Daily Research Updates
Morning Briefings
Expert market analysis delivered every morning. Stay informed with comprehensive research and data-driven insights.
On The Fed, The BOJ & S&P 500 Earnings
Fed Chair Powell came across as hawkishly dovish in his latest public remarks, observes Melissa. He noted risks to the labor market, the near completion of the Fed’s quantitative tightening, and inflationary pressures that are only temporary—all dovish points. But he warned of risks in whatever action the Fed takes. Other Fed officials speaking recently echoed Powell’s measured approach. … Also: William discusses the risks posed by the yen carry trade, a strategy that gains appeal as the yen falls. If this speculative trade fails, it puts markets everywhere at risk. … And: Joe analyzes S&P 500 companies’ estimate revisions data, which he finds to be impressively strong for most sectors.
Gold Is The New Bitcoin
The surging gold price has already exceeded our year-end target of $4,000 per ounce. Risk-off investors may be concluding that gold offers greater protection from geopolitical risks than bitcoin, which is more like a risk-on speculative vehicle and has been weak recently. Bitcoin has been described as “digital gold,” but we see gold as “physical bitcoin.” We now think the gold price could reach $5,000 an ounce by year-end 2026 and possibly $10,000 by the decade’s end if not before. … Also: While the government shutdown has shut off many of the usual economic data spigots, we can tell from other sources that the economy remains resilient.
Banks, Auto Loans & AI Surveillance
The big banks likely earned big bucks during Q3, with several winds at their backs. But their Q4s should be more problematic, Jackie explains. … And: Several big banks were lenders for a used car dealer serving illegal aliens, Tricolor Holdings, which now has gone belly up. While the banks’ writedowns won’t be large, the issue highlights the effects on the auto industry of the Trump administration’s mass deportations. … For all its benefits, AI can also be means to undesirable ends. Our Disruptive Technologies segment highlights allegations that Oracle’s tech solutions facilitate the Chinese government’s surveillance and control of its citizenry.
Trump Trade Turmoil, Again
The latest US–China aggressions have the financial markets worried about the high stakes of a trade war between the globe’s biggest trading nation and its largest economy. William observes that a disruption to global supply chains would have adverse consequences for earnings, economic growth, and central banks’ pursuit of their mandates. But given the severity of the consequences, we expect a quick de-escalation of the tensions, with both sides willing to negotiate. … Also: The German economy is contracting, with weak industrial production, exports, employment, and consumer sentiment. Yet the government’s stimulus measures do little to address the underlying structural causes.
On Data Centers, Semis & Stablecoin
The rapid revenue growth of cloud providers that meet AI data storage needs has enticed lots of players to build new data center capacity. Some, like Amazon and Open AI, are doing so to meet their own AI needs and others to farm out storage capacity to others. With capacity buildouts so enormous, Jackie asks, will there be enough juicy profits to go around? … Also: Nvidia is still the undisputed AI semiconductor chip leader, but alternatives to Nvidia’s chips are proliferating. … And: The Genius Act prohibits the paying of interest to investors, but not the paying of “rewards.” What’s the difference? None, say banks, fearing lost deposits and demanding rule revisions.
On Japan, France, Europe & S&P 500 Earnings
Investors in Japan’s stock and bond markets aren’t likely to welcome the policies of Japan’s probable new prime minister. William explains why. … Also: Political and fiscal crises in France are rocking that nation’s financial markets as investors wonder about the need for an IMF bailout. … And: Melissa discusses the economic data that have been coming out of Europe, where the stock market has been forging ahead even as the overall economy limps along. … Finally, Joe has cheery news about the prospect for Q3 S&P 500 earnings beats.
China & India Diverging
Chinese stocks are rallying on AI exuberance and a leap of faith that governmental reforms will bear fruit, with little fundamental support for their ascent from earnings or economic data. William likens it to a similar runup a decade ago, which preceded a sudden plummet. The government’s team of investors can swoop into the stock market with buying support at critical times, but that does nothing for China’s underlying structural problems. … Also: Record outflows from India’s stock market reflect concerns about the economy’s ability to shoulder 50% US tariffs, which will imperil labor-intensive sectors that don’t generate enough low-end jobs as it is. The economy needs a fiscal stimulus jolt.
Still Roaring
Sunshine during my tour of the West Coast and in the stock market last week. But everyone's on the lookout for signs of an AI bubble. Jeff Bezos has a positive take on bubbles that makes sense to us: They accelerate funding and hasten AI’s tremendous benefits. Revisiting the BRAIN Revolution and our long-standing confidence in technology and its positive impact on the economy. ... Also: Pandemics, tangled supply chains, and tariffs are no match for the resilient US economy in the Roaring 2020s. … And: The labor market is weak, but productivity is strong. … Dr Ed reviews “Downton Abbey” (+).
