Smart insight and clear visuals that matter – what we’re watching now and how intention and conviction shape our portfolios.
The Tide May Be Turning
So far this year, the four major U.S. hyperscalers have issued $144 billion in bonds, up significantly from $83 billion in 2025. Despite soaring since early 2023 and vastly outperforming the S&P 500, these tech giants have recently stumbled, dropping 8.7% since late May and trailing the broader market by 10.2%. This recent dip aligns with a growing theory among investors: the AI capex cycle could end when the market pushes back against massive, debt-fueled spending that lacks immediate returns. As markets process what be feel is an unprecedented borrowing over the past two years, the hyperscalers' recent relative underperformance may be the first warning sign that investor patience is wearing thin.
A review of an inherited dividend strategy this week offered a useful reminder of how much traditional style definitions have shifted. The portfolio held a 26% allocation to a T. Rowe Price dividend growth fund, yet the fund carried a dividend yield of just 1.9% and traded at roughly 22x earnings. Many investors may likely be surprised to find a "dividend fund" looking increasingly like a growth portfolio.
This is not an isolated example. Bill Nygren, Manager at Oakmark, noted in his quarterly commentary that nearly half of the Russell Value Index's return this year came from fewer than ten companies that entered the year trading at an average P/E multiple of 39x—equivalent to just a 2.6% earnings yield. By any traditional definition, many of today's "value" stocks would be difficult to explain as value investments to the average investor.
Source: Oakmark Quarterly Commentary
Of course, the reason those holdings are now considered value is that the true highfliers have entered the index, pushing many of these companies—as well as some of the Magnificent Seven—from growth into value. This is all happening as free cash flow at the hyperscalers continues to plummet (below charts) as they pour cash into the sales and earnings, of course, of semiconductor companies.
We are three quarters into the crypto bear market that began after the November 2025 peak. Bitcoin is currently down about 54% from its $125K high. While the correction has been painful, we may not be entirely out of the woods just yet. However, we believe there is a silver lining. Historically, crypto bear markets have lasted roughly 12 to 15 months, with previous cycles experiencing declines of 75% to 90%. By comparison, the current downturn has been much milder, suggesting this cycle could be more resilient than prior ones.
Tues, 7/14 @ 6:00 am: NFIB Index of Small Business Optimism
@ 8:30 am: CPI/ CPI YoY
@ 8:30 am: CPI Core/ CPI Core YoY
Wed, 7/15 @ 8:30 am: Empire State Manufacturing
@ 8:30 pm: PPI, Ex-Food & Energy PPI, M/M%
@ 8:30 pm: Personal Consumption
@ 2:00 pm: U.S. Federal Reserve Beige Book
Thur, 7/16 @ 8:30 am: Retail Sales
@ 8:30 am: Philadelphia Fed Business Outlook Survey
@ 8:30 am: Weekly Jobless Claims
@ 10:00 am: Manufacturing & Trade: Inventories & Sales
@ 10:00 am: NAHB Housing Market Index
@ 10:00 am: Pending Home Sales Index, M/M%
Fri, 7/17 @ 8:30 am: Housing Starts
@ 8:30 am: Import Prices
@ 10:00 am: University of Michigan Preliminary Consumer Survey
Mary Ahn
Investment Research and Portfolio Strategy Manager
Cal Jones, CFA
Managing Director of Fixed Income
Eric Speron, CFA
Managing Director of Equities
Alton Tjahyono, CFA
Sr. Investment Strategist