is joining us now, Scott Lindiccom, vice president of general economics at the KO Institute. Scott, thanks for joining us this morning. >> Thanks for having me.>> So, I'm not going to deal with what President Trump said. I I But there is a general view, Scott, that tariffs have not been as bad as expected either in inflation or in growth terms. What's your response to that.>> Yeah, I think there's two things. Uh first the there has been some surprises related to the tariffs. Um mainly related to the lack of ...

Group 1: Consumer Sentiment and Economic Indicators - Consumer sentiment for December was revised down to 52.9 from an initial estimate of 53.3, although it improved from 51.0 in November [4] - The Consumer Price Index rose 2.7% year-over-year in November, with regional variations; for example, inflation in Southern California was 4.5% compared to 1.1% in Dallas [4] - Year-ahead inflation expectations declined for the fourth consecutive month to 4.2%, the lowest level in 11 months, but still above the 3.3% recorded in January [5] Group 2: Capital Expenditures in the Tech Industry - Major tech companies, including Alphabet, Amazon, Microsoft, and Meta, are significantly increasing their capital expenditures (CapEx) in AI infrastructure as competition intensifies [9] - Meta expects its 2025 CapEx to be in the range of $70 billion to $72 billion, up from a prior outlook of $66 billion to $72 billion [10] - Alphabet raised its CapEx forecast for 2025 and 2026 to between $91 billion and $93 billion, up from a previous estimate of $85 billion [12] - Amazon reported cash CapEx of $34.2 billion in Q3 and a total of $89.9 billion spent so far this year, emphasizing continued significant investments in AI [13] Group 3: Market Outlook and Predictions - The S&P 500 is predicted to rise another 10-15% in 2026, driven by strong spending in technology and the resilience of major companies against tariffs [14] - The tech sector is expected to maintain expanding profit margins even as it enters lower-margin businesses like AI [14]

Economic Sentiment - Consumer sentiment for December was revised down to 52.9 from an initial estimate of 53.3, although it improved from 51.0 in November [4] - Year-ahead inflation expectations declined for the fourth consecutive month to 4.2%, the lowest level in 11 months, but still above the 3.3% recorded in January [5] Capital Expenditure Trends - Major tech companies, including Meta, Alphabet, Amazon, and Microsoft, are significantly increasing their capital expenditures (CapEx) in response to the growing demand for AI infrastructure [9] - Meta's expected CapEx for 2025 is now in the range of $70 billion to $72 billion, up from a prior outlook of $66 billion to $72 billion [10] - Alphabet raised its CapEx forecast for 2025 and 2026 to between $91 billion and $93 billion, up from $85 billion [12] - Amazon reported cash CapEx of $34.2 billion in Q3 and a total of $89.9 billion spent so far in the year, with continued significant investments in AI [13] Market Outlook - The S&P 500 is predicted to rise by another 10-15% in 2026, driven by strong spending in technology and the resilience of major companies against tariffs [14]

Macroeconomic Overview - The yield on the 10 Year Treasury reached 4% first, briefly dipped below 4% to a 52-week low of 3.88 in April, and is currently around 4.15% [2] - Job growth has significantly slowed from over 100,000 jobs added per month in early 2025 to approximately 17,000 jobs per month from June to November, indicating a negative outlook for a tight labor market [3] - Corporate earnings expectations for 2026 have increased from a projected 12% growth to nearly 14%, suggesting a positive trend in earnings growth which is crucial for stock performance [4] Company Insights - **NVIDIA Corporation (NASDAQ:NVDA)**: Despite being impacted by a ban on selling AI chips to China, NVIDIA's stock is up more than 36% for the year. The company is expected to benefit if it can ship its H200 chips to China in the spring [9] - **Apple Inc. (NASDAQ:AAPL)**: The company has successfully navigated tariffs through significant domestic investments, maintaining its status as a "buyback monster" with a 33.7% reduction in share count since 2015. The stock has appreciated 933% over the same period [10]

