Daily Research Updates
Morning Briefings
Expert market analysis delivered every morning. Stay informed with comprehensive research and data-driven insights.
On Europe’s Declining Influence, China’s Auto Glut& More Great US Earnings
Internal discord among the EU’s member nations portends fragmentation and waning geopolitical influence, reports Melissa. … China’s EV industry, BYD in particular, had been booming until recently. Now it faces formidable headwinds from within the country and without; William discusses. … Joe’s data on consensus expectations for S&P 500 companies’ aggregate Q3 earnings suggest that investors can look forward to a third straight quarter of above-trend, double-digit-percentage y/y growth.
Europe’s Debt Trap
A new wave of sovereign risk is washing over European economies, with the UK and France most vulnerable as they navigate fiscal fragility, political instability, and cratering bond market confidence. Will the UK and France need bailouts from the IMF’s limited funds? Are they “too big to save”? William examines how each country got to this point of debt reckoning and how Trump’s tariffs have upped the stakes. The Bond Vigilantes, he warns, smell blood. … Also: Not only in Europe have Trump’s actions—his tariffs and attempts to abolish the Fed’s independence—rained problems on world economies.
Nvidia, Data Centers& The MIT AI Report
Nvidia investors were underwhelmed by yesterday’s impressive earnings report with surging revenue growth; its shares sold off in after-market trading. Jackie looks at what's been driving the performance of the company and its stock. … Also: AI-related stocks have been surging, so why have data center REITs—which own the buildings where AI resides—been sinking? Read on. … And: some takeaways that investors may have missed in MIT’s recent report on how generative AI is changing the ways companies do business. So far, the impacts have been disruptive mainly in tech and media, but the promise of future transformative effects remains.
On US Labor Market, The Dollar In Asia & SMidCaps
The balance of risks in the US labor market is shifting, as Fed Chair Powell discussed at the Fed’s Jackson Hole Symposium last Friday. Today, Melissa breaks the labor market down into its moving parts, identifying the areas of strength and weakness with reference to Powell’s views. … Also: Don’t short-change the US dollar; its global supremacy is secure for solid reasons that William explains. …And: Joe discusses the wild ride that sent US stock market indexes plummeting and soaring so far this year and where it has deposited the major ones at this point in time.
Trump's Tariffs Unsettle Japan & Latin America
The potential for lower US interest rates, a weaker dollar, and Trump Tariff Turmoil have created one big headache for Bank of Japan Governor Kazuo Ueda. William explores how Japan’s central bank will weigh the need to stimulate its economy to offset declining exports with the need to continue normalizing interest rates. If the Fed cuts rates and the BOJ hikes them, the yen-carry trade could be at risk. … Latin America faces its own Trump Tariff Turmoil. Our southern neighbors are increasingly sending their exports to China and would suffer if tariffs trigger a global economic slowdown. Diversifying their export base could be part of the solution.
The Chair Has Spoken
Fed Chair Powell’s eagerly awaited speech at the Fed’s Jackson Hole Symposium on Friday fanned stock investors’ hope that the FOMC would lower the federal funds rate in September—despite Powell’s hedges and the fact that upcoming data releases will figure into the decision. Notably absent in his speech was mention of the Fed’s need to maintain financial system stability if it is to achieve either goal of its dual mandate. Easing in September could test that stability, test the Fed’s commitment to its 2.0% inflation target, and test the Bond Vigilantes’ patience. But it would be good for the stock market. We’re maintaining our targets for the S&P 500 price index of 6600 by year-end 2025 and 7700 by year-end 2026. ... Also: Dr Ed reviews “Grizzly Man” (+ + +).
On Retailers, Small Caps & AI Powered Brains
Retailers’ earnings reports offer a window into recent consumer behavior. Tariff-related uncertainty hasn’t slowed consumer discretionary spending and perhaps has buoyed it, but consumers do seem reluctant to make big purchases requiring financing, Jackie reports. … Also: Small-cap stocks have been outpacing their larger counterparts in recent weeks for the first time in a long while. A look at why. … And: Brain-computer interfaces, controlled by thought, aren’t just the stuff of sci-fi: Sam Altman, Elon Musk, and others have firms working on implantable AI devices that operate alongside human brains. The merging of humans and AI is inevitable, says Altman; but when it happens, will humans retain the upper hand?
On China’s Economy & S&P 500’s Record Earnings
China’s stock market has been strong, up 20% since April, as investors appear to be downplaying the potential consequences of the tariff war with the US. But with China’s weak economic underpinnings, we’re not so sure that’s wise. William discusses the reasons Chinese stocks may be overvalued, the governmental decisions that led to China’s economic predicament, and the challenges ahead for Team Xi. … Also: “Stunning” is Joe’s word for the degree by which S&P 500 companies that have reported Q2 results so far (most of them) collectively overshot analysts’ earnings estimates: nearly 9%!
