Core Viewpoint - Goldman Sachs predicts that the biggest investment opportunities in 2026 will arise from cyclical sectors rather than the current focus on artificial intelligence and mega-cap tech stocks [1][11]. Sector Analysis - Analysts expect a significant acceleration in earnings per share (EPS) growth in cyclical sectors due to anticipated economic growth in 2026, particularly in Industrials, Materials, and Consumer Discretionary [2]. - EPS for real estate companies is projected to increase from 5% this year to 15% next year, while Consumer Discretionary is expected to rise from 3% to 7% [3]. - Industrial companies are forecasted to see EPS growth accelerate from 4% to 15% [4]. - In contrast, EPS growth for information technology companies is expected to moderate from 26% in 2025 to 24% in 2026 [5]. Market Trends - Recent market actions indicate a shift towards cyclical stocks, which have outperformed defensive stocks for 14 consecutive trading days, marking the longest streak in over 15 years [6]. - Despite this outperformance, market positioning suggests that investors are anticipating growth closer to 2%, which is below Goldman’s forecast of 2.5% [6]. - Goldman analysts emphasize that the market does not seem to fully price in the expected economic acceleration in 2026, which is crucial to their outlook [7]. Earnings Forecast - Goldman Sachs anticipates a 12% rise in S&P 500 earnings per share in 2026, driven by overall US economic growth [7]. - The S&P 500 has increased by 16% this year, with the "Magnificent Seven" mega-cap tech stocks comprising about one-third of the index's weight [9]. - Nvidia, a leading AI chip maker, has seen its shares rise by 30% this year, highlighting the current enthusiasm for AI [10].

Sector Upgrades - The company has upgraded the industrials sector to overweight, indicating a positive outlook as it has recently broken out of a five-month trading range [2] - The materials sector has been upgraded from underweight to neutral, reflecting an anticipated uptick in the overall economy [4] Economic Outlook - The industrials sector is expected to benefit from an improved economic environment next year, with a focus on accelerated depreciation for corporations [3] - The materials sector has only increased by 7% this year, suggesting potential for further growth as economic conditions improve [4] Market Trends - There is a growing confidence among investors regarding increased consumer activity in the upcoming year, contributing to a market migration towards cyclical stocks [6] - Despite the positive sentiment, there is caution regarding the sustainability of the current trends until earnings upgrades are more evident [7] Technology Sector - The technology sector has faced pressure recently, with a noted 70% increase from its lows, which was double the S&P's performance [10] - There is an expectation that money will eventually return to the tech sector, although a clear near-term catalyst is currently lacking [11] Future Projections - The potential for high single-digit to low double-digit returns for the next year is suggested, contingent on the tech sector's participation [12] - Economic data in the coming week may influence market perceptions and the Federal Reserve's decisions [13]

Core Insights - Archrock, Inc. (AROC) reported strong third-quarter results, but political factors are overshadowing these positive outcomes [2] - The oil and gas industry is characterized as a boom-bust, cyclical sector, requiring patience and experience for successful investment [2] Company Analysis - Archrock is being analyzed for its balance sheet, competitive position, and development prospects within the oil and gas sector [1] - The focus is on identifying undervalued and under-followed oil companies, as well as out-of-favor midstream companies that present compelling investment opportunities [2] Market Sentiment - The market is currently cautious about the potential outcomes in the oil and gas sector, despite Archrock's good performance [2] - Investors in the oil and gas space are encouraged to engage in discussions and share insights through active chat rooms provided by investment groups [2]

Group 1: Transportation Stocks Overview - United Parcel Service, Berkshire Hathaway, and Joby Aviation are highlighted as key transportation stocks to monitor, with significant trading volumes recently [2] - Transportation stocks are sensitive to economic activity, fuel costs, trade flows, and regulatory changes, making them cyclical investments [2] Group 2: United Parcel Service (UPS) - United Parcel Service, Inc. specializes in package delivery and offers a range of services including transportation, logistics, and insurance [3] - The company operates through two main segments: U.S. Domestic Package and International Package, focusing on express delivery services [3] Group 3: Berkshire Hathaway (BRK.B) - Berkshire Hathaway Inc. operates in various sectors including insurance, freight rail transportation, and utilities [4] - The company provides a wide array of insurance products and operates railroad systems across North America, along with energy generation and distribution [4] Group 4: Joby Aviation (JOBY) - Joby Aviation, Inc. is focused on developing electric vertical takeoff and landing aircraft for air transportation services [5] - The company aims to create an aerial ridesharing service and a platform for consumers to book rides [5]

