HI Market View Commentary 09-02-2025
Welcome to September = One of the worst months in the market
Last week we protected MU, NVDA, META Short Calls, JPM Short Calls
Today we added META, BAC, GOOGL
Tomorrow we plan on looking at DIS, AAPL
IS Trump out of line with the Fed courts and the Executive office responsibilities?
1974 Act – 15% leeway in raising tariffs, Congress but that 100% goes against the constitution, historical patterns over the last 50 years have made it a presidential responsibility.
Why is this a huge buying opportunity IF the market gives up 10% over Trump/Fed Court battle?= Who owns Congress by way of political parties = Republicans
Earnings
MU 09/24 est
https://www.briefing.com/the-big-picture
The Big Picture
Last Updated: 29-Aug-25 14:34 ET | Archive
Treasury market trading terms that matter for stocks are defined
Briefing.com Summary:
*Bull steepener, bull flattener, bear steepener, bear flattener: defined.
*The slope of the yield curve holds various implications for the stock market.
*Equity investors aren’t seeing a threat from where long-term rates currently stand.
The Federal Reserve is going to cut the target range for the fed funds rate at the September 16-17 FOMC meeting… or so the market thinks. That thought process is evident in the fed funds futures market, which currently places an 86.9% probability on the likelihood of a 25 basis point cut to 4.00-4.25%, according to the CME FedWatch Tool.
It is also evident in the Treasury market, specifically in the 2-yr note yield, which has dropped 32 basis points in August to 3.62%. That move was catalyzed initially by the July CPI report, which was deemed better than feared, and secondarily by Fed Chair Powell’s speech in Jackson Hole, where he acknowledged “the shifting balance of risks may warrant adjusting our policy stance.”
What hasn’t adjusted as much as the 2-yr note yield is the 10-yr note yield and the 30-yr bond yield. The former has declined 14 basis points in August to 4.22%, while the latter has increased three basis points to 4.91%.
The 2-yr note yield moving down faster than the 10-yr note yield and 30-yr bond yield is known in the Treasury market as a “bull steepener” trade. Today, we will unpack what that means while shedding light on some other esoteric trading terms applicable to yield curve dynamics.
Playing with “House Money”
A steeper yield curve, up to a point, is not a bad thing. Banks enjoy it since they borrow at short-term rates and lend at longer-term rates. Pension funds like higher long-term rates because they reduce the present value of their future liabilities. Fixed-income investors like a steeper yield curve since it allows them to lock in higher rates while taking on duration risk.
A steeper yield curve is often associated with a positive economic outlook because it is driven by expectations of lower interest rates that would be supportive for growth.
The short end of the curve is more reactive to changes in the fed funds rate than the long end, which is influenced more heavily by other forces like inflation and inflation expectations, the budget deficit and what that means for issuance, and the growth outlook.
It certainly hasn’t escaped the market’s eye that the yield curve is steepening at a time when inflation rates are closer to 3.0% than the Fed’s 2.0% target. To be fair, long-term rates, which are more sensitive to inflation, have fallen this year despite all the hubbub about tariffs. The notable exception is the 30-yr bond. It is up 13 basis points this year to 4.91%.
The increase in the 30-yr bond yield has coincided with the rise in yields for longer-dated securities around the globe. That, too, is drawing some attention amid the tariff pressures and increased fiscal stimulus seen the world over.
Global stock markets, though, are at or near multi-year highs, if not all-time highs. That suggests equity investors aren’t seeing a fundamental threat—not yet anyway—from where long-term rates stand. That is understandable here in the U.S. and for good reason.
The 10-yr note yield had climbed to 4.80% in mid-January, threatening a run at 5.00%, but it sits at 4.22% today. That is down 35 basis points since the start of the year, which is remarkable given the higher effective tariff rate now in play, the ongoing budget deficit, the weaker dollar, and the sticky inflation.
