Markets oscillate on many factors — from interest rates and risk appetite, to headline news and the economy. But in the end, it comes down to earnings.The easiest way to visualize this is by breaking down market returns into the underlying components. In the short term, multiple expansion or contraction is often the biggest driver, including the past year. However, over the long term it is earnings growth that dominates as a driver of market returns.The chart below shows the return decomposition for the ...

Market Overview - The current market environment is characterized by significant dispersion, with both 52-week highs and lows across various sectors, particularly impacted by AI disruption in Information Technology and Financials [1][10] - U.S. mid- and small-cap stocks have outperformed the S&P 500 Index, rising 7-8% year-to-date, while the S&P 500 has remained relatively stagnant, fluctuating within a 2-3% range [3][4] Stock Splits - There is a notable trend of both traditional and reverse stock splits occurring in the market, with traditional splits typically signaling confidence from companies, while reverse splits often indicate distress [5][11] - Booking Holdings announced a 25-for-1 traditional stock split despite being at a 52-week low, reflecting mixed market sentiment following its Q4 results [15][16] - Noodles & Company executed a 1-for-8 reverse stock split as its market cap plummeted from $600 million to $30 million, highlighting the struggles within the consumer sector [18] Sector Performance - The bifurcation in market performance is evident, with sectors like Energy, Materials, and Consumer Staples showing resilience, while others, particularly in technology, face significant drawdowns [2][10] - The S&P 500 has experienced its worst start to a year compared to international indices, with many country ETFs performing well year-to-date [4][10] Corporate Signals - Traditional stock splits are believed to enhance share accessibility and liquidity, while reverse splits are often a response to meet exchange listing requirements or to avoid negative market perceptions [11][12] - The slowdown in traditional split announcements is unusual given the high stock prices, suggesting potential underlying concerns among corporate leaders [13][14]

Biotech is quietly stepping into a leadership role here in early 2026 — and the move is not happening in a vacuum.After years of underperformance from 2021 through much of 2024, the sector began a powerful rebound in the second half of 2025.  That rally was significant. From its April 2025 lows, the SPDR S&P Biotech ETF (NASDAQ: IBB) surged roughly 75%, dramatically outperforming the broader market’s move over the same period.In many ways, that outperformance looked like a long-overdue catch-up trade.  ...

This is a follow-up to The Cold War Collapse: Why the Fourth Turning Ends With Capital, Not War.The Cold War Collapse argued that the Fourth Turning would not end in war but in the destruction of capital. That argument did not emerge from thin air. It is the logical conclusion of a sequence that has been unfolding since 2016. 2016: The Constructive ThesisAs commodities and wages bottomed together for the first time since the financial crisis, there was a genuine possibility of healthy normalization. If ...

Core Viewpoint - Small cap stocks, particularly the Russell 2000 Index, are showing leadership in the current market, which may indicate broader economic confidence and influence the next significant market movement [2][6]. Group 1: Market Performance - The Russell 2000 Index is maintaining its 50-day moving average and is in a bullish phase, contrasting with the S&P 500 and NASDAQ, which are struggling to reclaim their 50-day moving averages [2]. - Momentum in the IWM ETF is declining and has fallen below its own 50-day moving average, despite the price holding steady [3][4]. Group 2: Technical Analysis - A classic technical setup is emerging where weakening momentum could precede price changes, serving as an early warning for potential vulnerabilities in leadership [4][5]. - If the IWM can sustain its bullish price structure and momentum improves, it could support ongoing risk appetite and potentially uplift broader indexes [6][7]. Group 3: Future Implications - The next directional move in the market may hinge on the performance of small caps, with leadership, confirmation, and momentum alignment being critical signals to monitor [6][8].

Core Insights - The article discusses the phenomenon termed the "AI Scare Trade," where stocks in various industries drop significantly at the hint of potential disruption from AI technologies [1][5]. Industry Impact - Recent weeks have seen the AI wrecking ball affect multiple sectors, including wealth services, real estate, insurance, rating agencies, and trucking, with notable stock price declines: S&P and Moody's down -25% and -20% respectively, and Raymond James down -10% following the announcement of a financial planning AI tool [2]. - In the trucking industry, Algorhythm Holdings reported a 300% to 400% increase in freight volumes without adding headcount, leading to substantial market capitalization losses for truck transport shares [4]. Market Reactions - The market's reaction to AI-related news appears to be overblown, with short-term drops of -5% to -20% in various stocks, driven by retail investors and algorithmic trading [5]. - The divergence in market performance is notable, with the current level of performance dispersion among index members resembling that seen during market sell-offs, despite the overall market indices being only slightly down from their all-time highs [8][9]. Investment Considerations - Concerns are rising regarding the return on investment for hyperscalers investing heavily in AI infrastructure, as evidenced by the increase in credit default swaps for Oracle from 40 bps to 160 bps [6]. - The market may be pricing in excessive doom and gloom based on isolated headlines, suggesting that while disruption is likely, it may not be as catastrophic as currently anticipated [7][11].