Talking Fed Heads
To cut or not to cut? Fed Chair Powell’s speech at the annual Jackson Hole symposium on Friday may hint at which way he’s leaning. The stakes of the FOMC’s September 16-17 meeting decision could hardly be higher: The economic support for a federal funds rate cut is dubious amid a resilient economy, Dr Ed maintains, and unwarranted cutting could invite the Bond Vigilantes, a stock market meltup, and financial system destabilization. Yet the Trump administration is pushing hard for a rate cut, and investors widely expect one. William parses the viewpoints of individual FOMC members and a dovish Trump loyalist who looks likely to be on the committee in September—making at least three rate-cut advocates at the table.
Another Candidate For Fed Chair
Dr Ed is sticking to his guns: He has contended since early last year that the US economy is too resilient and inflation is not close enough to 2.0% for Fed officials to muck around with easing. The widespread expectation that they will ease anyway in September is lifting stocks, and the actual event may cause a stock market meltup. The bond market’s reaction to unwarranted easing is tougher to gauge. If it causes the Bond Vigilantes to drive up yields, the Fed’s reputation as inflation fighters could be shot. Recent inflation data suggest inflation could use some fighting, as Trump’s tariffs may be keeping it elevated above the Fed’s target 2.0% and services inflation remains hot. ... Also: Dr Ed reviews “The Gilded Age” (+ +).
On the Farm, Rare Earth Minerals & Optical Semiconductors
Farmers in America’s Heartland are hurting as crop prices are dirt cheap. Supplies are high, and international demand has receded in the wake of Trump’s tariffs. Jackie discusses their situation. … Also: The US/China trade deal waiting to be struck holds high stakes for both sides, which sits well with neither. As China races to produce high-end semiconductors at home, the US is scrambling to do the same for rare earth minerals. … AI data centers are notorious energy hogs. Researchers are exploring ways to transmit information using light instead of electricity and capturing an array of benefits.
On Trump's Fed, Global Inflation & S&P 500 Earnings
President Trump appointed Stephen Miran, a Trump loyalist and chair of the Council of Economic Advisers, to fulfill the remaining days of Fed Governor Adriana Kugler’s term. William explores Miran’s historical stances, including his calls for lower interest rates, reforming the Fed, a weak dollar, and aggressive tariffs and trade policies. … Global inflation has decelerated sharply from elevated pandemic-era levels, but it has been relatively sticky recently. Melissa parses the data to see what’s keeping inflation aloft and whether tariffs are having an impact. … Analysts’ net earnings revisions for the S&P 500 are increasingly positive, Joe reports. They’ve grown more optimistic about earnings in the Communications Services, Information Technology, Financials, Utilities, and Industrials sectors.
Tarrifying BRICS& Stagflating UK
President Trump’s aggressive tariffs on the BRICS nations could backfire. They have breathed new life into the bloc’s ambitions to depend less on US markets and to undercut the US dollar’s significance in global trade. William explores the BRICS’ ideal scenario and why it may not be realistic. … The Bank of England faces a fork in the road: It cut its benchmark interest rate last week even though the UK’s inflation is the highest among the G7 countries. The prospect of stagflation looms. But the path forward should be clearer soon, as a tariff deal with the US has been struck.
Why Are Stock Prices Still Rising?
With recent economic releases on the weak side, why have stock investors been taking the bad news in stride and pushing the S&P 500 ever higher? Dr Ed examines this question, offering four possible explanations: Investors expect the Fed to ease in September, although we’re not totally convinced the Fed will—or should. Recession fears have receded, helping to justify higher valuations. Productivity rebounded during Q2, and subdued unit labor cost increases helped to contain inflation. Finally, the Digital Revolution will continue to drive economic growth—supporting our Roaring 2020s scenario.
On Semis, Consumers & AI Advertising
Another day, another tariff target. President Trump’s news Tuesday that new tariffs on imports of semiconductors are coming soon got a muted negative reaction from semiconductor companies’ investors, who on the whole have been tolerant of Trump’s Tariff Turmoil. Jackie discusses where the industry’s players and investors find themselves at this point in time. … Also: Disney’s and McDonald’s earnings reports shed light on consumer demand trends last quarter. …. In our Disruptive Technologies segment: AI is taking advertising and marketing to a whole new level of targeted relevance, and it’s working.
On US Housing, Canada, & S&P 500 Earnings
The US housing market is haunted by poor affordability, Melissa reports; that’s why sales have been moribund despite supportive household wealth and income statistics. Would-be buyers are spooked by affordability challenges, and would-be sellers are averse to trade their low-rate mortgages for much higher ones. It will take lower interest rates and/or lower home prices to jumpstart sales. … Also: William discusses how Canadian policymakers are thinking about US tariffs. Tariff uncertainty has already stopped the central bank from easing, but prolonged uncertainty might be better than cutting a hasty deal. … Also: Joe assesses the strength of Q2 from the results of the three-fourths of S&P 500 companies that have reported so far.