In a manner of speaking, then, the market has some “house money” to play with before long-term rates get to a point that truly spooks the stock market. It’s a pretty comfortable dynamic right now with a normal sloping yield curve and a bull steepener trade that reflects a positive economic outlook more so than an inflation scare or deficit dustup.
A Bearish Development
An inflation scare or a deficit dustup would likely induce a “bear steepener” trade. That is a dynamic where the spread also widens, but because long-term rates rise faster than short-term rates.
That’s not a good situation for the housing market, as mortgage rates are tied loosely to the 10-yr note yield. It’s not a good condition for loan demand in general, given the higher cost of financing. It can also be a destabilizing situation for the stock market, given the competition posed by higher risk-free rates and the lower present value of future earnings stemming from the higher rates.
In turn, the velocity of a rate move can oftentimes be more unsettling than the level of rates, as it creates added angst around the move and certainly misgivings about the economic and earnings growth outlook.
The Flattener Trade
At this juncture, it may not surprise readers to hear that there is a “flattener” corollary to these steepener trades. They are aptly referred to as “bull flattener” and “bear flattener” trades.
The bull flattener is a product of long-term rates coming down faster than short-term rates, thereby leading to a narrowing of the yield spread. This dynamic is likely to unfold when market participants anticipate lower inflation or an adverse economic environment, like a recession.
If it is the latter, that is a bad setup for stocks (initially) since a fear of a recession or weak economic environment is bad for earnings prospects, but at the same time that would also invite expectations of rate cuts. It can be a particularly good circumstance for stocks if it is tied simply to inflation coming down since that, too, would invite rate cut expectations; meanwhile, lower long-term rates increase the present value of future earnings.
The “bear flattener” trade isn’t the stock market’s friend. This is a situation where short-term rates rise more than long-term rates, leading to a narrowing in the yield spread. This trade will likely take root if market participants are fearing higher inflation and/or an overheating economy that would lead the Fed to raise rates.
Short-term rates rising faster than long-term rates, and maybe even exceeding long-term rates (i.e., an inverted yield curve), isn’t great for bank lending activity. Moreover, when the yield curve inverts, that is when recession alarm bells start ringing. History has shown on more than one occasion, though, that inversions can be false economic alarms; nonetheless, inverted yield curves typically lead to more cautious-minded investment activity.
Briefing.com Analyst Insight
These trades can happen on any given day, yet it is the shape of the yield curve over time that makes them resonate as a mover of capital markets given what they imply about the interest rate and economic outlook, both of which are intricately linked.
To recap:
- Bull steepener = short-term rates move down faster than long-term rates
- Bull flattener = long-term rates move down faster than short-term rates
- Bear steepener = long-term rates rising faster than short-term rates
- Bear flattener = short-term rates rise faster than long-term rates
The bulls are running right now in the stock market, and they are also running in the Treasury market with the bull steepener action. It is a good trend dynamic, but it is one that would turn less friendly if long-term rates start rising appreciably. That, too, would invite a steeper yield curve but with a different connotation (a bear steepener) wrapped up in concerns about inflation and/or the deficit.
That’s not where the market’s mind is at right now, and hopefully it won’t have to go there. If it does, there will be less shine on the stock market outlook.
—Patrick J. O’Hare, Briefing.com
Where will our markets end this week?
Lower
DJIA – Bullish
SPX – Bullish
COMP – Bullish
Where Will the SPX end September 2025?
08-25-2025 -3.5%
Earnings:
Mon:
Tues:
Wed: M, AEO, CRM
Thur: AVGO, DOCU, SWBI, LULU
Fri:
Econ Reports:
Mon:
Tue ISM Manufacturing, Construction Spending,
Wed: MBA, Factory Orders,
Thur: Initial Claims, Continuing Claims, ADP Employment, ISM Services, Trade Balance, Unit Labor Costs, Productivity,
Fri: Average Workweek, Non-Farm Payrolls, Private Payrolls, Unemployment Rate, Hourly Earnings,
How am I looking to trade?
