Morning Briefings
Expert market analysis delivered every morning. Stay informed with comprehensive research and data-driven insights.
On Taiwan, EVs, Europe & Earnings
President Trump’s Venezuelan gambit may give China cover to tighten the noose around Taiwan. That could slam global markets and supply chains, William writes, as well as unnerve global AI investors envisioning Taiwan Semiconductor winding up in China’s control. … Also: In the EV market race, BYD is running circles around Tesla. But whether that will remain the case is questionable. … And: In Europe, gradual fiscal stimulus is keeping the economic backdrop stable, Melissa reports, which is keeping stock markets moving higher. Forward P/Es have been capped around 15 since March. … Also: Joe says the absence of Q4 earnings warnings by managements of S&P 500 companies could set the stage for yet another epic earnings quarter.
Trump’s Tariffs: More Bark Than Bite
The bark of President Trump’s harsh tariff policy has been worse than its bite. While many of the rates are punishingly high, Trump’s tariffs have not hobbled the global economy or saddled the domestic economy with runaway inflation. William attributes this to the tariffs’ on-again-off-again nature, their many carveouts, and the workarounds that US trading partners have found to keep their export activity aloft. … Also: The Supreme Court soon may strike down the tariffs, ruling that the justification used for them is unlawful. If so, the administration has other justifications up its sleeve. … And: No “grand bargain” between the US and China is likely anytime soon, which suits China just fine.
The Gen-Shaped Economy
It’s an economic curiosity of our times: The US economy is undeniably strong, in fact remarkably resilient in the face of recent headwinds. Yet it’s in the midst of an affordability crisis that has hit Gen Zers and other lower-income folks especially hard. Even so, consumer spending is brisk, and Dr Ed expects it to remain so. What’s going on? The paradoxes can be explained largely by one distortive phenomenon: The largest generation in history is retiring and spending substantial nest eggs accumulated over decades of work. … Also: Dr Ed reviews “Goodbye June” (+).
On Utilities, Oracle & Data Centers In Space
Among the improbable accomplishments of artificial intelligence, it has turned sleepy Utilities stocks into hot commodities. Demand for electricity to power AI data centers is expected to soar. Jackie examines forecasts for electricity generation and what’s fueling them. … Also: Oracle has been spending with abandon on data center buildouts, feeding investors’ fears that such massive capex won’t pay off. All it took was the loss of a potential partner for a future project to send Oracle shares reeling. … And: Some visionaries see data centers in space solving a lot of problems, but do they have stars in their eyes?
On Brazil, Mexico & S&P 500 Earnings Revisions
As Brazil’s economy falters, its central bank has not eased, more determined to tame inflation than spur economic growth. Such Volcker-esque monetary policy has put bank chief Gabriel Galipolo in the hotseat, William reports, and at odds with President Lula. Will looser fiscal policy revive the swooning economy or will it be taken too far for political reasons? … Also: Tearing a page from Trump’s playbook, Mexico has imposed its own 50% tariffs on imports from Asia. Melissa explores the reasons Mexico doesn’t want to be China’s backdoor into US markets. … And: For a fifth straight month now, Joe reports, analysts’ earnings revisions have been net positive and to a strong degree.
On Challenges For China & Europe
It’s not China’s feared “Lehman moment.” But the psychological impact of Chinese property developer Vanke’s inability to pay its debt on time can’t be overstated, writes William. The situation is rattling investors who recall the 2021 default of China Evergrande Group and catastrophic aftermath. Now Vanke’s problems suggest the property sector’s troubles are far from over, putting the government’s GDP growth goals further from reach. Japan’s lost decades hold lessons for China, if only President Xi would heed them. … Also: The European Central Bank may be about to start tightening, notwithstanding the global challenges. This has stirred global debate about the limits of monetary policy to fix what ails an economy.
Game Of Thrones: The Mag-7 & The Fed
It has all the drama of “Game of Thrones”: The Magnificent-7 kingdoms, each surrounded by moats, rarely had threatened each other’s monopolies in the past. Now, with the advent of AI, they have been encroaching on each other’s previously sacrosanct fiefdoms, forcing one another to spend ever more to remain in the game. Amid the chaotic disruption, investors’ AI euphoria has given way to AI agita as confidence in the Mag-7 ebbs. Are their earnings inflated by accounting? Will returns justify their capital investments? Our take: AI will have a powerful impact on productivity in the economy. The winners may not be among the Mag-7 at all but the S&P 500’s Impressive 493 and the economy at large. … Today, Dr Ed enlists the help of Google’s Gemini AI assistant to extend the “Game of Thrones” metaphor to this disruption as well as the transition in the Fed’s Iron Throne. ... Also: Dr Ed reviews “Task” (+).
