From the desks of Stanley Katz & Lauren Madera
HAPPY NATIONAL GOLF LOVERS DAY, DAD! AND CONGRATS ON YOUR 79 LAST WEEK!
Markets finished the week mixed (DJIA: -1.26%, S&P 500: -0.26%, Nasdaq: +0.45%). Bonds remained in the spotlight as long-term Treasury yields reached multi-decade highs before retreating later in the week. The personal consumption expenditures price index (aka PCE, the Fed’s preferred inflation gauge) rose 3.4% over the prior 12 months, unchanged from July’s revised reading, though manufacturers reported a sharp jump in the prices they pay. The economy looked better in the rearview mirror, where second-quarter growth was revised up to a 2.2% annualized rate from 1.5%. Then came Friday. The Bureau of Labor Statistics reported that employers added just 29,000 jobs in September, well short of the roughly 90,000 expected. Stock futures rose and Treasury yields fell after the release, and futures markets lowered the odds of another rate hike at the Fed’s October meeting.
Schwab’s latest “On Investing” podcast steps back from the week’s data to ask who is actually buying and selling stocks. Their guest, a co-founder of the research firm Vanda, tracks positioning (i.e., how heavily market participants are invested and which way they are leaning). Three of Vanda’s findings stand out.
- Excluding the firms that simply facilitate trades, computer-driven funds and individual investors together now drive roughly 70% of volume. A decade ago that role belonged to hedge funds and large mutual funds. Anyone still watching only the old guard is missing most of the action.
- Individual investors have found another outlet. Their purchases of single stocks peaked last fall. Activity has since waned as prediction markets, where people wager on the outcome of events, have captured investor interest. Vanda leaves open what this means for stock demand.
- Positioning sits close to its historical average, even as the S&P 500 and Nasdaq flirt with all-time highs.
Record highs usually imply a crowded room. By Vanda’s count, this one is about half full.
Argus Research’s latest commentary turns to AI, the theme behind much of the market’s recent strength. In the first of a three-part series, Argus addresses three important questions about AI:
- Why has the AI trade held up when the dot-com boom collapsed? Decades of research and receptive business customers were already in place, which made the trade profitable almost from the start.
- What keeps the excitement alive? Argus points to agentic AI, which pursues goals instead of simply answering questions.
- Will the enormous sums a handful of companies are pouring into infrastructure pay off? Argus’s view is generally positive, though they flag risks such as equipment that ages quickly. The companies themselves expect the payoff to take years.
Seven questions remain, which says something about how settled the subject is.
Below are links to a number of third-party research reports that we have read and analyzed over the past week. We hope you will find the information interesting, useful, and worthwhile.
Schwab:
Argus:
J.P. Morgan Asset Management:
Capital Group:
First Trust:
Stanley Katz & Lauren Madera, Financial Advisors
ClientFirst Financial Strategies, Inc.
937-293-5500
Source for weekly stock market returns: Barron’s.
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