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Stocks Pause on ‘Less than Magnificent’ Earnings
October – synonymous for delivering market jolts – passed with barely a whimper. However, it was the market’s first negative month since April. Are stocks losing their mojo? In short, large cap tech earnings from five of the ‘Mag 7’ were less than magnificent. Meta, Apple and Microsoft all dropped post earnings. Google managed a small 5% rise initially – but gave it all back. Amazon managed hold gains of ~3%. This post talk to what the market expects from the nearly $1 Trillion in AI capex… and how their patience could be starting to wane…
Decoding the Drop in Oil
Middle East tensions are rising. However, oil prices are dropping. Why? The Israeli missile attacks on Iran, while not entirely unforeseen, triggered a negative response in the oil market. Now this may seem curious… contrary to expectations of a price surge due to heightened geopolitical tensions, crude oil prices plunged ~5%. In short, market sentiment tends to prioritize economic supply and demand concerns over (short-term) geopolitical risks
Stocks Losing Momentum
Are stocks starting to lose momentum? This week saw the S&P 500 reverse course – its first losing week since early September. Could there be more to come? My answer is yes – perhaps as much as 7-10%. However, it’s a question of timing. Irrespective, paying 22x forward earnings is a higher-risk bet.
The Bond Vigilantes Strike Back
Several weeks ago I suggested investors consider reducing their exposure to 10-year treasuries. At the time, the world’s most important debt security was yielding around 3.80%. They would continue to fall to a near-term low of 3.60%. In this case, the timing was good as these yields have rallied some 60 bps in turn crushing bond prices. For example, EDV and TLT have dropped more than 10%. So why are 10-year yields rising in the face of Fed cuts? There’s a good reason: term premium. Bond owners demand a premium if owning the debt of a fiscally irresponsible government. And this has major implications for investors…