Weekly Commentary

Wall Street’s eyes were all on the SpaceX debut on Friday, as well as a breakthrough in the Middle East.  The SpaceX IPO is important for a myriad of reasons, but mostly to gauge investor sentiment in future IPO’s (OpenAI and Anthropic), and the overall market response.  Given the sheer size of the offering, liquidity could move from the overall market to the IPO, and it will be interesting to see the dynamic and the market’s ability to absorb such an enormous supply.  Given the fast-track given to SpaceX by the Nasdaq and Russell, there is likely to be bids from passive funds for the foreseeable future, but the next week or two will be key as to the trajectory of the stock price.  Another factor permeating the market has been the on-again-off-again negotiations between Iran and the United States.  It does seem however, that some deal, albeit short-term and not comprehensive, is near, which is most likely bullish for stocks, especially growth stocks that have been shaken by the specter of higher interest rates.  We reiterate our stance that investors should continue to “buy the dips”, as market sentiment seems to be riding a tailwind at the moment.  Next week’s Fed decision could inject volatility, but market expectations of a more hawkish Fed are already baked into the cake so to speak.

A major disappointment, at least in the short-term, has been precious metals prices.  Gold has yet to recover from its recent correction, and near-term catalysts of lower energy prices and a less hawkish Fed have yet to materialize.  We also would advocate for a buying on weakness, but much less so than in equities, given the heavy uncertainties these catalysts.  However, long-term fundamentals remain sound, especially on the fiscal side of things, so for investors with extended time horizons, our view on gold remains constructive.

Fixed income markets continue to be very sensitive to monetary policy and inflation numbers, although the CPI print earlier in the week—with core inflation coming in below market expectations—could give some relief to upward yields, at least in the short term.  We reiterate our neutral stance on duration, and see minimal value in credit products, including high yield.  EM debt remains positive from a fundamental point of view, but spreads do limit upside potential.  Most risk-on allocations are best put into stocks rather than high yield, and especially private credit.

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