What a momentum trade for the yellow metal. Gold has now risen, Tom, over 20% since the dovish shift from the Fed back in Jackson Hole back in August in just six weeks added 20%, crossing 4000 for the first time ever across 1000 during the monumental Fed easing during the GFC across 2000 during the COVID pandemic, when the government started sending out stimulus checks across 3000 on Trump tariffs in the worries back in April, now notching 4000 for the first time ever on. Perhaps, as Ray Dalio mentioned, a ...

Market Sentiment & Investment Strategy - Despite facing criticism, the firm maintained a bullish stance, advising clients to hold or buy during market downturns, recognizing that excessive fear can cloud judgment [2][4] - The firm believes many investors are overly influenced by their own biases and portfolio losses, hindering their ability to see the bigger picture [3] AI Industry Analysis - The firm suggests that the AI industry is still in its early stages, comparing its potential growth to the exponential expansion of the wireless industry, which saw user numbers increase from 37 million to 7 billion over 20 years [6] - The analysis indicates that concerns about an AI bubble may be premature, as penetration rates are still low, estimating that the industry is only in the first quarter or first third of its growth cycle [6] - The industry is currently focused on infrastructure development (LLMs and data centers), similar to the early stages of the wireless industry, with the application layer expected to emerge later [8] - The firm draws a parallel to Global Crossing, a company that invested billions in laying physical cable but ultimately went bankrupt, highlighting the risk of overspending on infrastructure without immediate returns [9] Future Opportunities in AI - The industry anticipates a new wave of opportunities as companies like JP Morgan and Goldman Sachs leverage AI to improve their business strategies [10][11] - The focus is shifting towards security around AI and proof of human interaction, indicating a growing need for solutions in these areas [10]

Market Sentiment and Momentum - The market is experiencing a strong momentum trade, making it difficult to resist [1] - Market sentiment is considered stretched, despite the ongoing rally [4] - The momentum factor has been the best performing, up 20% [4] - Momentum can reverse powerfully, but it can also last for some time [5] Earnings and Valuations - Corporate earnings are coming in at 12% year-over-year, twice what was expected [2] - The S&P 500 is trading at 22 times forward earnings, based on analysts' expectations of 14% earnings growth in 2026 [3] - Midcap stocks are trading at a 30% discount to the broad market [9] - Midcaps are trading at average to their 20-year average valuation [10] Investment Strategy - Investors should trim into the riskiest pockets of the market and redeploy assets into higher quality stocks [6] - Focus on stocks with great return on equity and a strong PEG ratio [6][7] - The company is overweight technology stocks in the United States [7] - Diversification into high-quality areas in other parts of the market, such as midcap stocks, is recommended [9] Market Concentration - The top 10 stocks now represent 40% of the index, the most ever, indicating increased market concentration [8] Sector Outlook - Industrials are expected to benefit from capex in the United States [11]

Geopolitical Impact on Markets - The market initially reacted positively because the situation between Israel and Iran didn't worsen significantly over the weekend [2] - Markets generally don't react strongly to geopolitics, except for oil prices, which are closely monitored [2][3] - The market believes that as long as the US remains on the sidelines and oil prices stay relatively stable, the conflict's impact on stocks will be manageable [4] - US involvement would change the market's assessment [2][5] Market Drivers and Sentiment - The primary driver of the market is currently momentum, with a return to the momentum trade [6] - Equity markets assess geopolitical events based on their potential impact on companies' bottom lines [7] - The AI trade and mega-cap tech are currently not significantly affected by the geopolitical situation in the short term [8] Economic Concerns and Fed Policy - The economy is showing signs of a slowdown, which is a concern [11][12] - The Fed is unlikely to cut rates due to concerns about tariffs and potential higher oil prices [9][12][13] - The major risk is that the economy slows down while the Fed remains on the sidelines, potentially disrupting the momentum trade in the long run [13]