Time to start protecting for historical downturn,
www.myhurleyinvestment.com = Blogsite
info@hurleyinvestments.com = Email
Questions???
| Here’s a stat that stops a lot of people in their tracks: Less than 4% of all U.S. stocks have been responsible for the market’s net gains going back nearly 100 years.1 That’s from a landmark study by Professor Hendrik Bessembinder of Arizona State University, titled Do Stocks Outperform Treasury Bills?1 When it was first published in 2018, it made waves. And now, newly updated data through the end of 2024 confirms what the original research showed: A small handful of companies are responsible for almost all the market’s wealth creation.2 To put it in perspective, picking one of the long-term winners at random is a bit like rolling a 25-sided die and hoping to land on a single number. Even more eye-opening? Just one-third of one percent of stocks created half of all the market’s lifetime gains. We’re talking about names like Apple, Microsoft, and Nvidia.2 Apple alone has delivered nearly $4.7 trillion in shareholder wealth. That’s almost 6% of all the wealth generated by the entire U.S. stock market since 1926.2 The top five stocks together? Over 21% of lifetime market wealth.2 The rest of the market? Most stocks either underperformed safe government bonds or lost value altogether.2 This happens, Bessembinder believes, because most companies struggle to grow or maintain market share. A few, on the other hand, create breakthrough products, dominate industries, or ride powerful long-term trends. Those outliers deliver gains so large, they carry the whole market. That’s why stock returns aren’t distributed evenly. They’re lopsided. A small number of big winners end up covering for thousands of smaller or failing companies. So what does this mean for investors? To be clear, Bessembinder’s study is based on historical data. It’s always worth emphasizing that past results do not guarantee future returns. Additionally, the study also doesn’t say investors should avoid the stock market. Quite the opposite. Historically, equities have represented one of the most powerful ways to build long-term wealth. But the catch is this: most of those returns come from a very small number of companies, and it’s nearly impossible to know in advance which ones will be the standouts. Even professional investors, with research teams and advanced tools, rarely get it right year after year. For individual investors, chasing the next Amazon might feel exciting. But statistically, it’s much more likely to end in frustration. So instead of trying to guess which stocks will succeed, the study points to broad market exposure as a more reliable approach for capturing long-term gains. With a diversified portfolio, you don’t have to find the needles. You already own the haystack! That’s the beauty of broad market investing. You automatically capture the rare winners without needing to predict them. Want to know how your current strategy stacks up? This message is intended to educate, not to offer personalized advice. But if you’re unsure what this means for your specific situation, let’s talk about it. No pressure. Just a helpful conversation about investing with confidence. Sincerely, |
| P.S. Ever picked a stock that totally surprised you for better or worse? Hit reply and tell me about it. I’d love to hear your story. |
| Sources: Journal of Financial Economics, 2018 [URL: https://www.sciencedirect.com/science/article/abs/pii/S0304405X18301521?via%3Dihu]W. P. Carey School of Business, 2024 [URL: https://wpcarey.asu.edu/department-finance/faculty-research/do-stocks-outperform-treasury-bills#:~:text=Dec.%2031%2C%202022-,Updated%20spreadsheet,-%E2%80%94%20U.S.%20public] |
| Content prepared by Snappy Kraken. Investment advisory products and services made available through AE Wealth Management, LLC (AEWM), a Registered Investment Advisor. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the potential loss of principal. No investment can guarantee a profit or protect against loss in periods of declining values. The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. It is important that you do not use email to request, authorize or effect the purchase or sale of any security, to send fund transfer instructions, or to effect any other transactions. Any such request, orders, or instructions that you send will not be accepted and will not be processed. The text of this communication is confidential, and use by any person who is not the intended recipient is prohibited. Any person who receives this communication in error is requested to immediately destroy the text of this communication without copying or further dissemination. Recipients should be aware that all emails exchanged with the sender are automatically archived and may be accessed at any time by duly authorized persons and may be produced to other parties, including public authorities, in compliance with applicable laws. 07/25-4710300 |
