Morning Briefings
Expert market analysis delivered every morning. Stay informed with comprehensive research and data-driven insights.
Data Centers Unplugged & RTX During Wartime
Data centers are notorious gluttons for electricity and water, but not punishment. More and more are employing novel ways to address the outrage targeted at them by environmentalists and local communities, Jackie reports. … Also: One innovative company has a sea change in mind for data centers. Panthalassa has developed a combination hydroelectric plant/data center that bobs unanchored in the ocean waves—no land, no grid, no complaints. … And: With bloated backlogs and earnings flying high, RTX is one company benefiting from the war.
On 100% Depreciation, Rising Earnings & China’s Woes
How much has the OBBBA’s 100% capex depreciation provision boosted companies’ capital expenditures? Melissa has scoured the available data sources to learn, “not much.” On a macro level, business investment hasn’t risen enough to suggest a policy-driven catalyst. Few small businesses credit the OBBBA with affecting their spending plans. And depreciation in and of itself is an earnings headwind for the formerly asset-lite Mag-7, given all their AI-related spending. … Also, Joe reports that analysts have been raising their Q2-2026 estimates during the Q1 reporting season instead of the more typical reverse. … And: William counters the bullish view that China’s economy will weather the war just fine.
Three Tech-Led Economies In Geopolitical Crosshairs
Today, William examines the prospects of three similarly challenged emerging economies: South Korea, Taiwan, and Israel. All three are high-tech-focused, export-dependent economies riding the AI wave, yet located in geopolitical hot spots. If the war in the Arabian Gulf escalates, they face risks including rising risk premia, falling asset valuations, and capital outflows. But opportunities abound as well. … Also: Toby discusses the valuations and fundamental underpinnings of the three nations’ stock markets. Korea’s looks cheap given an explosive earnings growth outlook, Taiwan’s appears fairly priced, and Israel’s seems overvalued relative to fundamentals.
Debating Warsh
Kevin Warsh, the probable next Fed chair, wants to lower the federal funds rate sooner rather than later. Few FOMC members agree with him. Ed and Elias don’t either. Today, they explain why Warsh’s case for lower rates is fundamentally flawed. It rests on the economic dogma that, because the labor share of National Income is declining amid an AI-fueled productivity boom, the theoretical neutral federal funds rate, R*, is also declining. On the contrary, explain Ed and Elias, the productivity boom raises R* for reasons unique to the current economic backdrop. That leaves little room for the aggressive rate cuts Warsh envisions without risking speculative bubbles and a financial crisis. Also, the Bond Vigilantes would probably resist Fed easing, as they have since 2024. … Ed reviews “Anniversary” (++).
Oil, Financials & Slop
Equity investors, optimistic that the end of the Iran war is near, drove the S&P 500 to a record closing high yesterday. If only such optimism were reflected in oil prices. Jackie discusses the developments and expectations moving the two markets. … Also: The S&P Financials sector posted excellent Q1 results, but its ytd performance lags all other sectors’. Investors might be overlooking some tailwinds and overreacting to some headwinds. … And: Video disruptor YouTube is being disrupted by “AI slop” on its channels. So are its social media video platform peers. But prohibiting AI-generated content comes with a cost.
On IMF’s War Scenarios, China’s EVs & US Earnings Revisions
The IMF’s just released World Economic Outlook analyzes the impacts of war on economies based on decades of data. Melissa has mined its findings for insights to investors trying to see through the fog of war. Chief among them: The hit to US GDP growth may be negligible. … Also: William discusses the sales windfall Chinese EV makers are enjoying as a result of the energy shock. … And: Joe’s analysis of analysts’ net earnings revisions reveals that S&P 500 sectors tied to the recently outperforming Magnificent-7 have been the target of estimate cutting, while the reverse is the case for the long-time lagging sectors.
On Central Banks In Wartime
The economic trajectories that global central bankers had thought their countries were on before the Iran war started have been upended by disrupted supply chains, altered trade relationships, spiking inflation, and impaired growth prospects. When the war and the discombobulation it’s causing will end is anyone’s guess. William describes the decisions facing the Fed and its counterparts in Europe, Japan, England, and China as they attempt to steer their economies in the dark. … Also: Toby discusses the yen’s weakness, which displeases President Trump and complicates the BOJ’s path forward.
