Daily Research Updates
Morning Briefings
Expert market analysis delivered every morning. Stay informed with comprehensive research and data-driven insights.
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.
Geniuses Of Stablecoin
Now that the GENIUS Act has established a framework for stablecoin issuance with safeguards for consumers, we expect stablecoin usage to proliferate. Because stablecoins are backed by liquid assets such as Treasury bills, their proliferation is likely to affect bond market dynamics. Because stablecoins can be used for transactions, they’re likely to shrink the markets for other cryptocurrencies that can’t be, like bitcoin. Because stablecoins are a new M1 component, they’re likely to reduce the Fed’s control over the money supply. How stablecoin’s uptake will alter monetary policy, interest rates, and the federal debt is hard to predict. Stephen Miran theorizes that stablecoin proliferation will lower the neutral interest rate, requiring the Fed to ease accordingly. We aren’t convinced. ... Also: Dr Ed reviews “House of Guinness” (+ + +).
On Semis, Leading Stocks & AI Designed Proteins
The S&P 500 Semiconductors industry is rapidly growing earnings, buoyed by lofty demand for chips that enable artificial intelligence. But its valuations are lofty as well. Today, Jackie compares and contrasts the earnings prospects and valuations of two industry leaders, AMD and Nvidia. … Also: Semi stocks don’t top the list of the S&P 500’s best ytd performers, but several makers of the tech equipment AI runs on do. Like the semis, they sport historically high valuations reflecting their heady earnings prospects. ... And: How AI is being used to create proteins that will digest hard-to-degrade chemicals, like polyurethane.
On AI & Earnings
The first wave of AI adoption was about making work more efficient. The coming wave will be about redesigning work itself, says Melissa. AI is likely to transform the labor force by eliminating humans’ grunt work and creating new human-in-the-loop roles. … Also: Joe reports that Q3 earnings season is looking like one for the record books: The S&P 500 companies that have reported to date collectively have record-high EPS and double-digit y/y earnings growth. Plus, they’re collectively beating estimates by more than 10%.
Central Banking Is Challenging
Central banks around the world have lost control over their economies amid an unprecedented array of challenges, William reports. In several nations, political forces threaten their independence, and central banks have been making monetary policy decisions that don’t reflect economic fundamentals. As a result, trust in central banks is eroding. When central banks lose credibility, global macroeconomic stability is put at risk.
Powell’s Swan Song
The data-dependent Fed is operating as well as possible without the usual economic data releases from government agencies during the shutdown. The shutdown is the latest in a series of unusual challenges Jerome Powell has navigated admirably as Fed chair. When his term ends in May, he’ll no doubt be replaced by a Trump loyalist, who undoubtedly will push the FOMC’s other voting members to provide easy monetary policy. If the chair is outvoted, the resulting internal dissension would be unprecedented and seriously detrimental to the Fed’s credibility. … For now, Powell’s statements during his recent presser suggest that a December rate cut is far from certain.
On Consumer Spending & China’s Leading Humanoid
Consumer spending is being buffeted by countervailing winds—with heady financial market returns potentially lifting spending even as deportations, the government shutdown, and the effects of AI on employment potentially depress it. Jackie examines the recent earnings reports of consumer discretionary companies to extrapolate how these effects are netting out. … Also: A look at Unitree, the Chinese robotics company likely to give Tesla’s robotics division a run for its money, and Unitree’s visionary young founder Wang Xingxing.
On Trade Truce, Global Financial Stability & Quarterly S&P 500 Earnings
It’s great that Presidents Trump and Xi are coming to the table, but William argues that markets’ jubilance at the prospect of a US-China trade deal may be inflated. Much still could go awry, and tensions between the two proud leaders could flare anew, with global collateral damage. … Also: Melissa recaps the IMF’s worries about global financial stability as discussed in its newly updated report on the topic. Worrying about a crisis is a healthy way to prevent one, so we’re not overly concerned. … And: Joe shares takeaways from his data on how earnings and revenues estimates have been changing as Q3 earnings season proceeds.
Japan Agonistes
Japanese stocks surged after the election of Sanae Takaichi as prime minister, but investors’ enthusiasm may be premature. Japan’s first female leader is all for continued easy monetary policy, which puts her at odds with the Bank of Japan. Takaichi may be prioritizing “short-term sugar highs” over the supply-side reforms that Japan’s economy sorely needs, William warns. Her desire to prolong the weak-yen era is risky at a time of accelerating inflation, disappointing wage growth, gigantic public debt, and the need to wean Japan off exports to mitigate US tariff pain.
Inflation: 3.0% Is The New 2.0%
The Fed Put is back. Given the likelihood of two more reductions in the federal funds rate before year-end, we’re reducing the odds of our bullish base-case Roaring 2020s scenario from 55% to 50% and raising the odds of an even more bullish stock market meltup from 25% to 30%. Indeed, the stock market jumped Friday in reaction to a cooler-than-expected inflation report, since it buoys the case for Fed ease. Today, Dr Ed explains why further rate cuts are not needed now with both parts of the Fed’s dual mandate, unemployment and inflation, close to Nirvana. The Fed’s attempt to achieve the “neutral” FFR rate by easing is more likely to drive stock prices higher than to help the labor market. ... Also: Dr Ed pans “The Woman In Cabin 10” (- – -).
Defense, Auto Loans & Local LLMs
With wars ongoing, the federal government’s weapons purchases haven’t let up during the government shutdown. Investors have been bidding up the stocks of US defense contractors as a result, and the S&P 500 Aerospace and Defense industry has impressively outperformed the broader market. But investors liked what they heard in the earnings reports of just two out of four recently reporting companies. … Also: Jackie shares trends in consumer and auto finance after the recent bankruptcies of two subprime lenders. … And: Will the massive buildouts of AI infrastructure be rendered unnecessary if AI systems reside not in the cloud but locally on users’ equipment?
On AI, Earnings & France
Is AI really the jobs disrupter it’s chalked up to be? Melissa distills the research on how much AI has displaced human work, which industries are most affected, and which worker populations are out of luck. … Also, Joe notes a surprising trend: Early Q3 earnings reports for S&P 500 companies have pushed analysts’ aggregate Q4 consensus estimate up, instead of down as usual. … And: William takes us to France, where President Macron’s ambitious economic reforms are unraveling. His deficit-reduction plan seems unlikely to pass, and the Bond Vigilantes are circling.
On Reckonings For China & The UK
US/China trade-war brinkmanship has reached the brink: China’s President Xi hasn’t budged on the rare-earth-minerals export controls that will severely curtail the world’s ability to produce electronics. Numerous nations think China has gone too far this time, William reports, and are joining forces to formulate a solution. But China’s trade strategy may backfire on it if a reputation for petulant law-making drives away foreign companies. … Also: The UK economy is struggling with high inflation, weak domestic demand, and rising risks of a hard landing. Some fear a debt reckoning as the UK bond market reacts to mounting signs of distress in credit markets.
Halloween Is Coming
Investors’ panic attack Thursday was another of many short-lived frights that haunt bull runs. Our economic analyses help us spot the difference between panic-generated minor pullbacks and scarier downturns like corrections and bear markets. Corrections tend to occur when investors fear a recession that doesn’t happen. Bear markets tend to be caused by recessions. Currently, the economy remains resilient, and a recession is unlikely, in our opinion. Plenty of frightening scenarios have been floating around in recent years, but our confidence in the resilience of the economy has helped us to expose them as phantoms. ... Also: Dr Ed reviews “Eddington” (++).