Happy Friday everyone. My condolences to the many Philly fans who happen to get these emails.
Let’s catch up on the week that was.
📊 Weekly Market Recap
- S&P 500 return Year-to-date were approximately 16.52%
- S&P 500 3 month return were approximately 7.24%
- S&P 500 return over the past month were approximately 2.24%
- S&P 500 return over the past 7 days were approximately -1.45%
This Week in the Markets- 3 Things to know
- AI Power Plays – OpenAI, AMD, and the Expanding Deals– Tech’s AI engine shifted into overdrive this week. OpenAI announced a massive multi-year deal with AMD to deploy six gigawatts of Instinct GPUs starting in 2026 one of the largest infrastructure commitments in AI so far. As part of the partnership, AMD granted OpenAI an option to buy up to 160 million shares, a stake that could represent nearly ten percent of AMD if all performance targets are hit. Investors loved it, sending AMD soaring while reinforcing the idea that AI infrastructure is becoming its own asset class. At the same time, Nvidia agreed to invest up to $100 billion into OpenAI, Oracle is spending tens of billions on Nvidia chips, and Microsoft remains deeply integrated through Azure. The result is a web of cross-dependency that now stretches across every layer of the AI economy. It’s no longer one company leading the charge, it’s an AI ecosystem feeding itself. The upside is massive, but so is the exposure. When valuations depend on shared optimism instead of clean fundamentals, a single misstep could echo through the whole AI chain. For now, though, investors are weighing on this AI bubble and if it could pop at any given moment.
2. When Markets Fly Without a Compass- The ongoing government shutdown has thrown a wrench into Wall Street’s usual rhythm. With agencies like the Labor Department and Commerce Department partially offline, crucial reports like jobs data and inflation updates aren’t being released on time. That means investors are basically flying blind, trying to make sense of the market without their usual indicators. Traders are leaning more on private-sector data and Fed commentary to fill the gap, but it’s a shaky substitute. The lack of official numbers makes it harder to gauge whether the economy’s cooling or still running hot, which in turn fuels market swings and speculation. Some investors are pulling back until clarity returns, while others are taking advantage of the confusion to trade on momentum.
3. Rally Built on Hope or Momentum?– Global markets are riding a wave of optimism as investors pour back into equities, with inflows reaching their highest levels in nearly a year. According to Reuters, more than $49 billion flowed into global stock funds in the past week alone a clear sign that traders are betting on a friendlier Federal Reserve. Much of this enthusiasm stems from rising expectations that the Fed could begin cutting rates later this year as inflation cools and the labor market softens. Lower rates reduce borrowing costs and make risk assets like stocks more attractive, driving demand across technology, financials, and even high-yield bonds.
The rally isn’t driven by optimism alone, it’s also strategic positioning ahead of a pivotal fourth quarter. If the Fed delivers even modest rate cuts, growth sectors could extend their lead and risk appetite may rise further. But stubborn inflation or stronger-than-expected data could quickly reverse that sentiment. For now, markets remain cautiously euphoric, with the Fed’s next move set to determine whether this surge lasts or fades.
The Great Balancing Act
If the Fed can actually pull off a soft landing, things could still look pretty good heading into 2026. A slow and steady series of rate cuts would give both consumers and businesses some much-needed breathing room after two years of high borrowing costs. That could help spark new investment in areas like AI, automation, clean energy, and infrastructure while also giving the housing market a small rebound as mortgage rates ease. In the best-case scenario, inflation keeps cooling toward 2%, wages stabilize, and the economy finds a healthy rhythm based on steady demand rather than government stimulus or hype.
But today’s drop in the market showed just how fragile that balance is. Stocks fell hard after former President Trump threatened new tariffs on China, shaking investor confidence and reviving fears of a trade war. The S&P 500 slipped as well as bond yields pulled back as money rushed into safer assets. That sell-off reminded everyone that the “soft landing” path is narrow especially with the Fed split on how much more to cut. Some policymakers worry inflation is still sticky, while others are focused on keeping the job market from losing momentum.
To make matters messier, the government shutdown has delayed key data releases, leaving markets to guess where the economy really stands. Private trackers suggest growth is still solid, but cracks are showing in wages, hiring, and business confidence. The bottom line: the soft landing is still possible, but it’s no longer a sure thing. If inflation behaves, the Fed can keep easing and extend the expansion. If it flares up again, though, the central bank might have to hit pause and that could tip the economy into a mild recession. It’s not about avoiding turbulence anymore; it’s about keeping the plane steady enough to make it through.
S&P 500 SECTOR SNAPSHOT- Past Month
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