Analyst have penciled in at least some pain from tariffs. While 2025 consensus EPS growth is 9%, a lot of that is AI driven. Excluding those sectors EPS are expected to grow at 4% (Energy: -13%, Staples: -0.2%, Discretionary: 0.4%) Markets are now looking forward to 2026.

Cool chart from one of my colleagues. I think Trump sees tariffs as a fiscal policy tool as much as a trade tool. While the deficit will remain large the extra revenue does make a difference. Not impossible for FY2025 deficit to end up smaller than FY2024

Agree with everything here with the caveat that short bonds becomes very dangerous after the initial spike. US is not Turkey because all its debt is in its home currency. A compromised Fed could literally buy every single treasury in existence. It could set long term rates at

Tech companies are becoming more capital intensive. But they have also become more labor light. Median EBIT per employee for the hyperscalers has surged

AI IS the business cycle 😛

Misinformation around this chart is rampant. The BLS was forced to cut data collection due to the *federal* hiring freeze. The BBG chart and story *mistakenly* state that 35% of data is imputed. That 35% refers to 1 of 3 types of imputations, not that 35% of prices are missing..

Last week we released a report titled "Concentration doesn't matter." Equity index concentration offers little explanatory power for either risk or return. Whatever value it has disappears once you include traditional variables like size or valuation.

Thank you Neil. To clarify: In the US there is a correlation between concentration and forward returns. But this just comes from the fact that concentration and valuations are themselves correlated. Concentration doesn’t add any predictive value beyond what valuations already

So far, hyperscaler capex has been financed mostly with operating cashflow - a key difference from dot-com. However the ratio of capex to cashflow is now high. External financing will be needed soon. This will make capex more sensitive to traditional financial variables IMO.

The two economies: AI and everything Ex-AI.

China’s export led growth is reaching its limits. Chinese exports have begun to hurt strategic sectors to the German economy. Just like the US, the EU will begin to limit market access. China will have no other option but to stimulate consumption. I think CNY has upside.

A common thread of Trumps policies is that they favor production at the expense of consumption: - tariffs (consumption tax, production subsidy) - OBBBA (regressive: reduces income of those with highest propensity to consume) - Deregulation Hence the weak consumption. Production

If you look at capital market assumptions from major financial institutions from a decade ago, nobody was even close to projecting the 10-year return for US stocks.

Financing cashflows for the hyperscalers are still negative, which means that they are still giving back more money to investors than what they are raising. I think the red line below will turn positive next year but puts into perspective that there is further runway

This is your signal that the cycle is not over

Despite all the uncertainty from Trump's policies, I do think there are some signs of an industrial acceleration in the US. To be clear, it seems a story about output and not employment, and it is still mostly confined in AI and aerospace. But the signs are growing nonetheless

Honestly if I was Jimmy Kimmel I would have stayed cancelled and retired. There is just no competing with this level of comedy.

The US economy is gorging on machines but not really interested in workers. I think over the next few quarters we continue to have a divergence of strong GDP numbers but relatively sluggish labor market.