| How Vanguard defends a super-conservative strategy that has proved surprisingly controversial A 70% bond and 30% stock setup is the hottest new thing By Barbara Kollmeyer |
| Vanguard is liking the odds of returns for bonds over stocks in the next decade. PHOTO: GETTY IMAGES About a month ago, the world’s second-biggest money manager ruffled feathers by suggesting investors turn the traditional 60/40 stock-to-bond setup on its head. Vanguard, which manages $10.2 trillion in assets, announced that one of its strategies would now recommend a 70/30 bond-to-stock split. One critic on X went so far as to call that the “Great American Poverty” portfolio, while others envisaged potential retirees ravaged by inflation — the sworn enemy of fixed income: In the hot seat with our call of the day is Vanguard’s senior investment strategist Todd Schlanger, who explains that shift and why stocks may be the weaker bet over the next decade. For starters, Schlander says the 70/30 advice is in one of 13 strategies — the long-term time-varying asset allocation portfolio (TVAA) — which keeps allocations unchanged over time. The stock side of that was at 38% in March, he said. |
| “What we were trying to do with this strategy is really identify the risk tolerance that an investor in a 60/40 portfolio would have in more or less normal market conditions,” he told MarketWatch in an interview on Wednesday. To get to 70/30, they first applied that risk tolerance to the current market environment, with a forecast of “more or less normal rates of return” for fixed income but elevated valuations for the U.S. and global stocks. “You end up with a situation where our models would imply only taking on 30% equity risk instead of 60% and the remainder in fixed income,” said Schlanger. CHART: VANGUARD CALCULATIONS, AS OF JUNE 30, 2025. The equity side of it emphasizes some underdogs. “This particular strategy is tilted more towards value stocks, which are much more attractively priced than growth stocks, given the runup we’ve seen in the Mag 7,” he said, referring to the big tech giants led by Nvidia. That’s as Vanguard also believes that AI growth has been transformative, but for some U.S. companies stocks “priced to perfection,” he said. Small-caps and developed non-U.S. stocks are also a feature of that strategy shift. Those three areas offer “much more attractive valuation,” and expectations for higher returns, he said. Vanguard’s expected 10-year annualized return on that 70/30 strategy is 5.5%, versus 5.2% for the benchmark 60/40 strategy. Expectations for annualized volatility are 5.9% versus 9.2%, respectively. Schlanger said by following this time-bearing strategy, investors should almost expect it to underperform in the short run, because of the potential for strong momentum in markets and a difficulty in figuring out what would cause that to change. “Part of the decision and the magnitude by which an investor might want to de-risk their portfolio would be their tolerance for underperformance should the momentum in the market continue,” he said. Schlanger said the strategy is not just about trying to earn excess returns, but managing risk. “That’s why when you have very comparable rates of returns in equities and fixed income over the next decade, according to our forecasts, it just makes sense to overweight the asset class with less volatility and less potential for drawdown,” he said. “In this particular strategy the investor is trying to maximize the risk/return trade off, and again, when you have very comparable rates for equities and bonds, overweighting the less volatile asset class and also making the tilts towards more attractively valued-priced equities makes a lot of sense,” he said. The markets Nasdaq-100 futures NQ00 are down after Nvidia results, with small gains ES00 YM00 seen outside of that. Treasury yields BX:TMUBMUSD10Y BX:TMUBMUSD30Y are flat. Oil CL00 is tilting south. Key asset performance Last 5d 1m YTD 1y S&P 500 6481.4 1.34% 1.86% 10.20% 15.90% Nasdaq Composite 21,590.14 1.97% 2.18% 11.80% 22.98% 10-year Treasury 4.228 -10.20 -14.70 -34.80 36.30 Gold 3443.9 1.52% 3.49% 30.49% 35.64% Oil 63.52 1.08% -9.64% -11.62% -14.60% Data: MarketWatch. Treasury yields change expressed in basis points |
