Mitchell Martan
Investment Researcher for The Long Investor, Economics/Finance Background
Higher transport and input costs threaten US stock margins and demand. The PPI surprise shows the oil-cost pressure described in March playing out: headline rose 1.3% monthly versus 0.6% expected, and core 0.7% versus 0.3%. The March scenario put logistics costs at 3-6 weeks and consumer prices and weaker demand at 1-3 months; margins could shrink 100-300 basis points if costs cannot be passed on. The full scenario was not expected to play out. x.com x.comÂ
Rising Treasury yields raise the hurdle rate on the hundreds of billions of AI and data-center spending now driving the S&P 500 and Nasdaq 100's earnings growth. With the 10-year at 5.327%, the buildout needs more ROI whether it is debt- or internally funded, while investors pay lower multiples, and a few spenders are turning free-cash-flow negative. A 5.3% yield alone does not dismantle the trade, but at some point this math will matter a lot, and data-center names already show it. x.com x.com 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 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
Faster-than-expected US growth is encouraging for stocks, though inflation remains elevated. Q3 GDP rose 3.4% versus 3.2% expected, while the GDP price index rose 2.2% versus 3.2% forecast; PCE inflation matched expectations. x.comÂ
Plummeting base costs and weaker demand from struggling economies abroad should push crude oil lower next year. The same forces will also weigh on many other commodities and services. x.comÂ
Rising freight and oil costs threaten consumer staples margins, with plastic a significant input, while a weakening consumer adds trade-down risk. That makes chasing the recent bid for staples unattractive. x.comÂ
Oil stabilizing or falling would ease inflation and open the door to lower interest rates, supporting a market rebound. At current oil levels, a few more painful months may give way to recovery; falling oil would accelerate it into an everything rally. If oil instead rises above $100 and stays there, the S&P 500 probably has a down year in 2027. x.comÂ
Tech stock valuations are likely to compress before inflation cools, because valuations reprice instantly while inflation data lags. With oil high and the 10-year Treasury yield near or above 5%, high-multiple tech P/Es may shrink first; core CPI is down to 2.4%, but energy holds headline CPI at 3.4%. If earnings keep growing, prices should stabilize after oil peaks. A rapid oil decline could avoid the derating. Watch whether the 10-year stays below 5% and monthly CPI falls to about 0.2%. x.comÂ
Crude oil's last cushion is gone as recovering demand squeezes constrained Middle East supply. Barclays puts China imports near pre-war levels at 10.5m b/d, India up 600,000 b/d year on year and Middle East flows at 84% of pre-war levels; US demand is recovering. After more than 500m barrels of inventory were drawn down, buyers are paying a $13/bbl premium for next-week cargoes over the front-month contract, versus under $4 a week into the war. x.comÂ
Peace with Iran will be the market catalyst by easing oil-driven inflation and financing concerns. Normal cargo costs would stabilize oil prices as refineries rebuild and production rises; inflation expectations and the US 10-year yield would fall, bringing liquidity back into technology. The deal is an extremely strong suspicion, not concrete knowledge, and its timing is unknown. Unlike the 21.4% SPY drawdown before the April 2025 tariff pause, the index has seen no drawdown yet. x.comÂ
Uncertain AI-capex profits and higher oil costs from Iran still threaten US stocks. The SPCX-Nvidia deal brought much-needed overnight inflows to chips and is shifting sentiment, but tech's waterfall decline will not heal with a sharp V-bottom. Be prepared for a big fade. x.comÂ
