Markets push higher, even as warning signs multiply
A little over a week ago, a disappointing U.S. payroll report sharply altered the picture of the labor market. Revised figures from the U.S. Bureau of Labor Statistics showed job growth averaging just 35,000 per month over the past three months, well below the 186,000 monthly average for 2024. That’s the kind of data that, historically, sparks recession concerns and market caution.
Chief Investment Officer Thierry Hasse
Gains in the equity market were also supported by growing expectations for rate cuts at the Fed’s upcoming mid-September meeting. Market participants are betting that the Federal Reserve will be forced to ignore the uncertainties that tariffs on imported goods create on the future path of inflation and, instead, focus on the labor market part of their dual mandate.
Apple’s Big Week: Patience Rewarded
One of the hardest calls in managing an equity portfolio is deciding whether a company’s poor stretch reflects a permanent loss of competitiveness or is just a temporary detour. When the setback is structural — Intel’s diminished role in the semiconductor industry is a good example — it’s often best to reallocate capital to stronger opportunities. But when the weakness is temporary, patience can pay off.
Apple made that case last week. The company’s shares jumped 13% after announcing $600 billion in planned U.S. manufacturing investments over the next four years (Source: Bloomberg News). This move boosts domestic supply chains while neatly sidestepping potential future tariffs on imported chips. It also quickly added $400 billion to Apple’s market capitalization, its largest weekly increase since July 2020.
At $3.4 trillion in market value, Apple now sits behind only Nvidia and Microsoft. CEO Tim Cook’s deft handling of policy risk, reinforced by a well-timed White House meeting, appeared to be a masterclass in how to turn political uncertainty into a competitive advantage.
The Concentration Question: Leadership or Liability?
The market’s recent gains have been impressive, but they are also resting on a narrow base. Today, the top six stocks in the S&P 500 account for one-third of the index’s weight; the top 10 make up about 40%. Nvidia alone represents 8.2% of the index — the largest single-company share since 1981 — and nearly equals the size of the entire healthcare sector (Source: CNBC).
These companies have earned their leadership status with years of innovation and strong earnings growth. But their valuations leave little room for error: the S&P 500 trades at 22 times projected earnings over the next 12 months, and the Nasdaq 100 at 28 times. For perspective, Palantir is valued at $440 billion on $4.1 billion in annual revenue for a price-to-sales ratio near 100. Compare that to Johnson & Johnson, one of just two remaining AAA-rated corporations, with a $420 billion market value, $93 billion in annual revenue and $26 billion in net income for 2025 (Source: CNBC).
At a cocktail party, you may hear people boasting about owning Palantir, but five years from now, Johnson & Johnson may be the stock quietly doing the work in your portfolio.
Looking Ahead: Inflation and Retailer Reality Checks
This week, attention turns to the July Consumer Price Index report, due Tuesday. Economists expect core CPI to rise 3.1% year-over-year, up from 2.9% in May (Source: MarketWatch). This is a potential sign that tariffs are adding to price pressures.
Following the debate about the recent jobs report, concerns about the accuracy of official data are growing, especially given how much monetary policy decisions and market valuations hinge on these figures. That’s why, for many investors, two upcoming corporate earnings reports may be even more revealing: Home Depot on Aug. 19 and Walmart on Aug. 21.
These two retailers, in different ways, take the pulse of American spending. Home Depot’s results can hint at whether households feel confident enough to take on major projects or renovations. Walmart’s performance offers a snapshot of everyday spending (from groceries to back-to-school supplies) that often reveals when consumers are trading down, stretching budgets or splurging a bit more. Together, they can provide a clearer read on how tariffs and broader economic uncertainty are shaping real-world behavior. These are insights that, for some, may prove more useful than any spreadsheet from Washington.
At Elevage Partners, we anticipate — we prepare.
Markets can celebrate strength and shrug off weakness in the same week. Our role is to look beyond the headlines, weigh the risks and position portfolios to navigate both. This week, we’ll be watching not just the inflation data, but the stories within the data and the signals it might miss.
The information contained herein represents the views of Elevage Partners at a specific point in time and is based on information believed to be reliable. No representation or warranty is made concerning the accuracy of any data compiled herein In addition, there can be no guarantee that any projection, forecast, or opinion in these materials will be realized. Any statement non-factual in nature constitutes only current opinion which is subject to change. These materials are provided for informational purposes only and do not constitute investment advice. Any reference to a security listed herein does not constitute a recommendation to buy, sell, or hold such security. Past performance is no guarantee of future results. The historical returns of any securities and/or sectors mentioned in this commentary are not necessarily indicative of their future performance.