| Need to Know Sponsored by Yes, rate cuts will be good for stocks. But here’s why it means the Fed will be stimulating an economy that doesn’t need it. The market wealth effect will boost growth even more, according to Ed Yardeni By Jamie Chisholm |
| Rate cuts will help investors keep flying the flag. PHOTO: ANGELA WEISS/AGENCE FRANCE-PRESSE/GETTY IMAGES The S&P 500 SPX has now registered its 20th record closing high of the year. Nvidia’s NVDA results this week were navigated with little fuss, all but bringing a supportive second-quarter corporate earnings season to an end. Another prop for the market is hopes for easier monetary policy, with futures ahead of Friday’s PCE inflation data pricing in an 85% chance the Federal Reserve will cut interest rates by 25 basis points in September. Ed Yardeni of Yardeni Research, in a note shared with MarketWatch, says lowering official borrowing costs will help the stock market rise further “as valuation multiples continue to met up.” However, he warns that the Fed will be stimulating an economy, which doesn’t require such largesse. He backs up his call with a number of observations. First, consider the labor market. Thursday’s initial jobless claims report showed that layoffs remain low. In addition, Yardeni notes that the duration of unemployment may be stabilizing, as suggested by the decline in continuing claims. |
| CONTENT FROM: Pacaso Investors Are Buying This Unlisted Stock Major VCs and over 10,000 everyday investors have invested over $270M in Pacaso. Pacaso is attracting interest by using co-ownership to make vacation home ownership possible for more people. They’ve even reserved their Nasdaq stock ticker. But you can invest now, before this opportunity ends on September 18. Learn More > |
| Thursday also saw the latest revision to U.S. second-quarter GDP, which was nudged up by 0.3 percentage points to 3.3% on a seasonally-adjusted annual rate (saar). “Even more impressive is that real gross domestic income (GDI) increased 4.8%. Both GDP and GDI rose to record highs during Q2,” says Yardeni. Next, consider corporate health. “Corporate cash flow remained at a record high of $4.0 trillion (saar) during Q2. That is helping to boost capital spending, especially on information technology,” he notes. This week also saw the Citigroup economic surprise index jump to 26.8. That’s not conducive to concerns about an economic downturn. And directly pertinent to the inflation side of the Fed’s mandate are recent regional business surveys conducted by five of its 12 district banks, which showed price pressures are building. The average of the prices-paid indexes jumped in August to 56.0, the highest reading since October 2022, according to Yardeni. Source: Yardeni Research “The average of the prices-received indexes is lower at 24.5, suggesting that many companies are absorbing the increasing costs of tariffs and/or offsetting them with productivity gains. More companies may start to pass their costs on to consumers in the coming months,” she says. But here’s the final kicker; cutting interest rates will boost a stock market that is already making investors richer. “We think the bull market is having a significant positive wealth effect on consumers who own equities, more than offsetting the debt effect on them of rising credit delinquencies,” says Yradeni. He notes that a recent Gallup poll showed that 62% of Americans were invested in the stock market at the end of 2024 — the highest since the end of 2008. CHART: SOURCE: YARDENI RESEARCH At the end of the first quarter of this year, U.S. households owned $46.7 trillion in equities and mutual fund shares , according to Yardeni. “The baby boomers held 54% of that total. They are the richest retiring generation in history, with a combined net worth of over $82 trillion. They will spend more of their retirement assets and transfer a larger portion of these assets to their children,” he says. And as the market rises they get richer still. “The positive wealth effect will continue to stimulate the economy, which doesn’t really need to be stimulated,” says Yardeni. |
Nvidia beats on top and bottom lines as company expects breakneck AI spend to continue
Published Wed, Aug 27 202512:00 PM EDTUpdated Fri, Aug 29 20252:19 PM EDT
Key Points
- Nvidia beat on earnings and revenue for the quarter and issued guidance for the current period that topped estimates.
- The stock slid in extended trading but pared losses Thursday.
- Nvidia said there were no sales of H20 processors to China-based customers in the period, but the company benefited from the release of $180 million worth of inventory to a client outside of China.
