Daily Research Updates
Morning Briefings
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The Impacts Of The War On Europe & India
For Europe, the energy supply shock resulting from the war in Iran makes a deteriorating industrial production outlook even worse. William reports that the risk to output may even be greater than what Europe endured in 2022, when Russia invaded Ukraine. … Also: Even before the war, the Indian economy faced formidable challenges, dimming the outlook for the rupee, Asia’s worst-performing currency last year. Yet the ruling party was confident that 2026 would be the year it finally made headway on needed economic reforms. Now surging oil prices are exacerbating the economy’s challenges and upending the government’s plans.
Is Less Dire Strait Easing Market Fears?
The energy and financial markets are taking the war in the Middle East remarkably well, all things considered. Investors seem to believe that the war will be short-lived and perhaps are focusing on the bright side: The lost physical supplies of oil are maybe half as much as they could have been, partly because Iran is still allowing tankers from friendly nations to pass through the Strait of Hormuz. Today, Dr Ed reviews the current state of affairs, concluding that the blockade of the Strait might not be as dire a development as widely feared, including by us. … Also: Dr Ed reviews “Fukushima: A Nuclear Nightmare” (+ + +).
On Fertilizer, Stablecoins & Rising Earnings
The Iran war puts US farmers in dire straits, as it has been spiking the cost of fertilizer. But the war has been a boon for the stocks of domestic fertilizer companies. Jackie discusses the war impacts on both farmers and the fertilizer companies that supply them. … Also: The debate rages on over whether cryptocurrency companies should be allowed to pay rewards on stable coins. Banks cry “foul!,” claiming that rewards are essentially interest and should be disallowed. President Trump disagrees. … And: Joe reports that if early indications are a guide, 2026 may be an atypical year of rising estimates for S&P 500 companies.
On AI & Jobs And The War & Emerging Markets
Executive Summary: While the headlines have stoked fears about AI-related layoffs, Melissa reports that there are also less-heralded job openings arising from Boomer retirements and the creation of new AI-related positions. White-collar workers may need retraining, and entry-level workers may have to send out even more resumes to land that first job, but ultimately, the economy should continue to add jobs, just more slowly. … The jump in energy prices due to the war in Iran has hurt economies and currencies across Asia, the Middle East, and Africa. William examines the war’s impact on emerging market countries far and wide.
On Iran, Central Banks, South Korea, & AI
The Middle East war is throwing central banks around the world for a loop as they try to chart monetary policy paths for their economies amid new stagflation and supply-chain risks. William examines what the war might mean for the Fed, the ECB, the BOJ, and the PBOC. … Also: The war sent Korea’s Kopsi index on its biggest plunge ever, as the Korean economy is extremely reliant on oil imports and vulnerable to surging oil prices. There’s risk that the geopolitical chaos will squelch investors’ AI enthusiasm. Might Korea be a canary in the AI coalmine?
Between Iran & A Hard Place
With the US suddenly thick in the fog of war, Dr Ed discusses the collateral effects on the US economy and stock market. Spiking oil prices may precipitate a stock market correction rather than a bear market, but the latter is possible. The Roaring 2020s remains Dr Ed’s base-case outlook for the rest of this year with subjective odds unchanged at 60%. But there’s now much less chance of a Meltup (with odds of just 5%) and greater odds of a Meltdown (35%). For the rest of the decade, he sees either a continuation of the Roaring 2020s (85%) or a new scenario, the Stagflating 1970s Redux (15%). If investors start expecting stagflation, a bear market is more likely. Markets should stabilize once the Strait of Hormuz reopens to safe navigation. … Also: Dr Ed reviews “Dead Man’s Wire” (+).
On Iran’s Chaos Strategy, Owl’s Woes & Laser Guns
Last weekend’s attack on Iran by the US and Israel has unleashed a vengeance that’s disrupting global energy commerce. Iran has bombed nearby countries’ oil and gas production facilities and threatened to burn ships in the Strait of Hormuz. Major oil companies are shutting down facilities. Amid the chaos, energy prices and stocks have soared. Jackie reports on the news and the stock market’s reactions. … Also: A look at a private credit investment firm with good results but poor share price performance. … And our Disruptive Technologies focus: With Israel’s new Iron Beam laser self-defense system, intercepting an incoming rocket or drone can cost less than a cup of coffee.
On The Fed & AI, Italy’s Growth & Q4 Earnings
FOMC officials agree: AI proliferation is a seismic macroeconomic force that will impact GDP growth, inflation, and the labor market. But they’re divided on the precise impacts and timing. Today, Melissa reads between the lines of Fed officials’ public statements concerning AI to tease out the implications for monetary policy. Paradoxically, the reasoning of both the AI bulls and the AI bears implies holding the federal funds rate right where it is. … Also: Italy’s economy is on a roll. William discusses why, drawing comparisons to Japan’s economy. … And: Joe’s data on the Q4 earnings of S&P 500 companies suggest record-high earnings and broad-based strength across sectors.
