CME reported Q2'26 on 22 Jul (diluted EPS $2.88, in-line) and bounced +3.3% to $254.32, continuing to recover off the ~30% correction low ($219). Signals stay HOLD / HOLD / HOLD: the earnings-event gate cleared, Timing firmed +12 to 47 (intraday uptrends + daily MACD turning up), and the Driver stayed a mild tailwind (volatile regime helps exchange volumes). Valuation improved to Fair (~20.5x forward on 2026E ~$12.4 vs warranted ~18.9x, ratio ~1.08x) as the ~30% correction reset a rich name — but with the tape still below the 50/200-DMA the base stays HOLD, not a BUY. The 4.4% dividend is the support. Watch a reclaim of the 50/200-DMA ($258/$279) or a pullback to ~$234 for a cleaner entry.
CME Group is the world's largest derivatives exchange — the venue where interest-rate, equity-index, energy, agricultural, metal and FX futures and options are traded and cleared. Its business is a near-monopoly toll booth: it charges a fee on every contract traded and cleared, and earns interest on the cash margin members post. What sets CME apart is an almost unassailable moat — open interest concentrates liquidity at the incumbent venue, so traders cannot easily move to a rival, and its clearing house is systemically entrenched. Volumes rise with market volatility and hedging demand, making CME a rare business that often does *better* when markets are stressed. It returns nearly all its earnings to shareholders via a regular dividend plus a large annual special dividend.
Lifecycle / sector: Mature, wide-moat exchange / capital-markets infrastructure. Scored on the exchange model — operating margin, volume/open-interest trends, and moat durability — with the capital-light valuation lens (P/E, not P/TBV; guardrail 30x). Note the Q2 income statement carries a non-operating investment line (~$245m), so headline operating-income splits are noisy — the durable earnings power is the fee + clearing + float engine.
| Sub-signal | Value | Benchmark | Score | Read |
|---|---|---|---|---|
| Operating margin (TTM) | ~65-77% | Exchanges 50-65% | 92 | Toll-booth economics; best-in-class |
| EPS (Q2'26 diluted) | $2.88 | vs $3.18 Q1 (seasonally lower) | 78 | In-line; volumes healthy |
| Volume / open interest | Elevated | Vol-driven | 80 | Volatile regime lifts hedging demand |
| Dividend + special yield | ~4.4% | — | 82 | ~95% payout by design |
| ROE | High-teens | — | 82 | Capital-light, cash-generative |
Moat average ≈ 85. One of the widest moats in the market — the risk is valuation and volume cyclicality, not competition.
| Rival | Threat | Share trajectory | Erosion vector |
|---|---|---|---|
| ICE (Intercontinental Exchange) | Energy/rates competition | CME stable | Product-specific overlap (energy) |
| Cboe, Nasdaq | Equity-index/options | CME stable | Options venue competition |
| Crypto venues (Coinbase Derivatives, Deribit, offshore) | New-asset trading | CME adapting | Crypto derivatives migrating off-exchange — but CME has its own crypto futures |
→ Net effect: Switching Costs 88, Network Effects 92 intact — no rival is pulling CME's open interest. Threat level: low.
ROIC / capital allocation: exemplary — near-100% payout via regular + special dividends, high ROIC on a capital-light base. Management returns the cash rather than empire-building.
Warranted-multiple anchor (P/E): CME is a low-growth (~4-6% EPS) wide-moat compounder, so g_near 6%, g_term 3%, r 9.0% → warranted P/E ≈ 18.9x. Forward P/E (2026E EPS ~$12.4) ≈ 20.5x; trailing ~21.5x → ratio ~1.08x = Fair band. Well below the 30x capital-light guardrail. Fair (not cheap): the ~30% correction reset the multiple from rich toward reasonable, but with the tape unconfirmed the base stays HOLD rather than a BUY.
| Metric | CME | Warranted / Peer | Read |
|---|---|---|---|
| Forward P/E (anchor) | ~20.5x | 18.9x warranted | Fair (~1.08x) |
| Trailing P/E | 21.5x | — | Fair-to-full |
| Dividend + special yield | ~4.4% | — | The valuation support / income anchor |
| FCF yield | ~4.7% | 3-5% quality | Solid — nearly all paid out |
Implied-growth read: at ~20.5x the market implies mid-single-digit durable growth plus the moat premium — reasonable for CME. The stock corrected ~30% from its ~$329 high to $219 and has bounced to $254; a re-test toward $230 would put the multiple back near warranted and open a cleaner entry.
Analyst cross-check: consensus target $304, median $309, high $330, low $260 — ~20% upside to consensus (the correction opened it), yet grades are a Hold consensus (0 strong-buy / 15 buy / 17 hold / 5 sell = 40.5% bullish) — the classic 'great business, full price' split.
