Daily Research Updates
Morning Briefings
Expert market analysis delivered every morning. Stay informed with comprehensive research and data-driven insights.
On Consumer Strength & Bitcoin Weakness
Consumer spending has remained resilient in the face of higher gas prices and inflation generally, thanks much to a resilient job market. Jackie recaps recent employment data and discusses Q1 consumer behavior as described by the top brass of three retailers serving different customer niches. … In our Disruptive Technologies segment, a look at the sagging value of bitcoin and sagging investor confidence in Strategy, a small company that’s a play on the cryptocurrency. Investors were shaken by the company’s recent bitcoin asset sales and wonder about an encore.
On Q1 Earnings, AI Investors & China's Latest Clampdown
An accounting rule inflated the S&P 500 companies’ aggregate Q1 EPS to a record high and catapulted their collective y/y EPS growth to nearly 30%. Without the non-operating gains, Joe reports, the index’s EPS still grew 20% y/y but not to a record high. Several Mag-7 companies’ earnings were boosted as a result. Joe backs out the paper gains. … Also: Melissa discusses AI use in investment decision-making. It’s not just a research support tool anymore. … And: William discusses how China stifles the innovation it hopes to foster.
On Tumbling Asian Currencies & Stagflating Australia
Today, William discusses how a more hawkish US central bank and stronger US dollar hammer Asian economies. Besides driving down the value of their currencies, it makes them more vulnerable to excessive inflation and poses problems for their monetary and fiscal policymakers. … Also: He explains how the Australian economy, resilient for 30 years, was “undone by its own success” as structural advantages became liabilities over time. Stagflation now looms, putting the central bank in a tough spot. … And Toby gives a “boots on the ground” assessment of the stock market in his native Australia.
Fed Turning Hawkish
Today, Dr Ed and Elias set out the case for the Fed to tighten sooner rather than later. Unlike the consensus, which doesn’t expect a rate hike until late this year at the earliest, we see the FOMC raising the federal funds rate in July, after pivoting to a tightening bias at its meeting this month. That would be appropriate given the resilient economy, stable labor market, and rising inflation. Indeed, recent statements by various Fed officials suggest that a hawkish recalibration is underway. … Also: A sanguine take on recent consumer debt and credit statistics. They’re not cause for alarm, initial appearances to the contrary. … And Dr Ed reviews “Pressure” (+ +).
On CPUs, Oil & Securing Rare Earths
Agentic AI is proliferating, and to run AI agents requires way more CPU semiconductor chips than running chat boxes. Demand for CPUs is expected to skyrocket as a result, shifting the architecture of data centers. Today, Jackie examines the players and recent industry developments, including NVIDIA’s foray into the stand-alone CPU space. … Also: Oil prices have dropped on hopes that the US and Iran are nearing an agreement that will reopen the Strait of Hormuz. But if it doesn’t reopen soon, oil markets will be in dire straits. … And: Weaning America from dependence on rare earth minerals from China.
On AI’s Complex Pricing, South Korea’s Good Fortune, And S&P 500 NERIs
Pricing for AI services is becoming increasingly complex as AI becomes increasingly agentic. That takes much more computational power than fetching answers. Melissa discusses how AI pricing works, surmising that the winning AI providers won’t be those with the smartest models but those that use “tokens” the most cost effectively. … Also: William discusses the vulnerability of the South Korean stock market and economy. They’ve been soaring on the wings of AI with little underlying broad support. … And: Joe shares his takeaways from updates of our Net Earnings Revisions Index and Net Revenues Revisions Index.
On China’s Lagging Stock Market & An AI Chokepoint
Investors in China’s stock market ran for the exits at news that regulators would be cracking down on stocks driven by AI euphoria versus earnings potential. Fanning the fear, William explains, were the implications that China’s President Xi isn’t the capitalist proponent of free markets he claims to be. … Also: Toby discusses the China MSCI’s extremely low valuation for profitable companies. While that sounds enticing, share prices reflect risk that isn’t likely to go away. … And: The Strait of Hormuz isn’t a chokepoint only for oil. Some 20% of global internet and financial data run through it via subsea cables. Threats to tax that flow have Big Tech brainstorming Hormuz-avoidance strategies.
On Health Care, Housing & Space
The S&P 500 Health Care sector index has performed woefully so far this year, down 5%. Jackie looks at the many reasons it’s been under the weather and what may revive it next year. … Also: Toll Brothers' April quarter earnings confirmed that high-end home buyers still have the means to buy. Are other home buyers becoming less sensitive to affordability issues and more accepting of higher interest rates? Analysts are counting on it. ... And: SpaceX isn’t the only company with its head in the stars. The race to space is on as makers of satellites and other space equipment, both established companies and upstarts, compete to develop the final frontier.