Core Insights - Artificial intelligence (AI) is identified as the greatest investment opportunity of the current era, with a strong emphasis on the urgency to invest now [1][13] - The energy demands of AI technologies are highlighted, with data centers consuming as much energy as small cities, leading to concerns about power grid strain and rising electricity prices [2][3] Investment Opportunity - A specific company is positioned as a critical player in the AI energy landscape, owning essential energy infrastructure assets that will benefit from the increasing energy demands of AI [3][7] - This company is described as a "toll booth" operator in the AI energy boom, profiting from the surge in electricity demand driven by AI advancements [4][5] Market Position - The company is noted for its unique capabilities in executing large-scale engineering, procurement, and construction (EPC) projects across various energy sectors, including nuclear energy, which is crucial for America's future power strategy [7][8] - It is completely debt-free and has a significant cash reserve, amounting to nearly one-third of its market capitalization, positioning it favorably compared to other energy firms burdened by debt [8][10] Growth Potential - The company also holds a substantial equity stake in another AI-related venture, providing investors with indirect exposure to multiple growth opportunities in the AI sector [9][10] - The stock is described as undervalued, trading at less than seven times earnings, which presents a compelling investment case given its ties to the booming AI and energy markets [10][11] Industry Trends - The ongoing trends of onshoring, driven by tariffs, and the surge in U.S. LNG exports are expected to create additional growth opportunities for the company [6][14] - The influx of talent into the AI sector is anticipated to drive continuous innovation and advancements, further solidifying the importance of investing in AI-related companies [12]

Core Insights - Amgen (AMGN) has signed a significant agreement with the Trump administration to reduce drug prices in the U.S. [1] Group 1: Drug Pricing and Discounts - The agreement addresses major concerns in the pharmaceutical industry regarding drug pricing and tariffs, aligning Amgen's drug prices with those in other developed countries [2] - Amgen's direct-to-consumer (DTC) program, AmgenNow, offers substantial discounts, starting with its cholesterol-lowering drug Repatha at $239 per month, which is nearly a 60% discount from its U.S. list price [3] - The DTC program will also include migraine drug Aimovig and Humira biosimilar Amjevita, priced at $299 per month, reflecting discounts of 60% and 80% respectively [3] Group 2: Financial Terms and Investments - While specific financial terms of the agreement were not disclosed, it is expected to include a three-year exemption from import tariffs on pharmaceutical ingredients, contingent on increasing domestic manufacturing capacity [4] - Amgen plans to invest an additional $2.5 billion in U.S. production and research, which includes a $600 million science and innovation center in California, a $900 million manufacturing expansion in Ohio, and a $1 billion facility in North Carolina [4] Group 3: Industry Collaboration - Amgen is part of a broader trend, with eight other large-cap drugmakers, including Bristol Myers, GSK, and Merck, also entering similar agreements with the administration [5] - Some companies have committed to donating active pharmaceutical ingredients (API) to a government stockpile to enhance supply chain resilience during emergencies [6] - The Trump administration has now reached agreements with 14 out of 17 large drug manufacturers called to lower prices, improving investor sentiment towards the pharmaceutical sector [7] Group 4: Valuation and Performance - Amgen's shares have outperformed the industry year to date, trading at a price/earnings (P/E) ratio of 15.34, which is below the industry average of 17.48 [8][11] - EPS estimates for 2025 and 2026 have increased over the past 60 days, indicating positive market expectations [12]

