Core Insights - The S&P 500 is trading significantly above its 10-year average forward price/earnings (P/E) valuation, indicating high valuations relative to earnings [1][3] - In contrast, the MSCI EAFE ETF is trading at a lower P/E ratio compared to the S&P 500 and is only slightly above its 10-year average valuation [1][3] Valuation Metrics - The forward price-to-earnings ratio is a key metric for stock valuations, calculated as the stock price divided by the consensus estimate for the next 12 months' earnings per share [2] - The current forward P/E ratio for the SPDR S&P 500 ETF Trust (SPY) is 22.19, which is 120% of its 10-year average P/E of 18.49 [4] - The iShares MSCI EAFE ETF (EFA) has a forward P/E of 15.01, which is 105% of its 10-year average P/E of 14.29 [4] Fund Characteristics - The SPDR S&P 500 ETF Trust (SPY) has $655 billion in assets under management and an annual expense ratio of 0.0945%, resulting in annual fees of $9.45 for a $10,000 investment [4] - The fund is highly concentrated, with the top five holdings (Nvidia, Microsoft, Apple, Alphabet, and Amazon) making up 29.1% of the portfolio [4] - The iShares MSCI EAFE ETF (EFA) tracks 693 large-cap and midcap stocks in 21 developed markets, excluding the U.S. and Canada, with an annual expense ratio of 0.32% [5] - The top five holdings of EFA (ASML, SAP, AstraZeneca, Novartis, and Nestle) constitute only 6.8% of the portfolio, indicating less concentration compared to SPY [5]

Core Viewpoint - Starbucks is facing challenges with its fiscal second-quarter earnings, which fell short of expectations, leading to a decline in share prices despite some progress in same-store sales improvement [1][4]. Financial Performance - Starbucks' adjusted earnings per share (EPS) dropped 40% year over year to $0.41, missing the analyst consensus of $0.49 [4]. - Overall revenue increased by 2% to $8.72 billion, falling short of the expected $8.82 billion [7]. Operational Changes - The new CEO, Brian Niccol, is prioritizing investment in human labor over equipment to enhance efficiency and customer experience, resulting in a 12% year-over-year increase in store operating expenses, which now account for 47.7% of revenue [2][3]. - The company's operating margin contracted by 450 basis points to 8.2%, attributed to the increased labor costs [3]. Sales Performance - Same-store sales decreased by 1%, marking an improvement compared to previous quarters, with global traffic down 2% but a 1% increase in average ticket [5]. - In North America, comparable-store sales fell by 1% with traffic down 4%, while international same-store sales rose by 2% with a 3% increase in traffic [6]. Strategic Focus - Starbucks is committed to menu innovation and product launches, such as the Cortado platform and summer berry refreshers, while managing tariffs through localization and sourcing strategies [8]. - The company aims to improve its brand image and customer retention through these strategic moves, despite the short-term pressure on profitability [10][12]. Valuation Insights - The stock has a forward price-to-earnings (P/E) ratio of approximately 27.5 based on fiscal 2025 estimates, indicating it is at one of the most attractive valuations since Niccol took over [11].