Hi,

You may have noticed that I skipped last month’s newsletter. My wife gave birth to our baby girl, and I took some time off to be with my family during those first important weeks.

We’re now back on our regular schedule, and I have several updates to share with you today. As always, if you find value in these updates, I’d appreciate it if you could share mulderstrategies.com with others who might be interested.

We have made an important adjustment to our proprietary indicator. After conducting extensive backtesting back to 1950 using FRED data, I concluded that both the name and the way we interpret the reading needed to be updated.

Since the era of quantitative easing began after the 2008 financial crisis, markets have behaved differently. Large-scale liquidity injections have allowed markets to recover more quickly from economic weakness. As a result, traditional recessions have generally become shorter and less severe than in previous decades. This has created an environment where markets tend to remain biased to the upside, often offsetting or delaying the impact of underlying economic deterioration.

While the indicator continues to perform well at identifying periods of elevated market risk and important turning points, calling it a “Recession Indicator” no longer accurately reflects what it measures. Going forward, we will refer to it as the Market Risk Indicator.

The indicator has historically done a good job of flagging periods where markets were vulnerable to meaningful declines. Readings above 50% have typically coincided with higher risk environments, where it made sense to adopt a more defensive stance, such as raising cash and reducing exposure to higher-risk positions. For example, the indicator moved above 50% ahead of the roughly 20% correction we saw in the S&P 500 last year.

A reading above 50% should be viewed as a signal to be more cautious, rather than a direct recession forecast. It suggests that downside risk in the market has increased and that investors may want to manage risk more actively until the indicator trends lower again.

We will continue to monitor and report on this indicator in every newsletter, as it remains a useful tool for assessing the overall risk environment.

Quick Summary

As of July 7th, 2026, our proprietary Market Risk Indicator stands at 33%. While this remains in favorable territory, there is still meaningful underlying stress in both the U.S. and Chinese economies. In the United States, consumer weakness continues to build. Given that consumer spending accounts for roughly 70% of GDP, this is already translating into a noticeable slowdown in economic activity. Combined with ongoing pressures in China, these developments keep the risk environment worth monitoring. Should the indicator move back above the 50% threshold, it would serve as a clear signal to adopt a more defensive stance.

I have said it in previous newsletters and I have been proven correct: Inflation has been a temporary issue driven by geopolitics.

We are currentily seeing higher inflation prints but that is normal as CPI is lagging indicator. The latest print gave us 4,2% coming from 3.8% last month. A steep increase which would be very worrisome but considering a big portion of that higher CPI print is driven by increase denergy cost and that same energy cost has been driven by higher oil prices, we can then see that this will now revert back lower as the war with Iran has nearly ended and oil prices are back below 70 USD.

Inflation has moved higher in the latest print, rising to 4.2% from 3.8% the previous month. While this increase looks concerning at first glance, it is largely driven by higher energy costs, which in turn were caused by the spike in oil prices earlier this year.

CPI is a lagging indicator, so it is normal to see these effects show up with some delay. The good news is that oil prices have already fallen back below $70, following the de-escalation of tensions with Iran. As a result, energy prices should start to ease in the coming months, which should help bring headline inflation lower again. As I mentioned in previous newsletters, this latest rise in inflation appears to be temporary and primarily driven by geopolitical factors rather than a broad-based and persistent increase in underlying prices.

Kevin Warsh made his first public appearance as the new Fed chairman in Europe last week. His comments were largely in line with the neutral scenario I outlined in my previous report.

Warsh reiterated that inflation remains too high and reaffirmed the Fed’s commitment to the 2% target. At the same time, he noted that inflation risks have eased in recent weeks, citing the de-escalation with Iran and the decline in energy prices. On the balance sheet, he repeated his long-held view that any reduction would take considerable time and would not come as a surprise to markets. This message was reinforced by the Fed’s recent reaffirmation of its commitment to maintaining “ample reserves.”

These remarks align with the neutral case I described earlier. The Fed has historically looked through temporary energy-driven inflation spikes when setting policy. While the market is currently pricing in an 89% chance of at least one rate hike by the end of 2026, I believe that probability is somewhat elevated.

If energy prices continue to stabilize — which appears likely as long as the situation in the Middle East remains contained — then the recent uptick in inflation should moderate. In that environment, the Fed would have room to adopt a more patient approach. Inflation is still above target, which makes near-term rate cuts unlikely, but the momentum appears to be cooling. This should limit any further tightening in 2026 to either zero hikes (a patient stance) or one modest, largely symbolic hike.

Overall, Warsh’s comments point toward a more neutral policy path than the market is currently pricing. The combination of easing inflation pressures and a cautious approach to balance sheet reduction supports the view that the Fed is in no rush to act aggressively in either direction for the remainder of the year.