Nvidia reported better-than-expected earnings and revenue on Wednesday, and said sales growth this quarter will remain above 50%, signaling to Wall Street that demand for artificial intelligence infrastructure shows no sign of fading.
The stock, which is up 35% this year after almost tripling in 2024, slipped in extended trading as data center revenue came up short of estimates for the second straight period. Shares pared the losses Thursday.
Here’s how the company did, compared with estimates from analysts polled by LSEG:
- Earnings per share: $1.05 adjusted vs. $1.01 estimated
- Revenue: $46.74 billion vs. $46.06 billion estimated
Nvidia said it expects revenue this quarter to be $54 billion, plus or minus 2%, though that number does not assume any H20 shipments to China. Analysts were expecting revenue of $53.1 billion, according to LSEG.
The company’s 2026 second-quarter results confirmed that Nvidia’s data center business remains entrenched in the global AI buildout. Nvidia finance chief Colette Kress told analysts on an earnings call that the company expects between $3 trillion and $4 trillion in AI infrastructure spending by the end of the decade.
Overall company revenue rose 56% in the quarter from $30.04 billion a year ago, Nvidia said. Year-over-year revenue growth has now exceeded 50% for nine straight quarters, dating back to mid-2023, when the generative AI boom started to show up in Nvidia’s results. However, the second quarter marked Nvidia’s slowest period of growth during that stretch.
During the quarter, after CEO Jensen Huang’s meeting with President Donald Trump, Nvidia signaled that it expected to get U.S. licenses to ship the H20 chip to China. The processor, which was custom built for sales to China, cost Nvidia $4.5 billion in write-downs and could have added $8 billion in second-quarter sales if it had been commercially available during the period, the company previously said.
Nvidia said it sold no H20 chips to China during the quarter, but benefited from the release of $180 million worth of H20 inventory to a customer outside of China. Kress said Nvidia could ship between $2 billion and $5 billion in H20 revenue during the quarter if the geopolitical environment permits.
Net income increased 59% to $26.42 billion, or $1.08 per share, from $16.6 billion, or 67 cents per share, in the year-ago period.
Nvidia’s growth is driven by its data center business, centered around graphics processors, or GPUs, and complementary products for connecting and using them in large quantities. Revenue in the division rose 56% from the year-ago period to $41.1 billion, which was short of a StreetAccount estimate of $41.34 billion in the quarter.
Kress said in a statement that $33.8 billion of Nvidia’s data center sales were for “compute,” or Nvidia’s GPU chips, which declined 1% from the first quarter because of $4.0 billion less in H20 sales. Kress said $7.3 billion of data center sales were from networking parts needed to build Nvidia’s more complicated systems, which was nearly double the amount from the year-ago period.
Large cloud providers make up about half of Nvidia’s data center business, the company said in the previous quarter. Those customers are currently buying Blackwell chips, the company’s latest generation.
Nvidia said that Blackwell sales rose 17% from the first quarter. In May, Nvidia said its new product line reached $27 billion in sales, accounting for about 70% of data center revenue.
Nvidia’s earnings report comes a few weeks after the company’s biggest customers, including Meta, Alphabet, Microsoft and Amazon, announced results. All four of those companies are spending tens of billions of dollars a quarter on infrastructure build-outs as they race to develop AI models and services used by consumers and businesses.
Nvidia’s gaming division reported $4.3 billion in sales, up 49% from the year-ago period. The division used to be Nvidia’s largest before the AI boom supercharged data center sales. Nvidia said during the quarter that its GPUs intended for gaming would be tuned to run certain OpenAI models on personal computers.
The company’s robotics division, which management has highlighted as a growth opportunity, remains a small part of Nvidia’s business, with $586 million in sales during the quarter, representing 69% growth on an annual basis.
Nvidia said that its board has approved an additional $60 billion in share repurchases, with no expiration date. Nvidia repurchased $9.7 billion of its stock during the quarter.
Correction: Nvidia had net income of $1.08 per share in the fiscal second quarter. An earlier version misstated the figure.
