Equity Market Froth and Earnings (with Jonathan Ferro, Lisa Abramitz, Amarie Hordern)

Asks where the speculative story is emerging given strong earnings.

Jonathan Ferro

Cameron Dawson

Highlights rally in speculative names: Goldman unprofitable tech index up 15% in last week, space names up 100% YTD, Russell 2500 leaders are unprofitable. Quality names only up 8%.

This shows froth and divergence between speculative and quality stocks.

Asks if stretched technicals are enough reason to sit out the rally.

Lisa Abramitz

Cameron Dawson

No, because earnings are very strong. Key drivers: hyperscaler capex upside (from 10% to 80% YoY) and operating leverage boom in semiconductors (margins expanded from 30% to 45%).

Warns that if sales slow, operating deleveraging could hurt earnings growth into 2027.

Asks if earnings deceleration or increased supply could drive a correction.

Amarie Hordern

Cameron Dawson

Equity supply is rising (IPOs, Google issuance) after years of falling supply and strong demand. This creates a 'Shakespearean sea change' in supply-demand balance.

Questions whether incremental demand can absorb the new supply.

Asks how to clear space to participate in IPOs, what to sell.

Lisa Abramitz

Cameron Dawson

Indices are forced to add weight to these names (e.g., SpaceX on NASDAQ). She will stick to valuation discipline and quality. Example: Palantir traded at 90x sales, sales grew 72% but stock flat as multiple compressed.

SpaceX at 80-100x sales with decelerating growth is risky.

Asks if record inflows into equities (BofA survey) are uncomfortable.

Amarie Hordern

Cameron Dawson

Inflows are from chasing; Deutsche Bank positioning index only at 61st percentile (vs 90th in late 2021). Household allocations at all-time highs, put/call ratios very low (complacency).

Not enough to be a tailwind, but not yet a headwind like 2021. Crypto sitting out suggests it's being used as liquidity to chase equities.

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