Earnings!!!!
Taking a step back from the noisy technical and sentiment driven price movements, there has been reasonable justification for the stunning bull market in US stocks over the past 36 months.
The view
Corporate earnings have delivered and forecasts continue to tick higher. While one can debate how soon AI will annihilate civilization, in the meantime we are in boom times.
The Fed seemed to acknowledge it this week with its first rate hike in years. Also, technically equities cannot seem to crack to the downside despite mounting macro concerns which has led the VIX volatility index to remain rangebound at multi-year lows.
While most hedge fund PMs acknowledge the strong fundamental backdrop, it has been quite tricky lately to monetize this view due to the top-down headwinds, narrow market leadership and violent factor and sector rotations under the surface.
So far this year, the set it and forget it crowd of passive equity investors are winning, and we remain eager to observe if/when this trend will ever inflect.
Global markets & economic data
- US
The FOMC raised its policy rate by 0.25% and signaled at least one more hike to come. Mich. Consumer Sentiment data remains extremely weak.
- Switzerland/UK/EU
Switzerland’s trade surplus narrowed driven by a drop in EU imports. The BoE held rates unchanged at 3.75% amid uncomfortably high inflation (Aug. CPI at 3.1%). Germany’s ZEW Economic Sentiment Index hit its highest level since February.
- Japan/China
Japan’s inflation rate remained at 1.9%, its highest level since December 2025 with prices rising across almost all categories. Chinese Retail Sales remained sluggish, growing only 0.4% y/y, held back by a nearly 20% fall in auto sales. Meanwhile, Chinese Industrial Production grew by 5.2% y/y in August ahead of estimates.
Disclaimer: This material has been prepared by MASTERPIECE ADVISORS for informational purposes only and should not be construed as financial advice. Investments in hedge funds are speculative and involve a high degree of risk. This material is confidential and may not be disclosed without the express written approval of MASTERPIECE ADVISORS.
Weekly market notes every Friday from Aaron Sweeney after the closing bell.