On The Shutdown, Travel & Bank Blockchains
On the first day of the government shutdown, stock markets stayed calm and carried onward and upward. But modest reactions in the bond and gold markets as well as the dollar were registered. … Also: Canadians feeling slighted by Trump and angry over his tariffs have stopped visiting the US in the usual droves. Jackie examines the impacts on US tourism. … And in our Disruptive Technologies segment: Traditional banks are modernizing their traditional services using blockchain technology, making them cheaper, faster, and more resilient. JP Morgan’s Kinexys division is the trailblazer. And Swift is at work developing a blockchain-based international transaction settlement system.
On Japan, Australia & Earning
Japan is at an economically precarious time, William reports. GDP is barely growing, yet the BOJ is bent on monetary tightening. A new prime minister is likely to roll out fiscal stimulus measures, but Japan has the heaviest debt of any developed nation; the prospect of fiscal loosening has already roused the Bond Vigilantes. Might Trump renegotiate Japan’s trade deal? … Also: Australia’s productivity growth problem can’t be solved by monetary policy; what’s needed are government leaders willing to make bold fiscal reforms. But reformist energy is in short supply in Canberra. … And: Q3 estimate revisions data for S&P 500 companies suggest to Joe yet another quarter of impressive y/y growth.
On Argentina’s Woes & China’s Policies
Argentina’s failing economy was buoyed by IMF intervention in April, but since August the floor has fallen out. President Milei’s austerity plan is slamming consumer confidence, and foreign investors are rushing for the exits. Trump’s controversial $20 billion bailout won’t help, William predicts. It simply buys more time for a (MAGA loving) president whose shock-therapy plan is failing spectacularly, and it could set off a 1980-style downward spiral. … China’s stock market has been riding high on the government’s commitment to 5% annual GDP growth. But prioritizing the GDP targets warps economic incentives and comes at the expense of getting China’s fiscal house in order.
Meet Bonnie
Our Roaring 2020s outlook has been on target since the beginning of the decade. Over the past two quarters, GDP growth and consumer spending have been robust, and the recession widely anticipated for three years and as recently as April never showed. The Fed’s September interest-rate cut—made proactively in response to weak payroll stats—was probably a mistake that could stoke price inflation and financial speculation. While unemployment is low, AI is disrupting some areas of the labor market. The Fed’s rate cut won’t help former tech workers now driving for Uber. … The good news: Consumer spending should remain strong as Baby Boomers work down substantial nest eggs and support the spending of their adult progeny. ... Also: Dr Ed reviews “Audrey’s Children” (+ +).
On Nvidia, Stablecoins & AI Shopping Agents
Nvidia has been seeding its future demand by investing huge sums in companies that will likely grow into big purchasers of Nvidia chips. Will the investments bear the hoped-for fruit? Jackie has the story. … Also: The Genius Act brings guardrails and clarity to the stablecoin market, but some say the legislation doesn’t go far enough—leaving investors without guaranteed reimbursement if issuers fail. … And in our Disruptive Technologies segment: E-commerce evolves yet again with the arrival of AI shopping agents.
On CBO Outlook, Korea’s Troubles & S&P 500 Earnings
The Congressional Budget Office envisions a late-cycle slowdown of the US economy, with sharply lower labor force growth and budget deficits rising as GDP growth slows. Melissa shares highlights from the CBO’s September forecast and the BLS’s recent report on the shrinking share of foreign-born workers in the US labor force. … Also: South Korea’s economy is not up to meeting Trump’s tariff demands, William reports; an economic collapse is a real danger if they remain in force. … Joe reports that analysts’ estimate revisions activity for S&P 500 companies has staged a sudden, strong, and broad rebound—supporting the stock market’s recent strength.
On Japan’s Politics & China’s Alibaba
Two recent shockers have unnerved Japanese investors—the resignation of Japan’s Prime Minister Ishiba and the tapering of the BOJ’s stock market supporting ETF purchases. Bond Vigilantes, fearing that Japan’s huge debt will only swell under Ishiba’s successor, have driven 20-year government bond yields to a 25-year high, William reports. Neither frontrunner for the PM job is an economic reformer; either would likely continue the same old easy-money policies that have sapped Japan’s animal spirits. … And in a surprising twist, Jack Ma—the Alibaba co-founder who vanished after criticizing the Chinese government—is back and leading the government’s charge to dominate global AI markets.
Is The Fed’s Policy Restrictive?
The Fed’s 25-basis-point cut in the federal funds rate last week doesn’t change our S&P 500 price targets or our subjective probabilities of a meltup (25% odds) or correction (20%) by year-end. Today, Dr Ed explores the reactions to the rate cut in the markets for stocks, bonds, the dollar, and gold as well as the significant takeaways from the FOMC’s September 17 meeting. Notably, the post-meeting Dot Plot and press conference revealed less dovishness than many investors had expected. … Also: Dr Ed opines on the weird notion of an indeterminable “neutral” federal funds rate used to determine the restrictiveness of Fed monetary policy.
