Core Insights - Micron reported earnings that exceeded expectations on both the top and bottom lines, along with better-than-expected guidance [2] - Federal Reserve Chair Jerome Powell expressed concerns about a softening labor market, indicating a stagflationary environment, and suggested that equities may be overvalued [2][3] - Amazon is engaged in a legal battle against the FTC over allegations of misleading practices related to its Prime membership [3][4] Economic Indicators - The Russell 2000 index reached a fresh high, suggesting a potential reacceleration of economic growth in the U.S. that could benefit small-cap stocks [6] - U.S. flash PMI data indicated continued expansion but was weaker than expected, with slower hiring and tariffs contributing to higher costs and limited pricing power [6] - A busy week of economic data is anticipated, including PCE, consumer sentiment, jobless claims, new and existing home sales, and GDP numbers, which will provide insights into consumer behavior and inflation [7][8] Federal Reserve Outlook - The Federal Reserve is experiencing divisions among its members regarding future monetary policy, with upcoming speeches from Fed officials expected to clarify their positions [9][10] - Mary Daly's remarks on the U.S. economy will be closely watched, particularly her views on inflation and the labor market [10][11] - Mortgage applications surged by 29.7% week-over-week, driven by refinancing activity as the 30-year fixed mortgage rate declined to 6.39% [12][13]

European Market & Fiscal Policy - Europe is shifting towards a more aggressive fiscal spend on arms over the next decade or longer, presenting a significant structural tailwind for European fiscal expenditure [2] - The implementation of this increased spending will take time, and some sectors might anticipate the investment too quickly, as it's a structural rather than a short-term tailwind [2][3] - European equities' rally has stalled in the last two to three weeks, struggling to maintain momentum [3] Currency Impact on Investment - A US dollar investor buying European stocks unhedged on their currency exposure has gained roughly 12% in the past five months solely from currency exposure [4] - The depreciation of the US dollar is expected to continue, contributing to the underperformance of US stocks compared to international markets [5] - US stocks have underperformed by approximately $8 trillion, partly due to currency factors [6] - Unhedged European stocks are likely to outperform US stocks for US investors, but in local currency terms, this outperformance is not guaranteed [7] Federal Reserve & Monetary Policy - The market is eager to see potential rate cuts by the Federal Reserve [8] - The Federal Reserve appears divided, with conflicting comments from officials, potentially influenced by pressure to cut rates sooner [9]