I expect GDP for the second quarter to remain positive. This would be supportive for the bullish case and consistent with my view that equities, particularly the S&P 500, may still be in a phase of potential overextension. It is worth noting that GDP readings throughout 2025 were flattered by the front-running of imports ahead of the implementation of tariffs. Because of this, we should interpret the recent GDP prints with some caution. The strength in earlier quarters was likely overstated, and conversely, the Q4 print probably did not appear as weak as it would have been without the earlier pull-forward of imports.

GDP growth remained solid through the end of Q1 2026. However, early indications for the second quarter point to a slowdown, primarily driven by weaker exports. According to the Atlanta Fed’s GDPNow forecast, this softening trend could become more concerning if it continues into the coming quarters. While the initial GDP print may look relatively stable, it is important to wait for the subsequent revisions before drawing any firm conclusions. These revisions can meaningfully alter the final picture and often take several months to be fully reflected.

Earnings season is approaching, and at this stage there is little reason to expect disappointing results. Other indicators remain supportive as well. Both the manufacturing and services PMI readings are still in healthy territory, and the Federal Reserve is widely expected to keep interest rates on hold. When the Fed holds rates steady, it generally signals that the economy remains in decent shape, a view that is also reflected in our Market Risk Indicator.I continue to believe the current environment has room for further upside. As mentioned previously, I would not be surprised to see the S&P 500 extend beyond my original annual target of 7,620 and move into the 8,000 – 8,300 range before this bull market reaches its peak in 2026. These final stages of a rally are often driven more by rotation and sentiment than by fundamentals, which means volatility is likely to remain elevated in the months ahead.

That said, I remain of the view that 2026 will likely mark the peak of this cycle. A larger correction of around 20% remains the most probable outcome once this final advance runs its course. Markets could continue grinding higher into the fourth quarter, potentially around the mid-term elections, or they could turn lower sooner. No one can time these turning points with precision, which is why we continue to rely on our fundamental framework and risk management rather than trying to predict the exact top.

Liquidity conditions remain an important driver of market direction. When liquidity is abundant, risk assets generally perform well. When liquidity tightens, markets tend to become more volatile or experience corrections.

Quick summary:
For now, U.S. liquidity conditions remain neutral. The U.S. Dollar has strengthened toward 100 and appears likely to move toward 103 in the near term, which introduces a mild risk-off bias. Banking system stress remains low, and domestic liquidity continues to hold in a balanced range. Higher energy prices have not yet translated into meaningful stress for banks.

The DXY has bounced sharply from deeply oversold levels and is now trading near 101. As mentioned in recent updates, I continue to expect the dollar to trade within the 100–103 range over the coming weeks. It has now broken out to the upside, so I am watching for a potential move toward 103, which represents a significant resistance level. Should the dollar reach that zone, I would expect a reversal lower from there, potentially setting up one more leg down. With interest rates likely to remain on hold, the dollar is likely to stay in a choppy range in the near term. On the domestic liquidity side, both the TGA and RRP have remained relatively flat. This suggests that liquidity conditions in the U.S. banking system continue to stay neutral for now. Given that there has been little change since the last update, I will not include updated charts this month.

Global liquidity has been in a strong uptrend throughout 2025 and into 2026. However, the steep uptrend line has recently been broken, which could signal a potential regime change ahead. While it is still too early to draw firm conclusions, this is something I will continue to monitor closely in the coming months.

The current pause in liquidity growth appears healthy after such a strong expansion. That said, several factors could contribute to an inflection point in the period ahead, including shifts in monetary policy, the absorption of large-scale U.S. debt refinancing, ongoing geopolitical uncertainty, and the natural maturation of the liquidity cycle itself.

Historically, periods where liquidity momentum fades have often led to increased volatility or corrections in liquidity-sensitive assets such as equities and cryptocurrencies. This development is broadly consistent with my view that we are in the later stages of the current equity bull market, where a larger drawdown remains possible. However, it is still too early to call for a definitive shift in the liquidity regime.

Not much has changed on the liquidity front since last month, with overall conditions remaining neutral. That said, I am paying closer attention to the Global Liquidity Indicator (GLI). If it continues to stall, it could point to rising volatility in the months ahead. This development would be consistent with my expectation that we are approaching a peak in equities sometime between now and the end of 2026.

Many investors are concerned that AI could rapidly erode the competitive advantages of traditional software and SaaS companies. This fear has contributed to the sharp sell-off in software stocks in recent months, as capital has rotated toward AI infrastructure and computing hardware.