On Rates, Tesla & Labor Market Shifts
The Fed decided to do yesterday exactly what was expected of it. So its 25-basis-point drop in the federal funds rate barely moved the needle in Wednesday’s trading. But anticipation of the move has helped interest-rate-sensitive stocks outperform the broader market ytd. … Tesla’s board of directors has a bold plan to boost its market capitalization to $8 trillion, and it rests on the efforts of one man. Will CEO Elon Musk come through for Tesla? Jackie examines the marks he needs to hit to earn a ginormous payout. … Is artificial intelligence replacing recent college grads in the labor market, or are there other reasons for their difficulty breaking into their chosen careers?
On China’s Troubles, Slippery Oil& The Magnificent-7
It may not be as feasible as some think for China’s government to achieve its 5% annual GDP growth goal given formidable headwinds, including slow-moving economic reforms and the impact of US tariffs. William discusses the challenges that China faces and why Chinese equities investors who are counting on President Xi to save the day may be disappointed. … Melissa looks at supply and demand dynamics in the global oil market, explaining that the oil price may languish until excess supply is sopped up by demand. … The Magnificient-7 has staged an impressive comeback, Joe reports, with a record-high collective market capitalization and ytd performance that beats the S&P 500’s.
Indonesia Is Cautionary Tale For Emerging Markets
For many emerging markets around the world, Trump’s tariffs on their exports to the US are stressing economies that already were facing formidable challenges, William reports. The President of Indonesia has been making moves that undermine Bank Indonesia’s independence—shaking investors’ confidence, roiling the country’s financial markets, and risking destabilizing capital flight. Economic mismanagement in Indonesia also has triggered civil unrest. Other vulnerable economies, made more so by the US tariffs, include Brazil, India, South Africa, Turkey, Argentina, South Africa, and Thailand. Each is battling its own set of headwinds, but all seem to be in the same boat in a turbulent sea.
Dear Scott
A recent article by Treasury Secretary Scott Bessent takes aim at the Fed for its use of unconventional monetary tools and its mission creep. Today, Dr Ed addresses the Treasury secretary in an open letter, detailing where they agree and diverge on the Fed’s role and what monetary and fiscal policies are needed to sustain the Roaring 2020s scenario that both support. While an original aim of the Fed was to promote financial system stability, Bessent’s push for lower interest rates risks a stock market meltup and upward pressure on inflation and bond yields. … Also potentially destabilizing: The administration’s highly unconventional Genius Act, which would use stablecoins backed by US Treasury bills to increase demand for Treasuries and fund the federal debt.
The Eurozone’s Economy
It’s nice to buy stocks at relatively low valuations, but only if they aren’t cheap for a reason. European stock markets may be climbing a wall of worry that’s about to get steeper given a weakening economic and financial foundation, the likelihood that the European Central Bank will opt not to cut interest rates further, and several country-specific fiscal and political problems. Melissa discusses these and other reasons that Europe’s low relative valuations might not be going higher anytime soon. Investors would be well advised to proceed with caution and focus on European stocks with earnings growth rather than just low forward P/Es.
On Global Bond Yields & A Japanese Canary
Global debt markets are in disarray, with Bond Vigilantes driving up yields in various nations—including two that lost their leaders this week, France and Japan. William discusses global investors’ uncertainties regarding both countries as well as how President Trump’s actions have roiled financial markets the world over. … Also, Joe has great news: The S&P 500’s forward earnings have hit record highs for 16 straight weeks now. And participation is broad, with most sectors’ forward earnings—and stock price indexes—around their record highs. Plus, Joe reckons that Q3 earnings should grow y/y for all the sectors but one.
India Needs More Reforms
India’s economy is generating some serious steam—GDP is growing at a fast and accelerating clip, industrial production is at a record high, and inflation has dropped below the central bank’s target. But the stats don’t tell the whole story: William reports that India is in dire need of structural reforms to address unemployment and broaden the benefits of rapid growth to the entire economy. Without these and other reforms recommended by the OECD, the country is ill prepared to shoulder Trump’s 50% tariffs on exports to the US.
The Good, The (Not So) Bad & The (Relatively) Ugly
Our Roaring 2020s economic scenario and expectations for inflation and the labor market suggest that the Fed probably shouldn’t cut interest rates this year, although one cut might be warranted if upcoming inflation reports are more subdued than we expect. Yet a rate cut next week, after the FOMC meets Wednesday, is practically a foregone conclusion. Stimulating an economy that doesn’t need stimulation won’t create more workers to address the undersupply that’s constraining the demand for labor, Dr Ed explains. Plus, cutting rates when it’s not necessary could cause stock prices to melt up and destabilize the broader financial system. ... Plus, a look at the debt crises attracting Bond Vigilantes’ attention in the UK, France, and Japan. ... Also: Dr Ed reviews “Happy Face” (+ +).
On Retailers, Crypto SPACs & Green Sailing
If consumers are as depressed as sinking sentiment surveys suggest, you’d never know it by the stellar July-quarter results that retailers from all walks of the industry have been reporting. Jackie summarizes key points from the earnings reports of several. … A new kind of special purpose acquisition company has been born; its special purpose: to acquire not companies but cryptocurrencies. … And in our Disruptive Technologies segment: They may sail the ocean blue, but big shippers are going green. They’re starting to propel ships via alternative fuels, cutting their CO2 emissions dramatically.