On A Profits-Booster, AI For Main Street & Xi’s Weak Point
The first quarter was another record-high one for S&P 500 companies’ earnings, but accounting gains posted by two behemoths—Amazon and Alphabet—skewed the results northward. Joe has the details. … Also: Melissa foresees wider adoption of AI by small businesses, with offsetting effects on productivity and on jobs creation. She also identifies the next leg of the AI investment trade, the equipment enabling data center expansion. … And: President Xi Jinping is overly optimistic about the direction of China’s economy, says William.
A World Of Hurt
Stagflation is spreading globally as the closure of the Strait of Hormuz stymies trade, slows economies, and exacerbates inflation. Toby points out that stagflationary macroeconomic environments don’t necessarily hobble a country’s stock market (Japan is a case in point) if companies can grow profit margins nonetheless. … Also: William discusses how the Fed’s likely pivot toward tightening and the prospect of a stronger US dollar cause problems for emerging market economies. … And: Germany’s economy, the economic engine of Europe, is sputtering as it slides into stagflation. As Germany goes, so goes Europe, and a weak Europe doesn’t bode well for global economic resilience at a time of escalating geopolitical threats.
Bond Vigilantes Welcome New Fed Chair Warsh With Loud Bronx Cheer
The financial markets expect interest rates to remain higher for longer, notwithstanding President Trump’s demands that Kevin Warsh, newly instated as Fed chief, get rates down. But the macroeconomic backdrop no longer supports an easing bias, let alone a rate cut. Paradoxically, Elias and Ed explain, a more hawkish Warsh than investors expect would actually work in Trump’s favor via its downward effect on long-term Treasury yields. … We expect the Fed to hold rates unchanged at its June meeting, shifting to a tightening policy stance, followed by a rate hike in July. … Also: Two recent Fed reports confirm consumers’ resilience.
On Technology, Semiconductors & Fusion
Yes, there’s some froth in this bull market. A few companies have ditched their traditional businesses to jump into AI-related areas. And the market’s performance has certainly narrowed. But the S&P 500 Information Technology sector’s earnings forecast for both this year and next should provide the support this market needs to continue moving higher. … Jackie also looks at the S&P 500 Semiconductors industry, one of the strongest within the Technology sector. Charts of the industry’s amazingly strong earnings and wide margins illustrate why shares have rallied so sharply. … Finally, with the world facing an oil shock, we take a look at some of the recent advancements in fusion energy. Could fusion reactors come online in the next five or so years to solve many of our energy problems?
On Booming Earnings, European Politics & Dangerous AI
The stock market’s meltup has been led by an earnings boom. Joe goes through the numbers and finds that the boom is widespread. … European politics are moving to the right as voters express their discontent about unchecked immigration. William explains that the right is likely to push for tax cuts without also reducing spending, resulting in bigger government deficits. That’s one reason why bond yields are rising in Europe. … Melissa examines the potential dark side of AI.
POTUS Goes To China
What will be the likely outcome of the Beijing summit between Trump and Xi? William considers the possibility that the one-year “détente” agreement between China and the US, signed in October 2025, will be extended. Both sides could use some trade deals. The big question is whether China will lean on Tehran to accept US terms for ending the war. … Our “house” position is that China’s stock market is appropriate for traders, not investors. Toby sees upside in China’s tech stocks if Xi convinces Trump to allow more US semiconductor exports to China. … William updates on developments in Japan that might impact the carry trade.
Sweet Spot For The Labor Market
April’s employment report had lots of good news for the labor market. Ed & Elias discuss some of the news that seemed to be bad but really wasn’t on closer inspection. In their view, the April jobs report amounts to a vote of confidence in the narrative that the labor market is stabilizing and may even be improving without boosting inflation. Meanwhile, retiring Baby Boomers are weighing on wages, payroll employment, disposable income, and the personal saving rate. But they are boosting consumer spending by spending their substantial net worth. … Incoming Fed chair, Kevin Warsh is likely to find that the majority of his FOMC colleagues will want to eliminate the easing bias in the committee's next statement. … Dr. Ed reviews Remarkably Bright Creatures (+ +).
The War’s Supply Shocks
Our friends at Capital Alpha released a great summary of the impact of the war in the Middle East on the availability of key commodities that are produced in the region and transported through the Strait of Hormuz. Even if the war ends soon, the ripple effects will continue to be felt around the world through the end of this year and perhaps next year too. … William focuses on the war’s impact on global food supplies.
