Daily Research Updates
Morning Briefings
Expert market analysis delivered every morning. Stay informed with comprehensive research and data-driven insights.
China’s Currency & Japan’s Stocks
Trump’s Tariff Turmoil has undermined the US’s credit worthiness and unsteadied the dollar. For countries harboring currency-dominance aspirations, that’s been a blessing in disguise. Today, William explains why China’s aspirations for the yuan won’t bear fruit anytime soon. … Also: The opportunity China is jumping on to recast itself as the world’s protector of globalization. … And: Japan’s stock market has been on a tear for the past decade. But whether spreading cracks in its foundation suggest overvaluation is a legitimate concern. Japan faces a stagflationary economic outlook, reform initiatives going nowhere, corporations struggling to reinvent themselves, anemic demand for Japanese bonds, and BOJ tightening plans now in limbo.
Stress Testing A Resilient Economy
How damaging to the US economy are Trump’s on-again, off-again tariff proclamations? The stock market is barely reacting to them anymore, but consumers remain worried about the inflation implications of tariffs, according to “soft” survey data. Even so, they’re still breaking out their billfolds, feeling well supported by the strong labor market. Indeed, the “hard” economic data confirm that the US economy remains remarkably resilient despite Trump’s Tariff Turmoil. Today, Dr. Ed walks us through the data as the US economy deals with Trump’s stress tests. ... Also: Dr. Ed reviews “The Narrow Road to the Deep North” (+).
Defense Tech, Nuclear Power & AI
Defense stocks are bifurcating: The underperforming have-nots are the big DOD contractors, with meager share price gains so far this year, if any. The outperforming haves are innovative defense tech companies redefining not only how war is waged in the AI era but how the DOD procures its weapons systems. Jackie discusses the investor excitement over defense tech. … Also: Nuclear energy is having its day in the sun, again. Trump is all for it, and even European nations are warming to the notion of reviving their nuclear energy industries. … And: If you fear AIs programmed for self-preservation at all costs, stay clear of Claude.
On The Euro, Brexit & US Stock Performance
The Trump administration’s protectionist policies have undermined the US dollar’s strength, but do they put its global supremacy at risk? No, there is no realistic contender among global currencies. Today, Melissa debunks the notion that the euro has a shot at usurping the dollar’s dominance. … Also: With Brexit five years in the past, EU/UK relations seem to be shifting. New agreements suggest the EU is softening its stance toward sharing member-state benefits with the UK. … Also: Joe discusses ytd performance data for major segments of the stock market, highlighting how their performances have diverged over the past few volatile months.
Japan’s Brawl With The Bond Vigilantes
After last week’s portentous Japanese government bond auction, in which demand was so weak as to be off the charts, William explains what went wrong and why. Contributing factors included the BOJ’s halted tightening owing to “tariff haze,” the Prime Minister’s unfortunate remark likening the nation’s fiscal situation to that of Greece, and vestiges of Japan’s economic past. But having Japan-specific causes doesn’t detract from investors’ fear that this auction was a canary in a coal mine, portending more upheaval for global financial markets and more difficulty for global policymakers amid Trump’s Tariff Turmoil. ... Also: The implications of Japan’s economic turmoil for the world at large and the conundrum facing the BOJ right now.
AI’s Worker Displacement, Consumer Spending & Robots
Tech companies are already putting AI to work to ramp up their efficiency and productivity and to pare down their workforces. Non-tech companies are sure to follow. Jackie takes a look at where this evolution stands today and where it’s likely headed. … Also: Home Depot and Hovnanian are two bellwethers of consumer spending trends, and their executives are seeing more cautious home-improvement and home-buying customer behavior. … And in our Disruptive Technology segment: The humanoid robots are advancing.
