MACRO
The macro backdrop remains supportive for stocks, but it can turn quickly.
Why it’s supportive:
Credit is open. High-yield spreads are at 2.80%, near the year’s lows, and business lending is growing ~10% year over year.
Earnings are accelerating. Adjusted earnings are forecast to grow ~29% in 2026, after +5% in 2025.
Liquidity is growing. Real money supply (M2) keeps rising.
Why it’s fragile: it comes down to one chain: Strait of Hormuz → oil (Brent $104) → inflation → interest rates → lower valuations.
Part of that chain has already happened. The Fed hiked 25 bps in September, and the 10-year Treasury yield is at 5.17%. At these rates, stocks’ earnings yield barely beats bonds, so valuations have little cushion.
The bigger picture: we’re living through a new industrial revolution, and it’s still early. Meta’s Muse is a good example. It’s a personal AI agent that books, plans, emails and shops on your behalf. Since launching on September 8, it has passed 3.4 million downloads, and it has become the most popular free app in the iPhone App Store. Meta calls it “the world’s first personal AI agent built for everyone”. If agents like this take off, they will drive a new wave of demand for AI compute.
Right now, AI is the only thing working. The Nasdaq hit a new high on Friday, yet only 37% of US stocks are above their key moving averages. The index is strong; the average stock is in a correction.
This week’s catalyst: Micron. Micron reports fiscal Q4 on Wednesday, September 30 after the close, against guidance of $50.0bn revenue and $31.00 EPS. With expectations already at the upper-middle of guidance, the focus shifts to the fiscal Q1 2027 outlook and whether tight supply, rising prices and HBM demand can last. Strong guidance could spark a new leg higher in semis and AI. The same week brings PCE inflation, payrolls, JOLTS and ISM, so rates will be tested too.
My stance: amber light. Half size and only the best setups until the green light.
INDEX
Both the S&P 500 and the Nasdaq remain in uptrends (Stage 2), above their rising 10-, 20-, 30- and 40-week averages.
Nasdaq: 27,069. It printed a new intraday all-time high at 27,289 on Friday and keeps outperforming the S&P. A weekly close above ~27,200 would confirm the breakout.
S&P 500: 7,743, just 0.9% below its all-time high of 7,817. Weekly momentum is fading (MACD below its signal line), so a weekly close above 7,817 is the confirmation to watch.
SECTORS & THEMES
Technology is the only truly strong sector. XLK is up 8.0% in a month and 43.5% in six months. Everything else is mixed or weak. Utilities are the weakest (−8.8% in a month), a clear sign of rate pressure.
Leading themes: cybersecurity (CIBR +9.2% in a month), semiconductors (SMH +9.1% in a month), cloud computing, disruptive growth, AI and quantum computing. Bitcoin remains strong (IBIT +41.9% in three months).
Lagging themes: the rate-sensitive, capital-intensive areas. Solar (TAN −23.9% in three months), nuclear (URA −15.0% in a month), homebuilders (ITB −14.2% in three months) and clean energy. Worth noting: biotech and fintech are fading this month (XBI −8.3%, FINX −8.9%).
PORTFOLIOS
10X MOMENTUM
My two open positions, ARQT and XERS, did well last week, and the portfolio is back in the green: +210% since inception, 38% annualized.
This week’s playbook: one half-size position, only if triggered.
Stock: LSCC (Lattice Semiconductor)
Buy-stop: $129
Shares: 24
Initial stop: $116.90
Risk: −9.4%
On the watchlist from the same AI related theme: BE, AXTI, ASML, CRDO.
10X EASY DOUBLES
I sold UPST last Friday. Consumer lenders sit in the weakest corner of the market right now, because higher rates hit both their funding costs and their borrowers.
I still like the business. UPST goes back on the watchlist, and I’ll look at it again when two things happen: rates start to ease and the stock reclaims its 150-day average.
No action this week.
That’s all for today! Let’s see what next week will bring us!
Important: This is not investment advice. Please consult a licensed financial advisor before making any investment decisions. AI tools used for editing.