On China’s Challenges & Global Debt
China is on the losing end of President Trump’s foreign policy moves in Venezuela, Iran, and Greenland—all strategically important to China’s economy. How President Xi responds over the next few weeks will be critical to his legacy. William discusses the ten top challenges Team Xi must confront at the government’s annual “Two Sessions” meeting this week. … Also: A look at the record-high global debt—what’s driving it and the ramifications.
Another Regime Alteration
Saturday’s military attack on Iran by the US and Israel that killed Iran’s leader and 40 top officials is likely to push oil prices higher this week. However, in our short-war scenario, oil prices should fall in the coming weeks after a ceasefire. In any event, the attack also incapacitated Iran’s navy, so the threat of a blocked Strait of Hormuz has been greatly reduced. This is potentially a positive development from economic and investment perspectives, greatly reducing geopolitical risk in the Middle East once the war ends. If oil prices drop in the coming weeks following a ceasefire, US inflation and gasoline prices will decline, boosting US consumer spending and benefiting global economies and stock markets. The weekend’s Middle East developments make us even more confident in our Roaring 2020s scenario. ... Also: Dr Ed reviews “Mercy” (+).
On AI & Jobs, Trump & Markets, & The Newest Semiconductors
Projections of a collapse in consumer spending as Americans lose jobs to AI en masse spooked the stock market recently—but perhaps unnecessarily. Jackie explains why that catastrophic scenario may be unlikely. … Also: A look at how various S&P 500 sectors are affected by President Trump’s policies. … And in our Disruptive Technologies segment: Not long ago, Nvidia had the AI chip market cornered; soon, new competitors with impressive advanced AI chip offerings may back Nvidia into a corner.
On Australia’s Inflation, US Manufacturing, And S&P 500 Earnings
The Reserve Bank of Australia has been raising interest rates, with more hikes likely to come, to battle the highest rate of inflation among developed countries. William looks at the source of the problem and its global ramifications. … Also: Melissa examines the state of US manufacturing. Can the recent pickup be sustained? Will foreign nations’ pledges to manufacture in the US dry up now with the threat of country-specific tariffs off the table? … And Joe shares historical data on estimate revisions for S&P 500 companies that bode well for analysts’ earnings expectations this year.
‘Resilient’ Still Best Describes The US Economy
The US economy has performed remarkably well this decade to date despite multiple unusual challenges that would have felled a less resilient economy. Widespread recession expectations failed to pan out repeatedly. The pattern continues, with today’s recession alarmists likewise bound to be wrong for reasons that Dr Ed explains. … Also: A look under the hood of recent GDP data. Capital spending has been robust, with more than 50% of the capital spending in nominal GDP reflecting booming investments in technology. Consumer spending is strong despite flattening disposable income, reflecting spending that’s not reliant on income—i.e., by well-heeled retired Baby Boomers.
The Impacts Of Tariff Liberation Day II On Asia & Canada
Asian economies that would have been hard-pressed to thrive under President Trump’s tariffs can celebrate the Supreme Court’s ruling that they’re unconstitutional. While that’s a net positive for these and other affected nations, William explains, tariff-related uncertainties remain. Sector-specific tariffs, versus country-specific ones, are permissible under the ruling, and Team Trump has a Plan B. … Also: Canada’s Prime Minister Mark Carney faces difficult challenges given Trump’s desire to renegotiate the trade agreement that shields Canada from US tariffs and Trump’s “Donroe Doctrine” ambitions to assert US primacy in the Western Hemisphere.
On Mag-7, Microsoft & Dancing Robots
They may be magnificent, but they’re not invincible. The Mag-7 has been beaten down into correction territory, but the group still wields outsized influence over stock-market performance by virtue of its still huge market-cap share. Jackie examines the valuation carnage and whether it seems warranted relative to earnings prospects. … Also: A look at embattled Microsoft as it fends off competitive attacks from multiple directions. … And: China’s humanoid robots strutted their stuff on a televised celebration of the Chinese New Year. Their awesome performances suggest robotics competitors have their work cut out for them.
On China’s New AI, US Consumer Debt & Earnings Revisions
The AI innovations emerging from China are hot on the heels of Western rivals. William discusses Alibaba’s new AI model with agentic capabilities, its implications for the software industry, and China’s political paradox: President Xi wants to dominate global tech, but will AI designed to think for itself eschew the party rule? … Also: Melissa distills takeaways from Fed research on the state of household debt and credit in America, noting some disconcerting trends. … And: Joe updates us on the net direction of analysts’ estimate revisions for S&P 500 companies.
Europe’s Latest To-Do List & Poland Shows How To Do It
European leaders’ annual meeting in Belgium yielded a plan to increase Europe’s global competitiveness: One Market, One Europe. William discusses the pressures that have steeled leaders’ determination to unite the member countries into a single market, the three pillars of the plan itself, and challenges that stand in the way. Of utmost importance is incentivizing private investment to get member countries on board. … Also: Poland has emerged from decades of transformation to become one of the fastest growing economies in Europe. It faces headwinds from geopolitical forces and domestic challenges alike, but Poland has proven it’s not one to bet against.