On Financials, Earnings & Distributed AI
Various Trump administration initiatives have showered love on certain industries in the S&P 500 Financials sector, helping to lift its ytd performance to fourth among the S&P 500’s 11 sectors. Jackie counts the ways they’ve benefited. … Also: A select few S&P 500 industries appear headed for dramatic earnings turnarounds next year. Read on for a peek at particular industries’ earnings growth prospects in 2026 relative to their 2025 forecasts. … And: “Look, Mom, no data centers!” A new way to train and run AI at much lower cost, but also less speed, is under development. Distributed AI is certainly an area to watch.
On Slippery Oil, Resilient Dollar & Q4 Earnings Outlook
Oil appears to be stuck in the mud. Melissa analyzes the bullish and the bearish forces keeping the price of Brent crude futures mired below the mid-$60s per barrel. We expect to see more of the same in 2026, barring a demand surprise or severe supply disruption. … Also: William addresses dollar bears’ arguments, defending our position that the dollar faces no great threat to its global supremacy. … And: Joe notes that the analysts following S&P 500 companies haven’t been cutting their estimates to the usual extent during “confession season.” That suggests Q4 will be yet another quarter of strong earnings growth.
A Challenging Year Ahead For Japan And Europe
High drama surrounds the Bank of Japan’s monetary policy decision next week, William reports. BOJ Governor Ueda is determined to end the many years of extreme monetary ease that have squelched Japan’s animal spirits. Prime Minister Takaichi is staunchly against his doing so now with Japan on the verge of a recession. The widespread expectation is a tightening move, which may put the two leaders on a collision course. … European Central Bank leader Lagarde is upbeat about the European economy’s resilience to recent months’ tariff chaos. But the economy will have to successfully navigate myriad risks to remain as well positioned in 2026.
2026: Another Year Of Living Audaciously!
The coming new year looks like another good one for stock investors. Dr Ed is adjusting his subjective odds of various stock market scenarios, including raising the odds of his base-case Roaring 2020s outlook to 60%. Associated assumptions for earnings and valuation levels produce an S&P 500 price target of 7700 by year-end 2026. Alternative scenarios include a bear case, triggered by a recession or recession fears (20% odds), and a stock market meltdown/meltup (trimmed to 20%). … Also discussed: Five winds at the economy’s back that support a continuation of the Roaring 2020s and six potential developments that could blow it off course. … Also: Dr Ed reviews “Sovereign” (+ +).
On Retail, Crypto & S&P 500 Earnings
The holiday selling season is off to a merry start for retailers. By most accounts, consumers gobbled up the post-Thanksgiving sales last weekend with more gusto than last year. … Also: Does the recent downdraft in the price of bitcoin suggest another cyrpto winter? Jackie parses the issues that bitcoin investors are wrestling with at this juncture, including two big headwinds and one helpful tailwind, courtesy of Uncle Sam. … And: Joe’s analysis suggests that 2026 may be a rare year in which analysts’ estimates for S&P 500 companies aren’t whittled down as the months pass.
Positive Spins On AI & On Australia
Investor concerns that AI may be costing more than it’s worth should be put into perspective, Melissa says. It is costing a fortune to build out AI infrastructure, and investors aren’t wrong to worry that OpenAI won’t make money for years, that depreciation practices unduly inflate earnings, that AI stocks may be overvalued. But compared to the GDP impact that ubiquitous AI will have as it sparks productivity growth economywide, the worriers are sweating the small stuff. AI will put our Roaring 2020s outlook into overdrive. … Also: Nvidia’s GPUs are facing new competition from TPUs, but the broader chip industry is expanding solidly. … And: William observes that Australia’s economic strength may be a bellwether for the global economy and bode well for the US.
On Challenges Facing China & South Korea
China has a shot at overshooting the government’s 5% GDP growth target in coming years, William reports, if it keeps its exports flowing, as they have been, to developed nations other than the US. But this would risk geopolitical collision with President Trump’s vision for US-China trade. … Also: South Korea’s stock market is up dramatically so far this year, reflecting newfound political stability, faith in the government’s reform plans, and exposure to the AI boom. Is the bull run sustainable? Several geopolitical, economic, and reform-related obstacles lie ahead.
The Affordability Crisis
On paper, the American consumer looks flush: Unemployment is low, inflation is down, the stock market is up, and average wage growth has kept up with inflation. Indeed, the Misery Index is low, which usually means consumer sentiment readings are high. But, no, sentiment is low. What gives? … Several factors may contribute to Americans’ feeling that life has become less affordable than before the pandemic. The prices of nine PCED components—essentials for many—have inflated way faster than wages. And many Americans’ wage growth is below the average and lags inflation. So why is consumer spending holding up so well? … Also: Dr Ed reviews “The Life of Chuck” (+ + +).
Consumers Still Spending & AI Agents Are Ready To Help
Consumers are well positioned to spend heartily this holiday shopping season even though investors and consumers themselves have their doubts. Inflation and economic qualms have done a number on consumer confidence. But Jackie argues that holiday spending may be stronger than feared. … Also: A look at what the managements of several diverse retailers have observed about the spending behavior of their customers over the past quarter. … And more shop talk in our Disruptive Technologies segment: How the newest breed of AI shopping assistants is finding exactly what consumers are looking for—and more.