On US Treasuries, The Big Beauty & S&P 500 Earnings
The headlines were wrong: Global investors in US Treasury bonds didn’t beat a hasty retreat when Moody’s downgraded the US’s debt rating. A “Liz Truss Moment” it wasn’t. Asian investors and policymakers already knew what Moody’s had to say, William reports. So global demand for US dollars remains intact, though the dollar does face risks. … Also: Melissa shares her analysis of Trump’s tax-cut bill, which carries a hefty price tag. … And: Joe recaps data on which way the winds of industry analysts’ net estimate revisions have been blowing (hint: It’s not north).
On China & Euro
Intractable demographic problems are straining China’s economic system and thwarting policymakers’ attempts to battle deflation. Rapidly declining birthrates are providing fewer new consumers, and elderly Chinese are savers, not spenders. Amid these pressures, falling prices “take on a life of their own,” William reports. No wonder China’s annual GDP growth is projected to slow to 2% by the 2030s. … Also: A look at the complicated issue of China’s fentanyl trade—including reasons China isn’t keen on stopping it. … And: The dollar’s recent weakness has revived predictions that the euro might usurp it as reserve currency to the world. But “King Dollar” remains hard to dethrone.
Meltup In Stocks Or Meltdown In Bonds?
Two scenarios to put on your radar: Bond prices might melt down if the Bond Vigilantes are roused by the downgrading of the US’s sovereign debt rating and/or the prospect that Trump’s tax-cut bill worsens the federal budget deficit outlook and/or tariff-related inflation. But a bond market meltdown could force Washington to set the US onto a more sustainable fiscal path—a positive end result for bonds and stocks. … The stock market might already be melting up again. … Also: Consumers are worried about tariff-related inflation coming, sentiment surveys suggest, but they’re spending apace nonetheless. And that’s not just spending on stuff in advance of anticipated tariff-related price hikes; they’ve been eating out a lot too.
Green Projects, Semis & Star Power
President Trump’s policies are regrading industry playing fields across economic sectors. Jackie discusses some of the ramifications for the companies hurt and helped. … If Trump 2.0’s attempts to dismantle Biden’s Inflation Reduction Act succeed, they would pose existential challenges to many green energy projects—$8 billion of which were already canceled during Q1. … But semiconductor makers are beneficiaries of Trump’s trip to Saudi Arabia: Several just got a windfall of new orders from the Middle East. … Also: To power the AI systems of the future, new energy sources will have to be developed, says OpenAI’s Sam Altman. He’s reaching for the stars.
On Asia, India & US Earnings
Today, we look at how Trump 2.0’s trade negotiations are impacting Asian nations’ economic policy decisions. From his seat in Japan, William describes the collective sigh of relief when President Trump slashed tariffs on China Monday and what the news means to Asia’s central banks and financial markets. … Melissa reports that India’s economic policymakers no longer trust their eggs in the global trade basket but aspire to become the world’s third largest economy by boosting domestic demand. Their strategy: stimulate consumer spending and grow India’s creative economy. … Also: Last quarter was another strong one for S&P 500 earnings; Joe shares takeaways from the data.
More On China: Deflation& ‘Made In China 2025’
China’s insidious deflation pressures are now evident in its producer and consumer price data. Government measures to stimulate the economy haven’t addressed the cause of the deflation problem—that the Chinese spend too little and save too much in the absence of adequate social safety nets. China needs to take decisive action in three areas, William explains. But a failure to see the urgency can be costly, as Japan learned the hard way; entrenched deflation can be difficult to root out. … Also: Does China’s ambition to dominate world tech markets pose a clear and present danger to Silicon Valley? Not quite yet.
Earnings & Valuation Under Trump 2.0 So Far
Even though Q1 earnings were fabulous, most economists, industry analysts, and corporate managements have low hopes that Trump’s Tariff Turmoil won’t dunk the US economy into a recession this year. Not us: We’re counting on the economy’s resilience. Today, Dr Ed discusses why the widely expected recession, like others in recent years, will be a no-show. Hard-to-ignore reasons include record-high forward earnings, strong economic indicators, and a forward P/E that hasn’t plunged as happens when a recession is imminent. Stock investors seem to be in our camp. Moreover, Trump’s tariff overreach is bound to be tempered by the courts and mid-term election realities if nothing else. … Also: Dr Ed reviews “How To Make Millions Before Grandma Dies” (++).
