In Your Money This Week, Nvidia had a blow-out earnings report, with its revenue doubling from a year ago and projecting 70% revenue growth in fiscal 2028. If you were concerned that the AI build-out was on its last legs, that same build-out that has propelled earnings growth, supported the economy, and captured investor attention, then this report put your mind at ease. It’s clear at least from this one bell-weather company that we have room to go.
What’s less clear is whether we should be concerned with the macro-economic environment. Inflation and bond yields are high, the war isn’t getting wrapped up, and this week we had a potential policy disagreement between Fed Chair Warsh and Treasury Secretary Bessent and an AI written WSJ editorial criticizing Bessent’s move to intervene in the Treasury market. It’s also possible that the AI spend will push inflation higher and turn out to be somewhat wasted money.
Investors shouldn’t be as worried about the hyper-scalers who are extremely successful companies in their own right. But some of these new AI companies will not survive and thrive, just like with the new internet companies thirty years ago, or airlines, or autos before them.
Andrew and I discuss this and more in this week’s video, plus we kick-off our college football preview segment at the end.
This week’s Weekly Reads and Book Recommendation are below.
Weekly Reads
What’s Upsetting the Bond Market? by The Big Picture
Barry Ritholtz with his case that policy missteps (tariffs and the war), uncertainty from Fed Chair Warsh, and high debt plus higher debt service costs are troubling the bond market. He still recommends taking advantage of the higher yields in a way suitable to your goals and financial situation.
64 major housing markets with year-over-year home price declines—and the 236 posting mild gains by ResiClub
U.S. home prices are up just 1.1% nationally over the past year, with 64 of the 300 largest markets declining and 21 of the 50 largest markets now posting year-over-year price declines. Weakness is concentrated in parts of the Sun Belt and Mountain West—particularly markets in Texas, Florida and Colorado where inventory has risen above pre-pandemic levels—while prices are generally holding up better in parts of the Northeast and Midwest where housing supply remains tight. The divide is significant: Austin prices are 27.2% below their 2022 peak, while Hartford is 28.7% above its 2022 peak, showing that the national housing market is soft but far from uniformly declining.
The Labor Market Is Weaker Than the Bond Market Thinks by Morningstar
The bond market appears to be pricing in a stronger labor market than the underlying data justify, with the two-year Treasury yield up about 80 basis points since March and investors now expecting two Fed rate hikes by early 2027. Job growth has slowed to just 0.2% over the past year, hiring is as weak as it has been since 2013 outside the pandemic, and wage growth has fallen to 3.3%, suggesting considerably more labor-market weakness than the recent decline in unemployment implies. If the bond market eventually recognizes that weakness, expectations for Fed hikes could reverse and give way to rate cuts in 2027 and 2028, putting downward pressure on yields.
Strategies for Concentrated Stock: How to Reduce Single-Stock Risk Without Ignoring Taxes by Savant Wealth Management
A concentrated stock position can become a significant portfolio risk, but reducing it does not necessarily require selling everything at once and absorbing a large tax bill. Investors can gradually sell shares across tax years, use tax losses from direct indexing to offset gains, donate appreciated shares, or use more complex strategies such as exchange funds, options and long/short portfolios to diversify or manage risk while deferring some taxes. The right approach depends on factors including cost basis, income, charitable goals and time horizon, with the objective of deliberately deciding how much single-stock exposure to retain rather than allowing concentration to persist by default.
See also: Tax-Loss Harvesting: From ETFs to Direct Indexing
Book Recommendation
Area 51: An Uncensored History of America’s Top Secret Military Base by Annie Jacobson
This bestseller from a Pulitzer Prize finalist gives readers the complete untold story of the top-secret military base for the first time.
