Joel
Long-Term Growth Investor & Options Trader
US stocks should benefit as US-Iran tensions appear to cool, with President Trump calling off planned US action for a second straight night and stock futures turning green. At this stage, though, the market probably wants an actual ceasefire deal rather than another temporary pause. x.com x.com x.comÂ
US stocks benefit when rates rise with growth because earnings outpace the drag from higher discount rates. Such periods have historically been very bullish, unlike inflation-led rate rises amid slowing growth. Since fall 2025 the 10-year yield rose from 4.1% to 5.1% while nominal GDP growth accelerated to 6.6%, faster than rates. Being long offers better risk/reward; high oil prices due to the war are the remaining inflation pressure, and an end to the war would improve the setup further. x.comÂ
S&P 500 earnings are keeping pace with prices, so this does not look like a bubble. Quarterly earnings are on track to grow 29.5%, more than twice the 10-year average of 12.6%, while the 18.7 forward P/E is just below its 19.1 decade average. x.comÂ
Renewed inflation raises the risk of a December rate hike and downside for the Nasdaq 100. Per Wall St Engine, core PCE reached 3.1% year over year, up from 3.0%, and rose 0.3% month over month, up from 0.2% previously. CPI, PPI and PCE are all rising again; a December hike is the bet. x.comÂ
US large-cap stocks are rising because inflation is cooling, which lets Fed Chair Warsh hold steady if Friday's jobs data cooperates. Per @wallstengine, core PCE rose 3.0% year over year versus 3.3% expected and headline PCE 3.4% versus 3.7%, while Q2 GDP came in at 2.2% versus 1.5%. x.comÂ
Broader participation, earnings growth and lower multiples support US equities into year-end, with seasonality also favorable. The equal-weight S&P rose 1.95% this week while the cap-weighted index slipped 0.05%; EPS is up 38% so far and multiples are down 17% year to date. The 10-year yield fell 41 basis points. x.comÂ
US stocks face a potentially bigger selloff as rising inflation compounds concerns about AI spending. PCE inflation reached a four-month high of 3.6%, increasing pressure on the Fed to raise rates; Alphabet shares fell after disappointing earnings, slowing ad growth and more than $51 billion of quarterly capital investment. x.comÂ
Improving breadth and GPUs massively outrunning depreciation costs put US-equity risk/reward heavily in bulls' favour. Some 59% of S&P 500 stocks are above their 50-day average; the Nasdaq 100 is positive over five trading days, and small caps bounced off their 200-day average. Buy gradually, as the selloff may not be completely over. x.comÂ
US large-cap stocks are not in a bubble, as S&P 500 EPS growth set against nominal and real GDP growth shows. That holds even as stocks slide with bonds, oil heads higher and the 10-year yield reaches 5.2%, its highest since 2007. x.comÂ
Forward risks matter more than good earnings for the Nasdaq now. The index looks to be topping and has a good shot at 28,000 before a rally after the midterms; tomorrow's PCE and GDP releases are unlikely to help, and this week's lows could break. x.com x.comÂ
US stocks look set to keep grinding toward new highs because CPI, not payrolls, will decide the Fed's next move. Fed governor Waller said he favors holding rates unless inflation data surprise, cutting CME FedWatch hike odds from 63.2% to 50.4%, and stocks, gold and bitcoin rallied. August payrolls rose 162,000 versus 55,000 expected, lifting hike bets, but if next Friday's CPI keeps falling clearly, markets will still trade future rate cuts. x.com x.com x.comÂ