CME's revenue is driven by traded volume, which rises with market volatility and hedging demand, plus float income on member margin (rate-sensitive). The current stagflation-lite, rate-uncertain, geopolitically-stressed regime is supportive of volumes — CME is one of the few names that benefits from turbulence — while elevated rates keep the float income healthy.
| Horizon | Driver read | Score |
|---|---|---|
| Historical (12–24m) | Strong volumes through the rate-volatility cycle; record OI periods | 62 |
| Current | Volatile regime + elevated rates = supportive volumes and float | 60 |
| Forward (6–12m) | Volumes stay volume-of-fear driven; a calm melt-up would soften them | 58 |
Amplification: driver 60 sits in the 36–64 neutral band, and the base signal is HOLD — so no amplification either way. (A HOLD never amplifies regardless.)
Thesis-invalidation floor: a durable collapse in traded volume (a low-volatility, low-hedging regime) or a credible structural challenge to the clearing moat — neither in evidence.
Macro report scores Financials (XLF) Outperform short & medium with money flowing in. CME additionally benefits from the regime's volatility (higher volumes) and elevated rates (float income). Pressure = Tailwind, stance Trend-Following. But because the base signal is HOLD (Full valuation + un-confirmed tape), the Tailwind does not amplify anything — amplification only intensifies an existing BUY/SELL. Note: the macro backdrop now includes a Fed leadership change (Kevin Warsh as chair) into the 29 Jul decision — a source of the very rate volatility CME monetises.
Source: sector-map (XLF) · Macro report 2026-07-20
Risk-reward: CME corrected ~30% from $317 to $219, then bounced to $254 on the Q2 print (+3.3%). Intraday timeframes turned to strong uptrends and the daily MACD histogram flipped positive, but the daily and weekly are still classified downtrend and price sits below the 50-DMA ($258) and well below the 200-DMA ($279). So the tape is recovering, not confirmed. Support $244 then $234/$218; resistance $270 then the $279 200-DMA.
Relative strength: lagged over 3m during the correction; the bounce is nascent. 52-week position mid-range after the pullback.
Position-risk: a stop below $234 is ~2.6 ATR — wide. The recovery is real but unconfirmed; buying before a 200-DMA reclaim, at a Full multiple, is why the signal is HOLD. A pullback toward $230 (multiple ~warranted, yield ~4.9%) would be the value entry. Sentiment: Hold-consensus grades but 20% upside to price targets.
| Date | Event | Impact | Forecast | Previous | Relevant? | Why |
|---|---|---|---|---|---|---|
| 2026-07-29 | Fed Interest Rate Decision (Warsh) | High | Hold 3.75% | 3.75% | ⚠️ Yes | Rate volatility drives CME rate-futures volume + float income |
| 2026-07-30 | Core PCE / Q2 GDP | High | 0.1% / ~1.6% | 0.3% / 2.1% | ⚠️ Yes | Macro surprises spike hedging volumes (good for CME) |
| 2026-08-07 | Non-Farm Payrolls | High | — | 57k | Medium | Volatility catalyst |
| Date | Event | Actual | Forecast | Surprise | Impact |
|---|---|---|---|---|---|
| 2026-07-22 | CME Q2 earnings | adj EPS $2.99 / GAAP $2.88 | ~in-line | stock +3.3% | Volumes healthy; bounce off the correction low |
| 2026-07-17 | Michigan Consumer Sentiment | 54.4 | 51.0 | +6.7% above | Risk-on; mild |
For CME, macro volatility is a positive — the 29 Jul Fed (under new chair Warsh), PCE and payrolls all spike the rate/equity-vol hedging that drives contract volume. High macro sensitivity, but asymmetric: turbulence helps CME's top line even as it pressures the tape.
| Timeframe | Trend | Direction | RSI | MACD | Key S/R | Breakout | Vol |
|---|---|---|---|---|---|---|---|
| Monthly | Uptrend ↑ | Neutral | 48.9 | − falling | S: 195 R: 329 | Res breakout | 1.04x |
| Weekly | Downtrend ↓ | Bearish | 44.4 | − falling | S: 244 R: 288 | Support breakdown | 0.94x |
| Daily | Strong Down ↓ | Neutral | 53.2 | + turning up | S: 244 R: 270 | Res breakout | 1.07x |
| Hourly | Strong Up ↑ | Bullish | 57.5 | + (flat) | S: 241 R: 257.5 | Res breakout | — |
| 15-min | Strong Up ↑ | Neutral | 49.6 | flat | S: 248 R: 257.5 | Res breakout | — |
| Confluence: Mixed / Recovering · MTF Score 50 | |||||||
A transitioning tape: the weekly/daily are still in the correction's downtrend, but the daily MACD has turned up and the intraday charts are in strong uptrends off the $219 low — the classic early-recovery split. The confirmation to watch is a reclaim of the 50-DMA ($258) then the 200-DMA ($279); until then it's a bounce within a correction. A pullback to $234-244 is the higher-probability accumulation zone.
CME 6-month daily — a ~30% correction from $317 to $219, now recovering to $254 post-Q2; still below the 50- and 200-DMA.
The correction fully unwinds — volumes stay elevated in a volatile regime, float income holds, and the multiple re-rates toward the $305-330 analyst zone. ~+24%.
