Well, let’s just dive into Monday morning and take the pulse of the market:
Markets: I have the Nasdaq 100 looking at 20% earnings growth next 12 months – but I ALSO have small value at 12% with half the valuation. AND rate cuts. You have broad participation of making earnings grow, a necessary component for broad participation. Add trade de-escalation and you end up with higher prices a year from now.
Tech Earnings expectations: Apple must show solid iPhone 17 demand, services is a sideshow without it, so a consumer story. Microsoft is all about monetize AI, or else we are no longer a growth and margin story which is a big transition! AMZN still looking at low double digit earnings. This week tells you the economy.
Tariffs: 100% tariffs on China “is effectively off the table” – there is no other news. Rare earths controls were deferred which is the best-case scenario. We bought some time and that’s good enough for markets.
Inflation: Sticky at 3%. I see labor and cost side keeping it that way. With declining wage inflation, sticky labor, you could see a slower rate cutting cycle than markets wants – that gives you volatility to commit capital – because, again, earnings are strong. Buy any dip from inflation scares.
Fed and yield activity: labor is in control not inflation. Invest accordingly. Now is a transition from risk management cuts with Powell to a full rate cutting cycle (next chairperson).