“If it is obvious, then it is obviously wrong.” Joseph Granville
I’ve noticed you can tell any story you want with a lot of the recent data. Today I wanted to share what I’ve found interesting, so you too can tell any story you want!
Earnings
This earnings season has been very impressive, with earnings on the S&P 500 coming in at 13.2% year over year in the fourth quarter, compared with barely over 8% at the start of the year.
But even more impressive has to be revenue. Revenue growth is clocking in at 9.0%, the best number since Q2 in ’22!
On the other hand, maybe revenue is set to peak and trend lower going forward. So is this good, is this bad, or something else? I’m honestly not sure, but you can tell whatever story you want!
AI Spending
AI and CAPEX spending continues to soar, with the big five expected to spend $700 billion in 2026!
This should continue to be a major driver for economic growth, but on the other hand …. maybe spending this much isn’t a good thing, as Amazon was down nine days in a row after they announced they would spend more than anyone at $200 billion.
The AI Architects Are the TIME Person of the Year
AI has been game changing and investors have greatly benefited the past few years by having a lot of large cap tech exposure. The excitement might have peaked with TIME Magazine naming many of the AI leaders the TIME Person of the Year in 2025.
On the other hand, seeing something like that sets a very high bar. As a result, all seven names in the Mag 7 are lower on the year. Incredibly, the other 493 stocks in the S&P 500 are up about 3% and outperforming the Mag 7 by nearly 10% so far this year.
Being Added to the Dow
Salesforce (and other software leaders) have been hit very hard over worries about AI taking away their market share. You know what AI isn’t eating into? Energy stocks.
Did you know that Exxon Mobil was kicked out of the Dow on August 31, 2020? It was this same year that crude oil futures went negative (yes, you read that right) nearly $40/barrel and no one wanted to own these companies, as software was obviously the place to be.
Well, Exxon is up more than 270% since this change and Salesforce is down more than 30%.
Large Banks Are Struggling
Large banks have struggled this year, with many large bank stocks firmly in the red. I’m old enough to remember banks lagging the overall market in 2007 and we all know what happened next. I’m not calling for that at all, but this has my attention.
On the other hand, small banks (the regionals) are about to break out of a 10-year base. How bad can things be if regional banks are soaring?
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The Consumer Is Awash in Debt
Debt, debt, debt, we hear about this often. Well, the number of accounts that are delinquent in paying back their college loans has soared! On the other hand, payments to credit cards and auto loans have quietly improved recently.
Yes, we have a record amount of credit card debt out there, but on the other hand, the number of bankruptcies fell last quarter, and foreclosures ticked higher, but are still beneath 2019 levels. If things were truly about to fall apart out there, we’d expect to see more trouble in the form of higher bankruptcies.
In conclusion, there are some cracks out there, but overall, we think there are still many more positives than negatives. We dove into many of these on our latest Facts vs Feelings, which we called A Tale of Two Markets. Enjoy and thanks for reading!
For more content by Ryan Detrick, Chief Market Strategist click here.
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