With nonfarm payrolls up 172,000 in May, more than double the 85,000 expected, the Fed has more reason to stay focused on inflation, and things aren’t looking great. After CPI rose 3.8% year over year in April, the highest in three years, RBC Economics expects headline inflation to increase by 0.5% month over month in May, bringing the year-over-year pace to 4.2%. No wonder, according to the CME FedWatch Tool, markets are now pricing in more than a 70% probability of a rate hike by year-end. And the worst part is that the main driver of inflationary pressures — high energy prices due to the closure of the Strait of Hormuz — remains unresolved.

Yet the S&P 500, Nasdaq, and Dow Jones are back on a growth track. Why?

First, another round of verbal interventions from the U.S. president, saying negotiations are progressing well and that a deal is imminent, helped calm investor mood. The problem is we have been hearing the same thing for over two months.

Second, the upcoming SpaceX (SPCX) IPO has shifted attention.

Now, despite the order book already being heavily oversubscribed, the company looks extremely expensive. Morningstar estimates fair value at roughly $63 per share, about 53% below the proposed IPO price of $135. And even that scenario assumes near-perfect execution: a fully reusable Starship system, commercially viable orbital AI data centers, and the monetization of technologies that, at this stage, are still largely unproven.

Thus, the real bull case appears to be less about fundamentals and more about hopes of profiting from speculation, in particular the idea that SpaceX could be fast-tracked into major indices, triggering billions of dollars in passive fund buying regardless of valuation.

While S&P Dow Jones Indices has so far refused to loosen key requirements, including the rule that companies must trade publicly for at least 12 months, be profitable under U.S. accounting standards, and maintain a free float of at least 10 percent, under Nasdaq’s new “Fast Entry” rules, SpaceX might be added to the index just 15 trading days after their IPO, compared to the historical waiting period of three months.

The risk is that if the company fails to justify its valuation, the fallout will not be limited to speculative investors. It will also hit pension funds, retirement accounts, and passive portfolios worldwide.