On US Profits, Consumers & Inflation
With the US economy producing record-breaking earnings and margins, Dr Ed and Elias wouldn’t be surprised to see employment pick up despite AI adoption and other factors holding it back. … They also expect consumer spending to remain resiliently robust even though income growth isn’t keeping up, which is depressing the saving rate. But not even a negative saving rate—which may occur—would tank consumer spending in today’s environment, they maintain. The spending of retired Baby Boomers would keep it afloat. … Also: CPI inflation historically runs higher than PCED inflation; lately, the reverse is true. That’s mostly because rent inflation, which is moderating rapidly, carries more weight in the CPI.
On Health Care, Energy Inflation & Small Nuclear Reactors
The S&P 500 Health Care sector is showing signs of a rebound following a period of significant underperformance. Jackie examines the recent surge of large drug companies buying biotech upstarts and the surprise increase in Medicare reimbursement rates for 2027. ... The cease-fire between the US and Iran sent the price of Brent crude oil futures tumbling 15%, providing some much-needed relief for airlines and shippers which have been aggressively passing higher fuel costs to consumers. ... Meanwhile, the race to build AI data centers is accelerating interest in Small Modular Reactors despite one project cancellation and pending regulatory approvals. We look at some of the major projects being planned across the country by X-Energy Reactor, NuScale Power, Oklo, TerraPower, and Holtec International.
The Impact Of The Oil Shock On Germany, Canada, And India
The global economy is currently grappling with a "polycrisis" driven by the war in Iran and the closure of the Strait of Hormuz, which has triggered a massive energy price shock and forced central banks into a "stagflation" trap. William and Toby team up to review the situation in Germany, Canada, and India. …In Europe, the ECB is pivoting toward aggressive tightening as German inflation spiked to 2.8% in March, threatening to push the 10-year Bund yield higher. Canada is facing a similar dilemma; while elevated oil prices at $110 per barrel theoretically benefit the net exporter, the immediate reality for Prime Minister Mark Carney and BoC Governor Tiff Macklem is a contracting services sector, a 6.7% unemployment rate, and a "wholesale repricing" of inflation forecasts that has moved the BoC toward potential rate hikes. …Meanwhile, India’s "Goldilocks" narrative is unraveling as the rupee slides toward a psychologically fraught 100 level, exacerbated by a $12 billion equity outflow in March and a 13% ytd drop in the Sensex, signaling that the structural failures in manufacturing and chronic deficits have left the economy uniquely vulnerable to this global risk-off pivot.
Anatomy Of The US Labor Market
Last week’s employment report was widely interpreted as good because jobs growth rebounded and the unemployment rate dropped. Dr Ed and Elias disagree. Our inflation-adjusted Earned Income Proxy fell as inflation surged, a bad sign for real disposable income. The drop in the unemployment rate is good news, of course. Both labor supply and labor demand have contracted in recent months but remain roughly in balance. … Also noteworthy: Retiring Baby Boomers are weighing on real disposable income while simultaneously bolstering consumer spending. … And: Dr Ed reviews “Project Hail Mary” (+).
On Aluminum, P/Es & Semis
The Iran war has tightened the market for aluminum, driving up prices and benefitting US producers. Jackie looks at the market dynamics and what Alcoa execs had to say about the unexpected demand they’re seeing. … Alcoa is also building a gallium plant for the US, Australian, and Japanese governments to ensure ample supplies of the metal used in electronics and produced mostly by China. … Also: Some S&P 500 sectors and industries have enjoyed rising valuations over the past year; we list some of the biggest winners. … And in our Disruptive Technologies segment, three announcements could dramatically alter demand and supply in the semiconductor industry.
On Private Credit, Brazil, And Earnings
The private-credit market is inherently illiquid. Recently, it has needed to gate redemptions, making investors who want access to their funds wait. Vocal retail investors have reporters questioning whether this could trigger a 2008-style financial crisis. That’s not happening, Melissa explains. But she outlines two contagion-transmission paths that bear watching during these uncertain times. … Also: William takes us to Brazil, where the uncertain outcome of a close presidential race will keep investors in limbo for months. Meanwhile, prioritizing Brazilian stocks over bonds might be wise. … And: Joe expects S&P 500 companies’ collective Q1 earnings growth to beat even the 14% analysts project.
Taiwan: Great Business, Bad Location
Taiwan’s economy could be collateral damage in the Iran war, reports William. The US’s geopolitical ambitions might embolden China to make good on its pledge to bring Taiwan back under its wing, especially if President Trump doesn’t offer the island nation continued US support—as well he might not. The prospect of TSMC under Chinese control holds apocalyptic economic implications since that one company makes most of the world’s advanced semiconductors. But Taiwanese ETFs are rallying all the same. Is the market right that China won’t risk its own GDP growth by invading Taiwan? … Also: Toby examines Taiwan’s rapidly growing but precariously undiversified economy, overly dependent on tech exports.