CME grinds back toward the mid-range as the bounce holds; mid-single-digit EPS growth + the 4.4% yield deliver a steady total return. Multiple stays ~Fair. ~+6% + yield.
A calm, low-volatility melt-up softens hedging volumes, or the correction resumes — re-testing the $219 low. The Fair multiple compresses toward warranted. ~−13%.
Forecast: No group met → Wait. Technical group — watch for a reclaim of the $258 50-DMA (Moderate, 1-3 weeks if the bounce holds) or a pullback into $234 (the cleaner value entry, multiple back near warranted). Fundamental group opens only if the price falls toward $230 or earnings/growth surprise. This is a 'great business, wait for a better price' setup.
Forecast: For existing holders the stop ($215) is ~15% below and below the correction low — unlikely absent a volume collapse. The name is a HOLD: neither a fresh-buy setup (Full price, unconfirmed tape) nor an exit (moat intact, 4.4% yield).
Buying at $254 means paying ~20.5x forward for a low-growth (if wide-moat) name, before it has reclaimed its 50/200-DMA, with no entry group met (Wait). What you gain is a fortress business, a 4.4% income stream, and ~20% upside to analyst targets if the correction fully unwinds. Read: the quality is A-grade but the price is Full — waiting for a pullback toward $230-234 (multiple near warranted, yield ~4.9%) or a confirmed 200-DMA reclaim materially improves the deal. HOLD.
No exit rule is live — the moat is intact and the yield is attractive. For an income holder there's no reason to sell a monopoly at a fair-to-full multiple yielding 4.4%. A total-return investor with no position simply waits for a cheaper entry rather than selling.
Position sizing not computed — no risk budget/role specified. The §12 Conviction Ladder reads Wait (0 of 3 entry paths met — Full price, unconfirmed tape): the guidance is to watch $234 / a 200-DMA reclaim rather than size a position here. ATR ~$7.8/day (~3%); beta ~0.6 (defensive); high macro sensitivity, but volatility is a tailwind to CME's volumes. Illustrative, not advice.
{
"ticker": "CME",
"date": "2026-07-23",
"version": "v6",
"exchange": "NASDAQ",
"exchange_ticker": "NASDAQ:CME",
"isin": "US12572Q1058",
"api_ticker": "CME",
"company": "CME Group Inc.",
"currency": "USD",
"sector": "Financials",
"sub_industry": "Capital Markets / Exchange",
"lifecycle_stage": "mature",
"price_at_rating": 254.32,
"signal_short": "HOLD",
"signal_medium": "HOLD",
"signal_long": "HOLD",
"primary_signal": "HOLD",
"quality_score": 82,
"valuation_score": 54,
"timing_score": 47,
"driver_score": 60,
"overall_confidence": 55,
"economic_alignment_stance": "Trend-Following",
"economic_alignment_conviction": 66,
"economic_alignment_pressure": "Tailwind",
"economic_alignment_source": "sector-map",
"macro_report_date": "2026-07-20",
"val_multiple_basis": "P/E",
"warranted_multiple": 18.9,
"actual_multiple": 20.5,
"warranted_ratio": 1.08,
"val_band": "fair",
"sector_guardrail_multiple": 30,
"discount_rate_r": 9.0,
"risk_free_10y": 4.5,
"g_near": 6,
"g_term": 3,
"dividend_yield": 4.4,
"trailing_pe": 21.5,
"nonop_pct_of_net_income": 20,
"clean_pe": 20.5,
"clean_peg": 3.8,
"competitive_share_trajectory": "stable",
"competitive_threat_level": "low",
"driver_commodity_trend": null,
"hard_gate_state": "caution",
"gates_triggered": [],
"gates_caution": [
"Valuation (Fair band, unconfirmed tape \u2014 HOLD, no hard cap)"
],
"do_not_buy_triggers": [],
"entry_groups_met": 0,
"entry_conviction": "Wait",
"exit_groups_live": 0,
"exit_action": "Hold",
"short_entry_confirmed": false,
"short_cap_reason": "Short HOLD \u2014 Full valuation + unconfirmed recovery (below 50/200-DMA); no entry group met (Wait). Watch a 50/200-DMA reclaim or a pullback to $234.",
"fair_value_est": 255.0,
"stop_loss": 215.0,
"target_price": 270.0,
"scenario_base_target": 270,
"scenario_bull_target": 315,
"scenario_bear_target": 220,
"analyst_consensus_target": 304.33,
"analyst_target_high": 330,
"analyst_target_low": 260,
"analyst_target_upside_pct": 19.7,
"analyst_grades_consensus": "Hold",
"analyst_bullish_pct": 40.5,
"analyst_coverage_count": 37,
"fmp_rating": "B",
"fmp_overall_score": 3,
"next_update_date": "2026-08-06",
"next_update_basis": "default +14d (next earnings 2026-10-28 beyond window)",
"next_check_date": "2026-08-06",
"analysis_status": "on-going",
"finder_ticker": "CME",
"finder_exchange": "\ud83c\uddfa\ud83c\uddf8 NASDAQ",
"forward_pe": 20.5,
"fwd_eps_2026e": 12.4
}