2/2 ...The third seems trickier, but history clearly shows that technological advances drive most global/US stock market returns over the long run. We remain bullish because of that track record.
1/2 Three uncertainties overhang US stocks right now: inflation, oil prices & concerns surrounding Gen AI-based business models. The first 2 issues are resolvable, either w/ time or as government policy addresses them. The US economy is strong enough to weather either option...
2/2...Future IPOs from @SpaceX, @OpenAI & @AnthropicAI will give investors new names to consider, introduce clearer benchmarks for AI economics, and potentially reallocate capital away from current public hyperscalers and toward more transparent, pure-play growth opportunities.
1/2 History suggests US Big Tech is oversold relative to the S&P & will likely outperform over the next 3-4 months. $NVDA, $META, $AMZN & $GOOG are emerging as near-term winners, with $MSFT, $AAPL & $TSLA lagging...
2/2 ...Technology is a leadership group. The dollar is weakening. For the rest of 2026 to mirror 2025’s persistent rally in terms of S&P 500 performance, Big Tech must lead the way.
1/2 The global/US equity market rally off the recent lows is a near-mirror image of the entire period from last year’s April lows through year end 2025. US & EM stocks are outperforming Europe & Japan...
Both US High Yield corporate bond spreads over Treasuries and the CBOE Volatility (VIX) Index are back to below-average levels, a multi-market confirmation of reduced recession risk.
2/2 ...The market is looking past this, however. The first basket of stocks (TSLA, AAPL, MSFT) are all underperforming YTD. The second (AMZN, META, GOOG) are all beating the S&P YTD. Investors seem to care more about AI development than 2026 earnings.
1/2 While US Big Tech should post better earnings growth in Q1/2026 than the “S&P 493”, that edge disappears w/out $NVDA. But estimates for the “Mag 6” are all over the map. $TSLA, $AAPL & $MSFT are expected to post strong Q1/2026 earnings growth. $AMZN, $META & $GOOG are not...
The dollar weakened against every major developed and emerging market currency last week, continuing a trend that suggests global investor confidence is still improving.
2/2 ...Emerging Markets have the same weighting to Tech as the S&P 500 (35%), so they are outperforming Europe/Japan (+15.9 vs 11.6/10.6%). The euro/pound are outperforming the yen.
1/2 Since the March 30 lows, the S&P 500 and rest of world stocks are both up +12.3%. Tech has powered the rally (Nasdaq Comp +17.7%), and US small caps are doing well (+15.0%)...
While US Big Tech should post better earnings growth in Q1 & 2026 than the “S&P 493”, that edge disappears without $NVDA. There's more nuance to this story than that, however.
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Both US High Yield corp bond spreads over Treasuries and the VIX are back to below-average levels, a multi-market confirmation of reduced recession risk.
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US tax refund season continues to run well ahead of last year, with the average payment $346 higher than 2025. This should help US households maintain spending despite higher gas prices.
2/2 ...Still, it is clear that corporate America is better at extracting profits than ever before, an underappreciated driver of high equity valuations.
1/2 US corporate profits have been growing faster than the domestic economy since the year 2000. The relationship between the two sits at/near record highs today. Some of this is certainly due to Big Tech’s global business models...
The Nasdaq is up +15.5% to the S&P’s 10.7% advance off the recent bottom.
Within US Big Tech, the best performers off the lows have been $AVGO (+35.2%), $META (+25.2%), $AMZN (+23.7%), and $GOOG (+22.4%).
Mutual fund/ETF investors bought US stocks as they swooned, at the bottom, and as they started to recover. Their dip buying has been rewarded, again, with today’s new highs.
US large caps are coming out of a rough patch & it would be very helpful to their cause if they could collectively report Q1 2026 earnings that are at least +7.0% above estimates. That's roughly the long run average beat amount (+7.1/+7.2%) & better than the last 2 quarters.
2/2 ... Small caps are a useful way to play a resilient US economy without the overhangs of potential AI overinvestment or disruption to software business models.
1/2 US small caps used to be solely an early cycle play. The Russell 2000 outperformed in the early 2010s, after the Great Recession, and again in 2021, in keeping with that standard playbook. Now, the story is somewhat different...
The last two US financial reporting seasons for the S&P 500 have been lackluster, failing to match the long run average of +7% upside earnings beats versus estimates. Q1 2026 reports should meet this benchmark and provide the foundation for a continued rally.
$IWM
At yesterday’s close of 18.4, the VIX is solidly back in bull market territory. Investor confidence was tested by spiking oil prices and geopolitical uncertainty but has recovered nicely. We remain positive on stocks and expect further near-term gains.
US small cap Tech’s 100-day returns have consistently outperformed US large cap Tech since October 2025, as investors prioritize near-term earnings visibility amid limited clarity on hyperscalers’ AI payoffs and threats to software-based business models.
$PSCT
Non-US stocks have been outperforming the S&P 500 on a dollar return basis to a degree not seen since 2010. Their performance from here will depend on currency and US Big Tech’s ability to justify its heavy AI investments.
$ACWX
History strongly suggests that the S&P 500’s recent lows will hold as long as oil prices remain solidly below $113/barrel, their recent highs. This oil/stock price correlation was very strong during the 1990 Mideast crisis and is proving to be just as important now.
The US corp HY bond market didn't respond as sharply to 2026’s US/Iran conflict as 2025’s US trade shock & are already back to normal levels. This is a reassuring vote of confidence in the US econ from an asset class that has a lot to lose if it misjudges future econ conditions.
3/3 ...Transactional currency in circulation ($1s through $20s) is declining on a real, population growth adjusted basis, but only very slowly (about 2%/year).
2/3 ...This is because there is still strong global demand for reserve currency “store of value” bills ($50s and $100s)...