Bond Vigilantes Are Mobilizing Globally
The unprecedented oil-supply shock caused by war in the Middle East has crushed investors’ former expectations for subdued inflation and dovish central banks’ actions. The Bond Vigilantes are repricing yield curves worldwide, especially at the short end, in some economies more than others. Today, Dr Ed and our new contributing editor Elias Griepentrog analyze what global yield-curve spreads imply about investors’ new expectations, opining that the front end of the US curve may be oversold. … Also: The three stages of a negative oil-supply shock. The US economy is still in Stage 1, anticipating a more hawkish Fed and a bear-flattening of the yield curve. But where it goes next depends on the course of the war.
On Helium Inflation, Oil-Price Disparities & Robot Evolution
Helium prices have inflated after one of the world’s largest helium producers, in Qatar, halted production for the duration of the war. Jackie examines the new helium market dynamics and discusses the ramifications for helium-dependent industries (like semiconductors) and countries as well as for US helium producers. … Also: While the Iran war has jacked up oil prices everywhere, different oil-price benchmarks have been affected differently. … And: Robots are becoming more humanlike by the day. We look at Unitree’s upcoming IPO, Amazon’s acquisitions, and McDonald’s temporary robots.
On Private Equity, Africa’s Latest Crisis, And S&P 500’s Excellent Earnings
Private equity sponsors are having difficulty selling portfolio companies and returning distributions to investors. Melissa explores the signs that the private equity market may struggle in 2026 and why the window of opportunity investors enjoyed back in 2021 has closed. … Also: William examines the impacts of the Iran war on troubled African nations, which have fielded crisis after crisis so far this decade. … And: Only Joe has positive news for us today, and it’s great! The typical end-of-quarter estimate cutting isn’t happening as the Q1 finish line nears—estimates have been soaring instead, despite the oil-price shock.
China’s K-Shaped Economy & AI Ambitions
China’s annual GDP growth goal is set at a low level that still might not be attainable, William reports. China has a two-speed economy: Exports are growing like gangbusters, while domestic growth is languishing. Insecure consumers, collectively gripping $22 trillion in savings, won’t spend more freely without greater social safety nets—which are notably absent from President Xi’s AI-focused economic plan. And the impacts of war may jeopardize even China’s powerful export growth engine. … Also: Investors are dubious that China’s massive AI investments will bear the promised profits. And something’s inherently off with China’s AI ambitions in the first place: How can AI creativity flourish amid ideological clamps on the free cross-border flow of information?
From Powell To Warsh
Kevin Warsh, President Trump’s nominee to replace Fed Chair Powell, no doubt will lean toward dovish policy-making, under pressure from the President to convince the rest of the FOMC to err on the side of easing. But the timing of Warsh’s confirmation is uncertain. Today, Dr Ed along with our new contributing editor Elias Griepentrog take us on a thought experiment: Under three alternative scenarios for the length of the Iran war, they project the economic impacts and associated ramifications for monetary policy under Warsh’s leadership versus that of Powell. … Also: They share eight takeaways from the FOMC’s March meeting. ... And Dr Ed reviews “The Secret Agent” (- – -).
On Retailers, Earnings & High-Tech Weapons
The S&P 500 Consumer Discretionary sector has been battling a trifecta of challenges, and only a couple of its industry indexes have escaped ytd declines. Jackie distills what the managements of several affected companies had to say on recent earnings calls about the impacts of oil prices, inflation, and tariffs. … Also: Joe reports that the downward earnings estimate revisions that analysts typically make as quarters progress haven’t been as disappointing as usual during Q1. … And: New weaponry technology leverages light and sound to destroy targets, shoot down drones, clear an area of people, and incapacitate enemies.
On Private Credit & EVs
Retail investors have initiated a run on alternative asset funds focused on the private credit market. Their confidence in the asset class is shot. Melissa discusses three weaknesses in the retail segment of this market—endemic fraud, poor underwriting, and structural valuation opacity. She also provides reasons that these problems don’t represent systemic risk but should remain contained; the same goes for defaults by software company borrowers. … Also: William discusses Chinese electric vehicle makers’ domestic market challenges as well as the problems that have caused Honda to downsize its EV operations.
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.