Market Overview - The S&P 500 is on track to end a 7-day winning streak after reaching a new all-time high [1] - Since April 8th, the market has experienced significant gains, driven by strong earnings that exceeded expectations, particularly in the context of AI advancements [2] Valuation Concerns - Current valuations appear stretched, raising questions about how much positive news is already priced in [3] - While not indicating a bubble, there is a caution regarding the sustainability of these valuations [3] Portfolio Strategy - It is suggested to rebalance portfolios by taking profits from high-performing sectors and reallocating to underperforming areas such as healthcare and small caps [4][5] - The focus should be on sectors where sentiment is less stretched, despite the potential for further gains in the current market [5] Earnings Outlook - Strong earnings growth is anticipated, particularly in the financial sector and among mega-cap tech companies, with growth rates above 20% expected [6] - The earnings story is expected to remain positive, which could support continued investment in cyclical stocks despite economic concerns [8] Economic Indicators - There is a high probability (92%) of a rate cut this month, with an 88% chance of another cut in December, indicating a shift in monetary policy [10] - Concerns about inflation persist, but small caps are expected to perform well in this environment [10] Year-End Expectations - The S&P 500 is not expected to experience a sell-off before year-end, with strong earnings supporting continued market strength [11] - The upcoming Q3 earnings season will be crucial in determining the market's trajectory, with potential for upside surprises [11][12]

Core Viewpoint - Cleveland-Cliffs is currently experiencing financial losses due to a downturn in the steel industry, which presents a potential buying opportunity for investors willing to take on risk [1][5][12] Group 1: Company Performance - Cleveland-Cliffs shares have decreased approximately 60% from their 2022 highs, reflecting the cyclical nature of the steel industry [1][2] - In Q2 2025, Cleveland-Cliffs reported an adjusted loss of $0.50 per share, an improvement from the adjusted loss of $0.92 in Q1 2025 [5] - The company is implementing cost-cutting measures and has idled steel mills to navigate the current weak market conditions [5] Group 2: Industry Dynamics - The steel industry is highly cyclical, with demand for steel products typically increasing during economic booms and decreasing during recessions [3][4] - Steel companies' income statements are closely tied to economic activity, making their stock prices volatile [4] - The cyclical nature of the industry suggests that buying opportunities may arise when the market is down, as prices are likely to recover [4][11] Group 3: Comparison with Competitors - Cleveland-Cliffs utilizes blast furnace technology, which is more volatile and requires high operational capacity, making it less flexible compared to competitors like Nucor, which uses electric arc mini-mills [8][9] - Nucor has reported earnings of $2.60 per share in Q2 2025 and has maintained a consistent dividend increase for over 50 years, making it a more stable option for conservative investors [9][10] - While Cleveland-Cliffs may offer higher potential upside during recoveries, Nucor is likely to be a safer investment during downturns due to its operational flexibility [12]

Joining us this morning, City research director of US equity strategy, Drew Credits with us. Drew, welcome back. Good to see you. >> Hey, good to see you, Carl.>> I got to say, um, making your way through September with no major hiccups on the headline uh, indexes kind of has the desks today saying maybe we averted weak seasonality and we can look forward to an up Q4. What do you think. >> Yeah, it's funny.It's going to be very dependent on the earning season. to us the the pressure's actually grown with a ...

Core Insights - Dow Inc. has experienced a significant decline in stock value, losing over 56% in the past year due to high energy costs, slowing demand, and broader macroeconomic challenges [2] Company Overview - Dow Inc. is one of the world's largest chemical producers, indicating its substantial role in the chemical industry [2] - The company operates in a highly cyclical market, which can lead to volatility in its financial performance [2] Market Conditions - High energy costs and slowing demand are key factors negatively impacting Dow's financial results [2] - Broader macroeconomic headwinds are also contributing to the challenges faced by the company [2] Investment Analysis - The investing group associated with the article focuses on identifying investment opportunities within the aerospace, defense, and airline sectors, suggesting a potential area for growth despite challenges in the chemical industry [2]

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Market Sentiment & Valuation - The market is assessing whether the recent pause is a temporary consolidation or a midsummer stall, similar to the previous year [1] - Some stocks have already priced in positive scenarios like tariff resolutions, interest rate cuts, and AI-driven economic growth, making them vulnerable during earnings season if results are not perfect [3] - Many relatively valued or inexpensive stocks, particularly in cyclical sectors, are pricing in a more bearish outlook and could potentially rally [4] - Overcrowding in momentum stocks requires continuous positive data to sustain their upward trajectory; otherwise, they are susceptible to a self-reinforcing downward cycle due to market leverage [10] - A shift from growth to value and from large-cap to small-cap stocks indicates the market is rebalancing to avoid excessive imbalances [8] Interest Rates & Economic Outlook - Speculation surrounds the Federal Reserve's actions and the necessity of rate cuts, influenced by global announcements such as Canada's interest rate adjustments [5] - Concerns exist that if interest rate relief does not materialize, a correction could occur across all cyclical stocks, regardless of their valuation [6] - The market anticipates Canada's interest rate to be 15%-25% higher [5][6] - The most probable cyclical outlook is one of steady performance, leading to a divergence in performance between expensive and reasonably priced cyclical stocks [7] Cyclical Stocks & Sector Performance - Certain industrial areas, especially within transports, exhibit trough multiples on earnings that have remained relatively stable, but are not at peak levels, anticipating a significant recovery [6] - A major cyclical rebound is unlikely due to the potential for the 10-year Treasury yield to rise, creating a counteracting force that prevents the cycle from becoming too strong [7]