SpaceX IPO Fever Has Yet to Fade, Why Have US Stocks Already Sounded the Alarm? Deadly Headwinds Loom, Has a US Stock Bear Market Begun?

TradingKey - Recently, SpaceX has become a major theme in the US stock market, with investors exhibiting unprecedented frenzy for the asset. According to data from Citadel Securities, the day of the SpaceX IPO coincided with a historic high in single-day net retail buying, surging 58% above the firm's previous record. This Tuesday, SPCX options officially commenced trading, with first-day volume reaching nearly 1.8 million contracts, shattering the historical record for post-IPO option listings.

During the US stock market 'carnival,' Bloomberg reporter and strategist Jan-Patrick Barnert warned that although geopolitical risks have receded recently with the conclusion of the US-Iran agreement, the market still faces multiple headwinds.

Barnert noted in his article that these headwinds include: potential policy uncertainty under incoming Fed Chair Kevin Warsh; US government intervention in AI trading, currently referred to as the hotly debated 'sovereign AI'; and the imminent arrival of the largest IPO boom in US stock market history.

US Stocks' False Prosperity: Short Covering Drives the Rally

Barnert warned that the current rally in US equities is driven more by technical flows, and the market is not genuinely bullish.

He cited Goldman Sachs trading desk derivatives specialist Brian Garrett, who noted that macro short covering has just set an early tone for the summer of 2026, with crowded hedge positions being unwound and shorts forced to buy back stock to cover their losses; as short-covering flows subside, the market is searching for conviction and direction.

Garrett pointed out that although hedge funds have bought US equity risk for four consecutive weeks—which seems like a positive sign—it is worth noting that this was mainly to trim short positions rather than to add active alpha exposure. He stated that within global prime brokerage net buying, the ratio of short covering to long buying was as high as 4.7 to 1.

Simply put, the current rally in US equities is merely due to short sellers buying back shares to close out their positions and exit, rather than because the market is genuinely bullish on US stocks.

Warsh Takes Office: 2026 Rate Hike Expectations Surge, US Stocks Lose Key Support

Another headwind came from the newly appointed Fed Chairman Warsh. On Wednesday (June 17), the Federal Reserve passed a resolution to keep the federal funds rate unchanged, marking the FOMC's fourth pause since 2026. The dot plot released after the meeting showed that 9 out of 18 officials expect at least one rate hike this year, with 6 of them projecting at least two hikes. Nick Timiraos, a reporter known as the 'Fed Whisperer,' commented that this was a highly hawkish dot plot.

Although the meeting kept interest rates unchanged, market expectations for a rate hike this year have reached a fever pitch. The CME FedWatch Tool shows that the market's expected probability of no rate hikes this year has dwindled to just 15%. The prospect of rate hikes undoubtedly dealt a heavy blow to US stocks, with the sell-off intensifying in late Wednesday trading and all three major indexes closing lower.

US Government’s Crackdown on AI Models Clouds Tech Earnings Outlook

Barnert believes that the U.S. government's tightening regulation of the AI sector is currently another headwind. On Friday, the U.S. Commerce Department placed Anthropic's two most advanced AI models, Fable 5 and Mythos 5, under export controls, after a company claimed it had successfully breached the security safeguards of the Mythos model, potentially compromising U.S. government systems and financial networks. For investors, pricing in this political escalation is a thorny issue—is this merely an attempt by the U.S. government to influence AI enterprises, or is it a turning point marking a loss of autonomy for frontier tech companies? If the latter, the future earnings outlook for tech stocks will become highly uncertain.

SpaceX's Epic IPO Could Drain Market Liquidity

While the US stock market has recently been driven into a frenzy by SpaceX's unprecedented IPO, Barnert believes this is precisely where a potential crisis lies. The capital raised by SpaceX alone has already surpassed the combined fundraising total of the entire US IPO market for 2024 and 2025; meanwhile, two other AI giants, Anthropic and OpenAI, are still waiting in line to go public. Barnert contends that the ultimate test will be market liquidity, and whether the market has sufficient depth over the coming months to absorb new listings of this scale.