Inside Markets

Reports about a potential AI bubble aren’t surprising, given that high private company valuations and performance concentration in public markets were also present in late ’99-early 2000.

Some discourse has emerged over whether it is appropriate for the Fed to begin cutting rates while equity markets make new highs.

The three main factors that contribute to September-early October seasonal weakness are fund flows, earnings estimate revisions and October fiscal year-end for active mutual funds.

The RTY should outperform in a declining rate environment as small cap companies tend to utilize floating rate debt.

The SPX keeps its bullish shape above ~6350, which means the primary trend is still higher despite seasonal headwinds, increased supply and fading fund flows in the back half of September.

Core CPI will be the focus for Thursday’s print, where we look for a +0.3% MoM increase, which equates to a 3.1% on a YoY basis.

The SPX is showing clear evidence of rally exhaustion, but the bullish trend remains intact above ~6350.

Software has meaningfully lagged the broader S&P 500 and semiconductor industry YTD leading to a very low level of sentiment and positioning in the space.

Tariff-related price adjustments will result in higher observable inflation over the next few months.

Consensus is only looking for non-farm payrolls of +77,500, up from July’s +73,000 surprise disappointment.