Stay Invested and Optimistic

I’m bullish on macro and fundamentals, but cautious about valuations and sentiment. Optimism is priced in.

Reasons to be optimistic:

? Strong earnings.
(Although, when everyone expects a positive surprise, is it really a surprise?)

? The high-wage consumer remains strong, with low unemployment and a strong balance sheet.

? The Fed has an easing bias. Short rates are coming down.

? GDP growth expectations may have overreacted to liberation day and could normalize back up.

? AI spending (and productivity gains) are accelerating. You thought we were spending a lot on gen AI in 2024? Hold my beer.

? Fiscal spending could be stimulative due to bonus capex depreciation and lower taxes on tips, social security, and overtime.

? MA and deregulation are accelerating.

Why not go overoptimistic about stocks?

With the elevated price-to-earnings ratio, high market concentration, and increased speculative trading, markets are vulnerable to two key macro risks:

1.?? ?Rising long rates (due to deficits or inflation).
2.?? ?Policy (trade, geopolitics)

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