Group 1: Market Overview - International stocks, particularly the MSCI All-Country World ex-USA Index, have shown their best return relative to the S&P 500 Index since at least 1995, indicating a significant shift in market dynamics [2] - Domestic "SMID" caps and defensive sectors like Consumer Staples and Real Estate are outperforming, while Energy and Materials are leading among the 11 S&P 500 sectors [3] Group 2: Economic Data and Earnings - A busy week of macroeconomic releases is expected, including Q4 GDP and PCE inflation data, which could reshape growth and inflation narratives [9][10] - The anticipated Q4 GDP growth rate is 3.0% quarter-on-quarter annualized, a deceleration from Q3's 4.4% [11] - The PCE update for October to December will provide a clearer view of inflation, with expectations of a warm year-end print [12] Group 3: Corporate Insights - Walmart's upcoming earnings report is anticipated to provide insights into consumer behavior and potential AI and cost-cutting strategies under new CEO John Furner [6][7] - The tech sector, particularly high-margin software companies, is facing valuation pressures, with many stocks trading at mid-teens P/E multiples [5] Group 4: Consumer and Business Sentiment - The S&P Global Flash PMIs will be released, which may reflect improved sentiment among business owners and corporate managers, potentially indicating a better labor market [14] - The University of Michigan Surveys of Consumers will provide a second update on consumer sentiment, with initial reports showing more optimism than expected [15]

Core Insights - The software-as-a-service (SaaS) sector experienced significant market cap losses, with major companies like Salesforce, Intuit, ServiceNow, and Adobe shedding hundreds of billions of dollars as AI hyperscalers announced capital expenditures exceeding market expectations [2] - The energy and materials sectors are leading the current bull market, with both sectors up over 15% in 2026, driven by rising oil and metals prices, a weaker dollar, and a rotation trade [3] - The narrative of "sell America" has shifted to "buy ex-USA," as international equities have surged, coinciding with the Dow crossing 50,000 for the first time and the S&P 500 nearing record highs [5] Market Performance - Information Technology is currently near the bottom of the S&P 500 year-to-date sector performance, while resource stocks are outperforming [3] - Oil and gas companies are achieving higher profits and stock prices despite historically low WTI and Brent values, indicating improved efficiency [4] Economic Indicators - Treasury yields have decreased recently, and U.S. corporate bonds are trading close to multi-decade low yield spreads, while the dollar has weakened following comments from President Trump regarding its value [6] - The jobs market remains delicate, with elevated corporate layoff announcements despite a strong January payrolls report [7] Upcoming Events - A series of investor conferences are scheduled, where executives will face tough questions regarding their economic and cultural stances, which could impact market perceptions [8][10][11][12][13][14]

Group 1 - Long-term bonds are entering a new era due to a new Federal Reserve Chair and uncertainty around interest rates, making reliance on predictions less viable [1] - TLT represents long-term U.S. Treasury bonds, which investors use for safety and diversification, with current price action being crucial [1][2] - In uncertain rate environments, monitoring price rather than guessing is emphasized as a strategy for investors [3][7] Group 2 - The monthly chart of TLT highlights the larger trend in long bonds and key levels to watch as markets deal with inflation, growth concerns, and Fed policy shifts [2][7] - The year 2026 is noted to bring new uncertainty regarding interest rates, impacting long bond attractiveness [7] - Various stock market ETFs are analyzed, with S&P 500 (SPY) returning to a bullish phase and the Dow (DIA) reaching new highs, indicating overall market strength [6][8]

Group 1: AI Spending and Capital Expenditure - Alphabet reported record annual revenues exceeding $400 billion with a 48% surge in Google Cloud growth, but stock softened due to a 2026 capital expenditure forecast of up to $185 billion [1] - Amazon's Q4 results showed EPS of $1.95, slightly below expectations, and a boosted 2026 spending forecast to $200 billion, leading to a 7% drop in stock [1] - Wall Street is concerned that aggressive spending on data centers and compute capacity may be cannibalizing free cash flow faster than new returns can be generated [1] Group 2: Software Sector Concerns - A sell-off in the software sector, led by Salesforce and Adobe, was triggered by fears that AI could replace traditional Software-as-a-Service (SaaS) models [2] - New AI agents and vertical automation tools are raising concerns about the sustainability of traditional SaaS models [2] Group 3: Supply Chain and Hardware Costs - Qualcomm issued a warning about rising memory chip costs, echoing concerns from Apple regarding the impact of these costs on margins [3] - The AI infrastructure is consuming high-end memory supplies, affecting the broader hardware market [3] Group 4: Earnings Season Insights - As of now, 59% of S&P 500 companies have reported Q4 2025 earnings, showing profit growth of 13% and revenue growth of 8.8% [4] - Upcoming reports from Cisco and Applied Materials will be critical to assess if capital is flowing into hardware orders or if rising memory costs are impacting margins [4] Group 5: Market Reactions and Future Outlook - The software replacement panic is expected to influence upcoming earnings reports from Shopify and Cloudflare, with traders looking for signs that AI is a growth driver rather than a threat [5] - Consumer giants like McDonald's and Coca-Cola will provide insights into the health of American consumers, with mixed signals from previous reports [6] Group 6: Broader Market Implications - The upcoming earnings reports will serve as a reality check for the market's high valuations, with a focus on whether growth is spreading across sectors [13] - Investors are particularly interested in how supply chain issues and rising costs are affecting companies like Ford and their EV margins [11]