Blog W&A

Mr. Warsh Meets the Market

David S. Waddell — Fri, 12 Jun 2026 04:00:00 GMT

On June 17, new Fed Head Kevin Warsh will hold his first post-FOMC press conference to comment on the rate decision, his outlook for employment and inflation, and his governance plans for Federal Reserve activities. Markets love to test new Fed Chairs. Donald Trump selected Kevin Warsh mainly for his lower interest rate bias. And yet, from the date of Warsh’s nomination, the 2-year Treasury yield (the market’s best proxy for future Fed policy decisions) has increased from 3.5% to 4.13%, above the current policy rate of 3.75%. While The Chair may want lower rates, The Market expects higher rates. This conflict requires resolution. We will not receive full resolution on Wednesday, but the resolution process will begin. To help frame the arguments let’s examine current conditions for both of the Fed’s congressional mandates, price stability and maximum employment.

When Super-Cycles Meet Super-Sized Expectations

David S. Waddell — Sat, 30 May 2026 04:00:00 GMT

Markets hit new highs again this week as powerful earnings releases and promising war negotiations cheered investors. The AI Revolution rivals any in world history as demand projections for computing power seem infinite. During the industrial revolution, companies competed for workers. During the AI revolution, companies are competing for compute. Some might even say blindly so as not to be left behind, leading to frenzy-like activity. In line with this thesis, consider the profound growth rate in IT investment today across the US economy:

The Third Engine of Portfolio Diversification

Matt Gentzkow — Fri, 15 May 2026 04:00:00 GMT

The month of May is one of the biggest times of the year in my hometown in central Indiana. The racing world turns its attention to the Indianapolis 500, commonly held on the Sunday of Memorial Day weekend. Thirty-three drivers push speeds approaching 230 miles per hour with one goal: survive 500 miles of straightaways and left turns better than everyone else.

The Market Beneath the Market

David S. Waddell — Fri, 08 May 2026 04:00:00 GMT

The stock market hit new highs again this week as earnings rose, oil fell, and rates retreated. While we talk about “the market” each week, it’s been a bit since we have disaggregated it for discussion. For our own purposes we disaggregate “the market” into the following categories: geography, investment style, market cap (company size), and sectors. This week let’s do a brief survey of the disaggregated returns and draw some conclusions.

The One Data Point That Rules Them All

David S. Waddell — Sat, 02 May 2026 04:00:00 GMT

Oil Prices?

Markets at Record Highs: The Math Behind Earnings Growth and Market Valuations

David S. Waddell — Sat, 18 Apr 2026 04:00:00 GMT

The world is in crisis. War rages. Tariffs disrupt. Allegiances fray. Protests seethe. Impeachment looms. Consumer confidence sits at record lows. US markets sit at record highs. How is this possible? Math. Forgive me for oversimplifying what should be more complicated, but the value of the market relies on only two variables: corporate earnings and how much investors are willing to pay for them.

The Masters and the Market: 2026’s Firm-and-Fast Conditions

Matt Gentzkow — Sat, 11 Apr 2026 04:00:00 GMT

Wake up! It is Sunday morning at Augusta National, the place where fans are called patrons, the back nine is the second nine, and each hole is named after a plant, tree, or shrub —like Pink Dogwood, Flowering Peach, Azalea, and Firethorn, to name a few. Every year at The Masters, the course is the same on paper, but it can play a bit differently each year. Agronomists reshape the greens, tee boxes move, rain softens the layout, heat firms it up, and players spend all week trying to judge the swirling winds. Amid those variables, the comfort of familiarity gives way to a fresh challenge, as the same holes, fairways, greens, and pin positions demand a different strategy.

In or Out: Navigating Markets in the Fog of War

David S. Waddell — Fri, 27 Mar 2026 04:00:00 GMT

We entered 2026 as we almost always do, bullish but fearful. Bullish because, on average, equity markets appreciate 75% of the time in any given year and appreciate 85% of the time without a recession. The combined fiscal, monetary, deregulatory and AI Capex stimulus should insure against recession and corporate profit margin expansion and earnings momentum should ensure continued gains for investors. Fearful, because supply shortages across the economy (labor and semiconductors) might overwhelm productivity benefits leading to stubborn, if not elevated, inflation levels. This could force Trump’s handpicked Fed to tighten policy, rather than loosen it, as ordered. Higher inflation doesn’t necessarily mean lower stock prices. In 2021, inflation rose from 1.3% to 7.1% while the S&P 500 rose 28%. However, it does increase performance disparity within the market, making selectivity more important. Higher rates increase the cost of debt and threaten higher valuations, leading us to favor companies with lower debt levels and lower P/E’s. In short, our strategy entering the year: expect continued gains, expect inflation risks, select accordingly.

Filtering The Fight

David S. Waddell — Fri, 13 Mar 2026 04:00:00 GMT

The conflict in the middle east has largely confused investors and commentators. We have been through many of these military market shocks before and gained well-earned perspective. To gauge investment impact and assess the case for reallocation, we focus less on battlefield maneuvers and more on key indicator maneuvers. This week, I will quickly share our war room dashboard and our investment battle plan.

Fog of War

Matt Gentzkow — Fri, 06 Mar 2026 05:00:00 GMT

Last week at this time fighting broke out between Iran, Israel, the United States, and more across the Middle East. Swift US military action on Friday night brought about another change in a foreign government, this time bringing Iran under intense pressure. The unfolding conflict is disheartening on many levels, particularly those with friends and family serving in uniform. I will attempt to provide some amount of clarity on the ongoing situation. For those investors curious about the ramifications of conflict in the Middle East, we’ve been here before; but let’s explore this specific situation.