Stagflation In Japan
Japan’s GDP is contracting as its inflation mounts, but newly installed Prime Minister Sanae Takaichi isn’t up to the stagflation challenge, William reports. Her massive stimulus package risks stoking inflation, as do US tariffs and a weak yen. That’s unnerving investors, and the Bond Vigilantes are circling. … Also making investors nervous: Takaichi has pledged Japan’s allegiance to Taiwan, triggering China’s President Xi Jinping and jeopardizing Japan’s relationship with its second biggest trading partner. Xi has retaliated with trade and tourism bans that aren’t helping the cause of simulating Japan’s economic growth.
2026 Is Coming!
Our base-case outlook calls for a continuation of the Roaring 2020s scenario next year, with ongoing productivity gains that fuel a robust economy, which propels earnings and the stock market higher. Today, Dr Ed reviews the Roaring 2020s thesis; outlines what he expects 2026 will bring in terms of economic variables, earnings, and the S&P 500; makes portfolio allocation recommendations; and weighs in on the “Impressive-493,” the rising appeal of foreign stock markets, bullish expectations for the dollar and gold, and bearish ones for bitcoin. After the Roaring 2020s? There’s reason to think the 2030s could roar as well. ... Also: Dr Ed reviews the 2025 remake of “Frankenstein” (+).
On Market Laggards, Health Care & AI World Models
Tech stocks, home-related stocks, and bitcoin have borne the brunt of the stock market’s sell-off this month. Jackie looks at the issues that scared investors away and the particular industries and stocks they dropped as they ran. … Also: The S&P 500 Health Care sector may be where many investors fled into; it’s up nearly 6% in November to date, buoyed by M&A activity and political winds. … And: World models are a new kind of AI that “gets” how the physical world works, picking up where large language models’ intelligence leaves off.
On Emerging Markets, Brazil & S&P 500 Q3 Earnings
Emerging markets’ stock markets are enjoying bull runs. Melissa says there are strong enough earnings support and low enough valuations to suggest opportunities for investors mindful of the risks. … Also: William reports that US tariffs will be tough for Brazil’s beleaguered economy to bear. With high interest rates, high inflation, and a President courting voters with fiscal stimulus instead of economic reform, the picture isn’t pretty. … And: Joe is impressed by the S&P 500 companies’ record-breaking Q3 earnings reports.
On China’s Woes & SoftBank’s U-Turn
China’s economy has been surprisingly resilient this year in the face of external headwinds. But it’s internal headwinds that pose the greater threat to GDP growth, William opines, and President Xi’s policies are perpetuating them. … Also: William explores the questions raised by SoftBank’s abrupt sale of its huge stake in Nvidia. Does the sudden stock dump say more about the future of Nvidia and AI, the ambitions of SoftBank, or the personality of SoftBank’s controversial leader Masayoshi Son?
All About Earnings
The economy and corporate profits have been remarkably resilient in recent years despite numerous formidable challenges. This year continued the remarkable performance, as Trump’s Tariff Turmoil failed to derail earnings or the economy. As a result, the stock market has soared. We remain optimistic on the outlooks for the economy, earnings, and the stock market, supported by a continuation of this year’s remarkable earnings strength into 2026. … However, there are some legitimate concerns regarding AI-related companies’ accounting practices that call into question the quality of S&P 500 earnings generally, given the Tech sector’s outsized earnings share.
On Data Centers, Crops & Quantum Computing
There’s no doubt that demand for AI is growing. The question is, will new data centers have access to the massive amounts of electricity needed to make AI possible? Jackie takes a look at the electricity logjam down on Earth as well as the potential for data centers among the stars. … Crop prices have had a terrible year, hurt by oversupply and falling exports. Prices could improve if China makes good on its promised purchases and farmers plant fewer acres next year. … Quantum computing may be in AI’s shadow, but that doesn’t mean progress isn’t being made. We take a look at the advancements the industry’s giants and upstarts are making.
On China, Financial Stability & S&P 500 Earnings
Hopes that China’s deflation problem is ending are premature, William reports. He explains why deflation remains a clear and present danger to China’s economy, and one that’s exportable to its trading partners. … Also: The Fed’s latest Financial Stability Report depicts a reassuringly resilient financial system. Melissa recaps the report’s main points, including its positive assessments in four main risk categories. … And: Joe reports that six months of improved net earnings revisions data suggest a trend reversal from years of negative readings to positive ones. Historically, such speedy reversals have led to positive readings for the next two years. This supports the S&P 500’s recent recovery to a record high.
O Canada
Canada’s Prime Minister Mark Carney has been pushed into action by President Trump’s tariffs and talk of making Canada the 51st state. Carney’s plan: spend big to boost economic growth and span the globe to woo new trading partners. William takes a look at both elements. ... Canada’s naysayers worry about a record budget deficit, growing inequality, and the lack of affordable housing. ... Carney is looking for new trading partners in Europe and Asia. Past squabbles with China and India are all but forgotten amid trade talks. A new deal linked with Indonesia is a start.