monetary policy stance in the coming months. If not, expect more tightening.

In FX, the dollar index is stronger this morning as investors have started questioning the risk of a peace deal not going through. The EURUSD felt uncomfortable above 1.16 yesterday, hinting that it needs more time and a few more answers regarding the peace deal before moving sustainably above that level. Meanwhile, the BoJ's rate hike did nothing to ease selling pressure on the Japanese yen, confirming how broadly investors had expected today's hike and how FX intervention may become inevitable to clear the short-term bearish yen positions, which rose to a nine-year high according to Bloomberg.