While these concerns are understandable, I believe many are overestimating AI’s ability to disrupt established software businesses in the short term (the next one to three years), while likely underestimating its impact over a longer horizon.

In my own experience using AI daily, it has already become a powerful tool for automating routine tasks and assisting with coding. However, it still struggles with complex, autonomous decision-making and frequently requires human oversight and correction. Much of the current enthusiasm appears driven by hype rather than proven, large-scale use cases that can fully replace existing software platforms. Many software companies are not standing still. They are actively integrating AI into their own products to improve functionality and maintain their edge. This is visible in the performance of the IGV software index, which has seen a sharp decline driven by rotation and sentiment, even though the underlying sector continues to generate solid results and remains highly relevant.

In short, while AI will undoubtedly reshape parts of the software industry over time, I expect many high-quality software and SaaS businesses to remain competitive in the year ahead. The recent sell-off appears to have created opportunities in names that have been overly punished by short-term fears rather than fundamental deterioration.

We are currently seeing a sharp pullback in software stocks, with prices retracing back toward more normal levels before bouncing. A similar pattern occurred in 2023, when the sector formed a bottom after breaking its downward trendline.I believe software stocks are likely approaching a bottom, although I do not rule out the possibility of one more leg lower into the red zone before a more sustainable low is established.

In the short term, we have seen a sharp repricing following the recent sell-off. This kind of move can sometimes spill over into other areas of the market. Stocks with strong and durable competitive advantages that have been sold off aggressively may offer attractive risk/reward opportunities. Below, I will highlight one such company that I believe has the potential to benefit from a recovery in the sector.

ServiceNow remains one of the highest-quality enterprise software businesses, supported by a strong switching-cost moat. Its single data model integrates workflows across IT, HR, customer service, security, and increasingly AI-agent orchestration. Once embedded across multiple departments, replacing the platform becomes a complex and time-consuming project for large enterprises.

This strength is visible in the fundamentals. Remaining performance obligations grew 25% year-over-year, subscription gross margins are guided around 81.5%, and free cash flow continues to expand. The company maintains conservative leverage and has been returning capital to shareholders. These are the traits of a mature, high-quality compounder.The main debate today centers on whether agentic AI will ultimately strengthen or weaken ServiceNow’s position. The company is positioning its AI Control Tower and Now Assist as a governance layer for both human and AI-driven workflows. However, if AI agents become effective at orchestrating workflows across different systems through open protocols, the value of being tied to a single proprietary data model could diminish. Competition from Salesforce’s Agentforce and Microsoft’s AI offerings adds to this uncertainty.

Growth has moderated as expected. Subscription revenue growth has slowed from over 30% to the low 20s, reflecting the law of large numbers. Recent acquisitions have also created some near-term pressure on margins.

Valuation remains the primary constraint. At roughly 8x sales and 49–61x forward earnings, the stock leaves limited room for error if growth slows further or the AI competitive landscape becomes less favorable.

Overall, ServiceNow has a real and durable moat with strong cash flow characteristics. However, the combination of maturing growth, a rich valuation, and an unresolved question around how agentic AI will impact its core differentiation makes this a more nuanced opportunity. I currently view it as a Marginal-to-Yes name, worth monitoring closely and potentially attractive on further weakness, but not yet a high-conviction position at current levels.

I start to become interested at sub 87 USD as this provides excellent location considering the current cashflow generation and historical P/E valuations.

A strong direct competitor to NOW is Salesforce (CRM). I think this one falls in the same camp. It has the same fundamentals supporting the stock and also has significant potential considering its current cash flows and historic P/E valuations.

If we look at the location (red) and volumes, this stock is at a far more favorable point and I would not be surprised if we build a base here from which we could accelerate to the upside.

The market is maturing in its bullish impulse towards a climax but there remains opportunity and potential in the markets for investors looking beyond the hype and current sentiment. No guarantees.

I launched this Passive Model Portfolio on January 1st, 2026. It is up over 7.9% as of May 2026.

I will not add any new capital to it. Instead, I’m running it as a transparent, real-world example of a well-balanced portfolio across sectors and regions.

Starting capital: €10,000. I will report any changes here so you can track performance over time. Because this is a passive portfolio, I plan to keep adjustments to a minimum and only make significant changes when I believe the secular (long-term) cycle is shifting.

Keep in mind that I started this on Jan 1st of 2026. At the time silver just had one of its hardest rallies in over 10 years and BTC had just seen its cyclical highs for the 4 year cycle. Because of this both these assetrs have been in a big drawdown ever since which is basically muting the performance a little bit in the short term. While this muted performance to a weak 8% in 7 months time, in the long run however it is likely to be a tailwind for the portfolio.

Changes made since last issue:

None