Hope you are all doing well. The S&P 500 and the Dow finished fractionally lower for the week. The NASDAQ dropped more than 2%. Stocks alternated between gains and losses throughout the week, extending a pattern that dates to early June, when the S&P 500 and NASDAQ set record highs. Bon Jovi is in the news this week after abruptly ending their concert in NYC. I have broken down this week’s update using lyrics to their hit song, In And Out Of Love.
Running wild, when me and my boys hit the streets
Tech earnings started hitting the street this week, and expectations are running wild. We got the first of the mega-cap tech companies’ earnings this week from Google parent, Alphabet. Alphabet once again delivered strong results that exceeded expectations. Cloud revenue rose 82% year-over-year. They also have an expanding backlog, which highlights the robust demand for AI infrastructure and solutions. As a result, forecasts were adjusted sharply higher. In general, earnings have been rising faster than stock prices this year. That is why this market is not overvalued. I still think the market has another leg higher. Despite my bullish assessment, I expect stock prices to drop over the next couple of months due to the midterm elections, spiking oil, and tariff rhetoric. If I am right and it drops, stay invested; you will be rewarded. Most asset classes trade in line with their 10-year average price-to-earnings multiple, which tells me valuations across the board are reasonable. Many mega-cap tech names are trading at a relative discount to the index in terms of price-to-earnings.
Take you higher than you’ve ever known
Tariffs are going higher again. The Trump administration on Friday imposed new tariffs on dozens of the United States’ biggest trading partners, including the European Union. The new 10.0% to 12.5% duties follow the expiration of a 10.0% global tariff that the administration had implemented in February 2026 after the U.S. Supreme Court struck down a prior tariff regime. Markets have largely factored in these ongoing trade policies. Viewing it as a replacement or continuation of previous policy rather than a new shock. Furthermore, many of the new tariffs include specific exemptions for key items like oil, gas, and certain foods.
Too much is never enough
It feels like too much is never enough when it comes to conflict in the Middle East. The problem is that once the U.S used force to establish deterrence, backing down signals weakness. Each strike, whether by Iran or their proxies, requires a heavier counter-strike to restore the balance of fear. This latest round of escalation has interest rates going up. Which is bad for bond investors and bad if you are looking to secure a mortgage. The average 30-year fixed mortgage rate rose to 6.58%, according to Freddie Mac’s latest weekly update. The average rate had briefly slipped below 6.00% in February.
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