Outlook

The middle of this week saw a volatile trading session, with the S&P 500 finishing up about 40 basis points. And then there was Nvidia doing its usual song and dance with the beat-and-raise routine it trots out every quarter.

Stocks ended mixed after a nail-biting week for investors, who grew anxious over megacap tech valuations and interest rates as the government shutdown came to an end. It takes time to get a tanker ship up and running again after a full stop.

Volatile trading on Wall Street has risk assets and fixed income swinging from gains to losses indecisively as investors await clarity on AI and the status of employment prior to making bold wagers.

Many small-cap industries and sectors outpaced their large-cap counterparts over this 6-month period, a sign of the broadening equity rally and the role of other secular investment themes in play.

US inflation is expected to settle in the upper 2% range through 2026, a level historically linked to strong corporate profits and healthy equity market returns, creating a favorable economic backdrop.

Resource availability has a crucial impact on understanding the economics of many industries. In the defense and transportation area, China is the lead country to watch because of its dominant position in many rare earth materials.

Markets wobbled following the FOMC’s decision to cut interest rates, and Chair Powell's comments that the Fed may not adjust rates in December.

The credit spreads on the CDX High-Yield Index widened, which is noteworthy because stocks and credit spreads generally tend to move in the same direction. It also seems that free cash flow for stocks does matter.

Stocks achieved records for the fourth consecutive session this morning as AI enthusiasm, robust corporate earnings, trade deal optimism and dovish monetary policy expectations encouraged risk-taking on Wall Street.

As the calendar has now turned squarely into Q4, the sweepstakes for who will be nominated as next Chair of the Federal Reserve will no doubt increase. Current Chair Powell’s term does not end until May 2026, but according to published reports, it looks like the Trump Administration could make an announcement as soon as January.

AI investment fuels a $1.1 trillion capex surge in the S&P 500, with IT returns soaring post-tariff. Meanwhile, AI transforms marketing by making high-quality ad creation affordable and narrowing the gap between big brands and small businesses.

While trade tensions with China dominated the attention during the week, some bank news also captured investor interest. Stocks pushed higher last week, buoyed by strong third-quarter results posted by several money center banks.