Core Viewpoint - Walmart is currently favored among retail analysts and investors, but its premium valuation raises questions about future growth potential [1][2]. Walmart's Valuation and Performance - Walmart is perceived as becoming too expensive compared to its peers and its historical valuation, with a price-to-earnings (P/E) ratio of 42, significantly higher than Alphabet's 30 [4][5]. - Despite the high valuation, analysts believe there is still upside potential for Walmart, particularly as it integrates more AI functions into its operations [3][7]. - Walmart is considered cheaper than Costco, indicating that there may still be room for growth despite its current valuation [7]. CEO Transition and Market Share - The upcoming CEO transition at Walmart is viewed as a potential headwind, although the new CEO, John Ferner, is seen as capable [2][6]. - Walmart's market share is low, with no category exceeding 3%, suggesting that even small gains could significantly impact profitability [6]. Comparison with Target and Costco - Target is also undergoing a CEO transformation, but its valuation parameters differ from Walmart's, with analysts expecting improvements in margins [5][7]. - Costco, while historically strong, faces challenges related to changing demographics and the convenience factor compared to Walmart [9][10]. Tariff Impact on Retailers - Tariffs are expected to continue impacting the retail sector into 2026, but the overall effect is anticipated to be neutral compared to 2025 [12][13]. - Footwear retailers are particularly affected by tariffs, but some companies like Dixs are managing to absorb these costs effectively [13].

Economic Impact - Consumer spending during the Thanksgiving holiday increased by 7% this year, with the average spender spending $337 compared to $315 last year [2][3] - The GDP growth exceeded expectations, reported to be higher than 4%, indicating continued consumer spending [7] Tariff Discussion - Claims that President Trump's tariffs are causing price hikes lack evidence, with reports indicating that tariffs are not significantly impacting prices [8] - Senator Elizabeth Warren's assertions regarding tariffs and their effects on consumer prices are challenged, suggesting that the narrative around tariffs has been exaggerated by media and political opponents [8] Consumer Behavior - Starbucks is projected to sell $60 million worth of gift cards on Christmas Eve, with one in five Americans expected to receive a Starbucks gift card [10] - There is an expectation that consumer spending will continue to rise, particularly with tax refunds anticipated to start in January [13]

Core Viewpoint - Curtiss-Wright Corporation (NYSE:CW) is recognized as one of the best defense dividend stocks to buy, with mixed price target adjustments from analysts reflecting a generally positive outlook for the company and the aerospace and defense industry [1][4]. Group 1: Analyst Ratings and Price Targets - Stifel has reduced its price target for Curtiss-Wright to $584 from $587 while maintaining a Hold rating, indicating a cautious stance despite the company's potential [1]. - Morgan Stanley has increased its price target to $660 from $645, maintaining an Overweight rating, which suggests a more optimistic outlook for the company [4]. - Overall, Wall Street analysts have assigned a Moderate Buy rating to the stock, with an average one-year price target of $605.60, indicating a potential upside of 9% [4]. Group 2: Market and Growth Insights - Analysts note that despite flat or lower volumes expected in 2025, diversified industrial companies, including Curtiss-Wright, are likely to achieve growth by leveraging their pricing power to pass on tariff-related increases to customers [2]. - Stifel anticipates low levels of inventory destocking and carryover pricing to contribute to volume growth in 2026, projecting mid single-digit top-line growth for the company [3]. - The company is well-positioned to outperform the market by introducing new products in stable to growing market segments, with specific opportunities in the nuclear sector that could significantly enhance growth [3].

Core Viewpoint - The current bull market is expected to continue, with strong earnings growth anticipated for the S&P 500 and MAG7 stocks as the year ends and a new one begins [2][8]. Market Outlook - Investors who remained invested during previous market downturns have been rewarded, and the outlook for the next year remains positive with strong earnings expected [2]. - Global economic conditions are favorable, and unless there is a significant external event, volatility is expected but the recommendation is to stay invested [3][4]. Earnings and Valuation - The growth of large-cap stocks, particularly those valued over a trillion dollars, is projected to be strong, although there may be less upside compared to the previous three years [3][4]. - The S&P 500's price-to-earnings ratio is expected to remain stable at around 22.5 times forward earnings, driven primarily by earnings growth rather than multiple expansion [7]. - Consensus estimates indicate a 14% earnings growth for the next year, with expectations of margin expansion and increased revenue growth [8]. Risks and Volatility - High expectations for earnings growth and elevated valuations may lead to increased susceptibility to market volatility, as there is less room to absorb external shocks [9].