Oil, Consumers & Driverless Taxis
Oil prices have sputtered amid fears of weak global oil demand in a trade-warring world. Today, Jackie reviews news that bears upon the supply/demand balance underpinning oil pricing. The decision by OPEC+ to no longer underproduce should increase supplies, but that could soon be offset if US shale producers curb their production while oil prices are low. News of the US and China talking trade is supportive for global oil demand and pricing. … Also: Reports from the front lines of the Consumer Discretionary sector, where different companies are feeling Trump 2.0 impacts to different degrees and in different ways. … And: Are you ready to hail driverless taxis? They’re ready for you.
On Europe & S&P 500 Earnings
The Eurozone is improving economically as the US remains cloaked in uncertainty, its exceptionality being questioned by some. Melissa explores the countervailing forces affecting the Europe’s economic growth prospects and suggests that its equity markets might offer some opportunities at this juncture. … Also: Funds flow and equity market performance data suggest a rotation: Investment dollars have been exiting the US stock market and flying off to Europe. But is the rotation poised to reverse? … And: Joe examines recent estimate revisions activity. Even though last week’s revisions for S&P 500 companies were upward on the whole, the broader trend in forward earnings remains downward.
On European Auto Industry& The BOJ
The reordering of global trade patterns stemming from Trump’s Tariff Turmoil is having distinct ramifications for market players and policymakers the world over, as William explains today. Inexpensive Chinese imports flooding into Europe’s auto markets are confounding the industry stalwarts and presenting policy conundrums. … Different policy conundrums have been dumped in the laps of central bankers in Japan and the US, and the decisions of each affect the other. Fed rate cuts could cause the BOJ to shift policy course, and simultaneous rate cuts by the two could shake financial markets worldwide.
Is The Recession Over Already?
We believe in the resilience of the US economy. Recent years’ monetary tightening didn’t bring on a recession; this year’s tariff turmoil isn’t likely to either. We’re lowering the odds we see of a recession back to 35%, where it had been in early March. One reason is that China and the US appear ready to start negotiating a trade deal. Trump needs to get past trade issues for the Republicans to keep their majorities in Congress after the midterms. … Also: The Index of Coincident Economic Indicators has been rising to new record highs. And Friday’s jobs report boosted our confidence in the labor market’s resilience. …And: Time to raise our S&P 500 target?
Tariffs, Earnings & Batteries
Trump’s Tariff Turmoil has resulted in tectonic upheavals of the operating environments companies navigate in myriad industries, and few chief executives know what the future will bring or how to plan for it. Today, Jackie reports on the tariff impacts seen by three CEOs in different industries—semiconductor manufacturing, steel, and global travel—and how they’re thinking about the uncertain future. … Also: A look at how the uncertainty has affected forward earnings for the S&P 500’s sectors and industries. … And: An update on the race to improve electric vehicle batteries.
On The Dollar, The Debt & Earnings
Investors can dismiss worries that the US dollar’s weakness presages an emerging-market-style crisis. That’s impossible for the US. Foreign investors need dollars to invest in US assets, which retain their clear advantage in attracting investment capital. We attribute the recent dollar weakness to the strong euro and devaluation of high-P/E Mag-7 stocks, which foreign investors shed amid Trump Tariff Turmoil. … Also: Melissa discusses expectations for the House’s tax reconciliation package that should stop Trump 1.0’s tax cuts from expiring this year—which won’t come cheap. … And: Joe reports that tariff-related uncertainties are reflected in analysts’ estimate revisions, skewed uncharacteristically downward despite strong Q1s.
Does China Need The US?