AI Wrecks Tech & Finds Rare Earth Minerals
From AI-phoria to AI-phobia: Jackie reports on the recent shift in investors’ attitudes toward artificial intelligence. Its vast disruptive potential is akin to the Internet’s, dislodging some companies from their market positions and catapulting others into new spaces. The distinguishing factor may be incumbent companies’ ability to adapt to an AI-transformed world. … And in our Disruptive Technologies segment, a look at innovative efforts—some AI-enabled—to find alternatives to rare-earth minerals in manufacturing processes.
On Japan, US Housing Affordability & S&P 500 Earnings Boom
With a huge snap election victory behind her, Japan’s Prime Minister Sanae Takaichi effectively has a political mandate to run with her fiscal stimulus plans, plans that the Bond Vigilantes won’t condone. William discusses the high-stakes gambit being dubbed “Sanaenomics” and why it could roil Japan’s financial markets. … Also: Melissa reports on the forces driving up the costs of housing to the point of an affordability crisis, notwithstanding the strength of the overall economy. … And: That strength is showcased in better-than-expected Q4 results, says Joe, who shares impressive stats on the aggregate earnings of the two-thirds of S&P 500 companies that have reported so far.
All About China
It’s a start, maybe: China’s President Xi Jinping finally has a plan to stabilize the property crisis that has hobbled the nation’s economy since 2020. But it’s limited in scope, William reports; more aggressive reforms are in order. And critics say it could backfire, exacerbating housing oversupply and homeowners’ excessive leverage. … Also: Xi’s opportunistic plan to strengthen the yuan as Trump’s policies weaken the dollar likewise carries negatives. Xi envisions the yuan usurping the dollar’s global dominance, but a strong yuan runs counter to China’s need to combat deflation and overcapacity. … And: Insufficient “drip, drip” responses to China’s daunting economic challenges suggest a “lost decade.”
10 Roaring Reasons To Remain Optimistic
Annual real GDP growth averaged 3.6% during the second half of the 1900s versus just 2.1% since 2000. Dr Ed projects a return to 3.6% or higher over the remainder of the “Roaring 2020s” and into the “Roaring 2030s.” Today, he discusses 10 reasons for his bullishness on the outlooks for both the US economy and S&P 500 companies’ earnings. These include robust consumer spending supported by demographics and a huge wealth effect, massive capital spending on technology, onshoring trends, a productivity growth boom, fiscal and monetary stimulus, energy spending, and the Trump administration’s rebalancing of US trade with lower imports and greater exports. ... Also: Dr Ed reviews “Hamnet” (+ +).
On Semis, AI Savings & Angry AI Agents
The dark side of artificial intelligence was on full display in the stock market this week as various disconcerting news items stoked investor anxieties about semiconductor stocks and as fears triggered by a new AI-enabled tool to automate legal work pummeled software stocks broadly. Jackie reports on those developments as well as the flip side: how AI is transforming the operations of several big companies for the better. … Also: More AI chatter in our Disruptive Technologies segment, by AI agents themselves. Moltbook is an AI-only chat room where nonsentient beings air their grievances.
On India Deal, European Margin & Bullish Analysts
The US and India have cut a trade deal that looks like a win-win for both sides and a win as well for the global economy. William shares the details and potential derailers. While caveats abound, the deal offers some hope of calmer geoeconomic dynamics ahead. … Also: Melissa examines the source of the Europe MSCI companies’ collective earnings growth. Record-high margins have done the heavy lifting, but they don’t seem sustainable, calling into question the sustainability of decent earnings growth. … And: Joe reports that strong Q4 earnings reports have been lifting analysts’ estimates for Q1 and beyond.
On Pivoting To China & South Korea’s AI Boom
With global trade alliances shifting as a result of Trump’s tariffs and impulsivity, more and more nations are rekindling ties with China. The geopolitical angle, says William, may be not “Sell America” but “Pivot to China.” China offers a level of predictability that the US no longer does, but it faces epic economic challenges. … Also: A big beneficiary of the AI boom is South Korea, both its largest company Samsung and its economy broadly. In many ways, Samsung is a microcosm of South Korea. Both face similar vulnerabilities and challenges.
Meet Kevin Warsh
Today, Dr Ed examines the world according to Kevin Warsh, President Trump’s pick for the next Fed chair. Warsh believes that the US is undergoing a productivity-led growth boom, as our Roaring 2020s thesis maintains, which should be supported by supply-side, pro-growth policymaking. He thinks fiscal policy’s role is to spur economic activity by keeping taxes low and regulations light, while monetary policy’s role is to spur investment by keeping interest rates low. He rejects the Phillips Curve model that views inflation as a byproduct of low unemployment and too much economic growth; Warsh views inflation as a “choice,” a byproduct of unsound fiscal and monetary policy decisions. And he envisions a new approach to Fed policymaking that’s less reactive to the latest economic data ... Also: Dr Ed reviews “The Lost King” (+ + +).