On Magnificent US Earnings, AI’s Impact On Jobs & UK’s Woes
“Truly magnificent!” are Joe’s words for the collective March-quarter earnings strength of the S&P 500 companies that have reported results so far. He shares his takeaways from the data. … Also: Melissa scours employment data to learn how much creative destruction AI has wrought so far. Over time, we think AI will create as many jobs as it destroys. … And: Political instability in the UK has driven 10-year gilt yields to highs not seen since the 2008 financial crisis. What’s spooking bond investors, explains William, is the prospect of a less fiscally responsible prime minister if Keir Starmer steps down. Another big uncertainty is whether the BOE will tighten monetary policy to quell higher inflation.
The War's Impact On Emerging Markets
Among the many economic ripple effects from the war in Iran, the inflation-economic growth balances in developing market economies have been upended. Currencies are plummeting relative to the dollar. William examines economies affected the worst including net energy importers India and Indonesia as well as Japan, where the yen-carry-trade risk has returned. … As net exporters of commodities, Latin American economies are faring much better. Toby sees opportunities for investors in Latin American stocks, particularly those of Brazil and Mexico.
Consumers Still Doing What They Do Best
Consumer spending is the single biggest driver of US GDP growth, and its remarkable resilience despite lackluster income growth contributes mightily to the resilience of the US economy broadly. Today, Ed and Elias explain why consumer spending has seemed to defy economic gravity and why it should continue to do so. The short answer: our “gen-shaped economy,” shaped by generational dynamics as the Baby Boomers move through life’s phases. As retired Boomers chip away at their massive nest eggs while not earning a paycheck, they’re keeping consumption aloft and the saving rate falling. … Also: Three other consumption tailwinds are worth noting. So is one potential risk to our optimistic spending outlook: a prolonged period of triple-digit oil prices. … And: Dr Ed reviews “Mr. Burton” (+ +).
On Consumer Spending, Rental Markets & Crypto
Consumer spending doesn’t seem to have let up despite higher gas prices and greater geopolitical uncertainty stemming from the war in the Middle East. That’s the view from the vantage points of both Hilton and Visa execs, Jackie reports. Both companies had strong March quarters and are optimistic about the remainder of 2026. … Also: A post-pandemic apartment construction boom oversupplied the market, and rent inflation has decelerated significantly as a result. But much slower new supply growth going forward should firm the market, says AvalonBay. … And: The line is blurring between banks and cryptocurrency companies, each expanding into products and services traditionally offered by the other.
On the Nikkei’s Ascent, Europe’s Energy Crisis & Great US Earnings
Japan’s Nikkei index has soared to a record high in defiance of economic reality. Stagflation looms, and the government has no economic rescue plan. William discusses the reasons for the decoupling of the stock market from economic fundamentals and shares measures the prime minister could take to keep the bulls running. … Also: The closure of the Strait of Hormuz puts European economies in harm’s way. Melissa examines the Eurozone’s exposure to energy imports from the Middle East and the stagflationary implications of the energy-supply shock. … And: Joe reports cheery stats from the 30% of S&P 500 companies that have reported Q1 earnings so far.
Eurozone Facing Tough Times Again
The European Central Bank faces a tough decision when it meets this week. Tightening to tamp down rising inflation from the energy shock of the Middle East war is riskier now that the recent PMI release indicates contraction, William explains. The unexpected weakness brings the specter of stagflation, squelching the economic optimism that prevailed prior to the war. … Also: The German economy, the Eurozone’s anchor, hasn’t been this weak since the Covid period. Officials warn of long-term pain. … And Toby traces the Europe MSCI’s comparatively poor earnings and productivity growth to Europe’s lack of AI powerhouses and other technology innovators, with the exception of ASML and SAP.
The Oil Shock & Inflation
Why hasn’t the price of Brent crude oil gone through the roof despite the closure of the Strait of Hormuz since February 28? Ed and Elias explain the anomalous price action. … Also: Why US oil producers aren’t pumped enough by higher energy prices to save the day. … And: How the energy supply crisis is likely to feed into inflation, not just via higher gasoline and fuel prices but higher food prices as well given constrained fertilizer supplies. Nevertheless, disinflationary wage and rent forces should prevail once inflationary pressures dissipate in coming months. … Finally, how the Fed is likely to react to higher inflation data near term. … Also: Dr Ed reviews “Michael” (+ +).
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.