Finance

Fed pivot, take two. A shock July jobs report — payrolls fell 23,000 vs. +80k expected, unemployment ticked down to 4.1% only because workers left the labor force, and May/June were revised down a combined 103,000 — flipped the market's rate narrative within hours. September rate-hike odds cratered from 57% to 44% (and toward ~30% by mid-August), even though the Fed's Jul 29 hold still carried three hawkish dissents (Hammack, Kashkari, Logan) pushing for a hike. July's FOMC minutes land Wed Aug 19.

AI earnings vindicate the capex story — for now. July CPI cooled to 3.4% y/y (+0.1% m/m), and blowout chip earnings pushed the S&P 500 to an intraday record 7,814.88 on Aug 13. Nvidia posted ~109% earnings growth with data-center revenue up 92%, AMD guided to 64% 2026 EPS growth, and Micron returned 208% on booming memory demand — nearly 90% of S&P 500 companies beat estimates, the best rate in five years. It's a sharp reversal from June's "AI ROI doubt" selloff, though NVDA's Aug 26 print is the next test for a stock priced for perfection.

Consumer cracks beneath the record highs. Retail sales fell the most in over a year in July and University of Michigan sentiment slipped, even as the S&P notched a third straight weekly gain and the Russell 2000 hit fresh all-time highs. Gold held near $4,430/oz (+8% on the month) as investors hedge the soft-landing bet. WTI stayed elevated near $84 (Brent ~$89.60) on the unresolved US-Iran Strait of Hormuz standoff, with some analysts warning of a path to $120 if it escalates.

Not refreshed this update — per-sector OW/Neutral/UW positioning and MTD/YTD figures weren't independently verified from source data, so the stale June table has been removed rather than left inaccurate. Re-populate once fresh sector-level data is sourced.

Bund/JGB/Gilt/SOFR not independently verified this update — omitted rather than left stale.

Thesis: The build-out of AI infrastructure represents one of the largest capital allocation cycles in modern economic history. Base case: $1 trillion cumulative global AI infrastructure spend by 2028, driven by hyperscalers (Microsoft, Google, Amazon, Meta) and sovereign AI initiatives.

Unlike the dot-com era, this cycle is underpinned by real revenue generation — OpenAI at $3.4B ARR, Anthropic at $1.2B, Microsoft Copilot contributing ~$10B incremental revenue in FY26. The demand signal is authentic.

The picks-and-shovels approach remains our preferred entry: NVDA (compute), ANET (networking), VST/CEG (power), EQIX (co-location). These are less priced for perfection than the model companies themselves.

Key risk: Efficiency breakthroughs (DeepSeek-style) that compress compute requirements faster than demand grows. The next 12 months will test whether scaling laws hold at the frontier.

View: Private credit remains attractive on absolute yield (SOFR+500–600bp = 10.2–11.2% gross) but spread compression is real. Best risk-adjusted exposure: senior secured, first-lien, sponsor-backed mid-market. Avoid covenant-lite and PIK-heavy structures.

Key managers: Apollo, Ares, Blue Owl, HPS. Watch SEC regulatory changes on BDC leverage and liquidity requirements.

View: Vintage 2022–2024 likely attractive — bought at lower multiples, operational improvement runway. Exit environment improving as rates stabilise. IPO window re-opening (ARM, Reddit precedents).

Caution: $2.4T dry powder competing for same deals. Manager selection is alpha — top quartile vs median spread is 800–1,000bp annually.