A Passage To India
Trump’s pivot on India from friend to foe, punctuated by a higher US tariff rate than expected, hit India watchers by surprise. Trump’s dismissal of the country’s importance to the West hurts Prime Minister Modi politically and India economically, William explains. A third of India’s foreign investment comes from the US. But the world’s fifth-largest economy is far from “dead,” as Trump proclaimed. GDP growth has been outpacing China’s, and the nation has big aspirations to position itself at the center of global supply chains and to become a developed nation by 2047.
Relax, Folks: Jobs Report Was OK
Yes, payroll employment rose less than expected in July, and, yes, revisions pegged it lower than initially thought during May and June. That doesn’t mean demand for labor has slacked off, as the extreme reactions of the financial markets suggested. The payroll weakness says more about the supply of labor than demand for it. Indeed, the two are in balance, which Fed Chief Powell even said last week. Other labor market barometers indicate strength: Hours worked are at a record high; so are wages—even adjusted for inflation. Companies aren’t firing more, though they are hesitating to hire so the duration of unemployment is up. The uncertainties related to Trump’s Tariff Turmoil might account for that. ... Also: Dr Ed reviews “Untamed” (+).
On Health Care, Industrials & Robots
The Health Care sector is the S&P 500’s most anemic performer ytd. But its downtrodden valuation might leave lots of room for upside on the slightest good news. And some of its component industries aren’t ailing at all. Jackie examines how Trump 2.0’s legislative initiatives have hurt some Health Care industries and benefited others. … Also: Boeing’s turnaround has sent its share price soaring and lifted the fortunes of its suppliers as well. … And: Humanoid robots are fast becoming smarter, cheaper, and more skilled than ever, as a recent global AI conference showcased.
Big Deals For Europe & Japan? Better Earnings For S&P 500?
While many European officials rue the US/EU trade deal struck last weekend, others accept it as the least bad of the EU’s options. One important benefit, William explains, is that it clears the uncertainty that’s been clouding the way forward for European policymakers and companies. … Japan and the US also have struck a trade deal, but in all uncertain terms. Both countries herald the agreement as a win but are on different pages about what it entails. … And Joe reports that better tariff clarity and strong Q2 earnings have raised analysts’ Q3 revenues and earnings sights for S&P 500 companies, with most sectors enjoying estimate pops.
On Bonds In Japan& Tariffs On South Korea
Japan’s Bond Vigilantes are riling the historically placid Japanese government bond market. Demand for JGBs has tanked, and now the risk of a destabilizing yield curve is likely to stay the Bank of Japan’s hand at its meeting this week, delaying its tightening push. Political uncertainty has the Bond Vigilantes fearing budget-busting fiscal loosening. William explores how Japan got to this point and what may come next. … Also: South Korea’s economy has rebounded impressively despite strong headwinds, and it’s not the only export-dependent Asian nation displaying remarkable resilience in the face of Trump’s Tariff Turmoil.
Update On The Roaring 2020s
Halfway through the decade, our Roaring 2020s investment theme remains on track. The US economy continues to prove remarkably resilient, supported by the robust spending of businesses and consumers, especially Baby Boomers. So far this year, it has been acing the stress tests of Trump’s trade policies. If the final years of the decade pan out as expected, Dr Ed reckons that the S&P 500 price index may be around 10,000 as the 2030s begin. And there’s no reason to expect the roaring to stop then.
On Materials, New Highs & AI Shopping Assistants
Tariffs and a resilient economy have helped boost many metals’ prices. Jackie looks at how that has helped steel producers and other companies that are able to pass along the higher prices to customers. Not all companies are so lucky, however. … Another day, another S&P 500 record. We take a look at the diverse group of industries helping to power the index higher. … And in our Disruptive Technologies segment, we go shopping with AI Assistants.
On 100% Depreciation & Brazil
One of the perks in the One Big Beautiful Bill Act is 100% bonus depreciation. Melissa analyzes why this tax break might have less of a macroeconomic impact than some anticipate. Bonus depreciation changes when an asset is expensed, not how much of it is expensed. That said, a small tax break is better than no tax break at all. We believe capital-intensive industries will benefit. … William looks at why Brazil continues to underperform, despite robust trade with China. The country needs to address its skyrocketing inflation and crushing debt levels, especially now, when it’s likely to get caught in the crosshairs of Trump’s Tariff Turmoil. … Q2 earnings season is underway and Joe reports that the traditional earnings hook is forming. More unexpected: Earnings forecasts for the second half of this year are rising.
Less-Grand Bargain with China & The View from Abroad on Powell Mess
President Donald Trump reversed course and allowed Nvidia to resume sales of its H20 chips into China. Could this change of heart indicate that the President is willing to bend on other trade matters as well? William explores whether the President might accept a “less-grand bargain” that can appease both US and Chinese politicians. … Meanwhile, foreign investors and analysts are growing uneasy about Trump's recent threats to fire Fed Chair Jerome Powell. Here’s what folks on the outside looking into the US are saying. … We don’t believe President Trump will fire Powell. But, just in case, we examine the credibility crisis that could ensue if he does.