In setting cartoonishly large tariffs on China, Trump assumes the US has the upper hand. But does China really need America as much as Trump thinks? President Xi hasn’t come crawling to Trump, pleading for softer terms; he’s been working out new trade deals with other Asian nations. Today, Contributing Editor William Pesek exposes the Trump administration’s potential miscalculations regarding China. China has been diversifying its export markets ever since Trump 1.0 in anticipation of just such a trade war, and it no longer needs the US consumer to meet its GDP growth goals. Moreover, China has a higher pain threshold than Americans can fathom (“chiku”) as well as unused stimulus options in its arsenal.
Anatomy Of A Correction
A dovish faction has been forming within the Federal Reserve Board, dissenting from Chief Powell’s hawkish party line. Rather than wait and see whether tariffs deliver greater blows to the economic or the inflation outlook before changing monetary-policy course, the doves claim that the economy is more vulnerable and espouse lowering the federal funds rate sooner rather than later. Dr Ed sides with Powell & Co. So does the data: So far, there’s more evidence of tariff-induced inflationary pressures than economic weakness. ... Also: The recent stock market correction partly reflects late January’s revaluation of tech stocks in reaction to the Deep Six ramifications. Now investors may be embracing the Mag-7 once again. ... And: Dr Ed reviews “Companion” (+ +).
Tariffs Hit Energy & Industrials
The US oil and gas industry isn’t in the direct line of Trump’s tariff fire, but it’s affected nonetheless, Jackie explains. Slower global economic growth in a trade-constricted world will dampen energy demand; that prospect is hurting oil and gas prices. Halliburton execs say their oil-drilling customers need oil prices above a critical level in order to warrant the expense of drilling. Moreover, Chinese importers of US propane will be hard pressed to afford it with China’s retaliatory tariffs in place. Long term, however, natural gas prices should head higher. … Also: How tariffs are expected to impact two industrials companies, 3M and RTX. … And: A look at how AI is revolutionizing the study of genes.
More On Trump’s Tariffs
Importers are responsible for paying tariff bills, but it’s Jane and Joe Consumer who will carry most of the burden. Importers will try to protect their profit margins by offloading the tariff costs to their export partners and customers when possible; when consumers lack substitution options for imported must-have products, they’ll pay up. … Also: Trump’s tariff tactics should surprise no one; they’re straight out of his book The Art of the Deal. Melissa draws the connections. … And: Joe reports that analysts’ net earnings estimate revisions for S&P 500 companies haven’t been so downwardly slanted for two years. Only two S&P 500 sectors had upward NERIs in April.
On Edge For 90 Days, More Or Less
Trump’s Tariff Turmoil has put the world on edge. A new world order may be the ultimate result, but for now we’ve got the New World Disorder, leaving everyone scrambling to adjust to Trump’s unpredictable policy pivots. The economic fallout is uncertain. The uncertainty is keeping Wall Street on edge. It’s keeping US trading partner nations on edge. It’s keeping YRI on edge. Today, Dr Ed reviews the timeline of Trump’s tariff proclamations; Trump’s frustrations with a Fed chair who won’t be cowed and can’t be fired; the mid-turmoil expectations for GDP, inflation, corporate earnings, and stock valuations; and the economic impacts of Trump’s tariffs on China and Europe. ... Also: Dr Ed pans “The White Lotus,” Season 3 (-).
Tracking Consumers & Nvidia’s Investing
How is the US consumer doing? Jackie examines the evidence. Trump tariff turmoil likely distorted the clues in March retail sales, and Tesla and Amazon weighed on the S&P 500 Consumer Discretionary index. We take a look at bank consumer lending and Americans' trips to Vegas for clues. Also: US importers appear suddenly to have stopped front-running tariffs as they work down inventories. Much anecdotal evidence even suggests they’re cancelling orders already placed. … And: In the wake of new government export restrictions costing Nvidia big bucks, we look at the acquisitions that expand the company's offerings beyond chips.