digest
Short Summary
Main recommendation: treat the current market sell-off as a buying opportunity in quality stocks, especially AI-linked infrastructure names, rather than panicking, while Seema Shaw advises expecting a choppy market driven by rising bond yields. Phil Blancato argues that record earnings and a historically weak September set up a possible rebound after the midterms, while Seema Shaw notes that broadening earnings growth beyond tech is a positive sign for sustaining gains.
Key Points
- Phil Blancato says a diversified portfolio is still up about 12% on the year, and the equal-weighted S&P 500 is down while the cap-weighted index is up more.
- Blancato points to the greatest earnings cycle in decades and productivity gains across industries as reasons not to panic over headlines.
- Charles notes market breadth was weak, with about 65% of S&P components down, though major indices fell less.
- Seema Shaw says the 10-year Treasury yield, near 4.9%, reflects structural forces such as fiscal deficits and heavy corporate AI-related debt issuance, not mainly inflation.
- Shaw describes the bond yield move as global, citing record-high yields in the U.K. and multi-year highs across Europe.
- Shaw expects midterm-year weakness followed by a rebound after November, provided growth and earnings stay constructive.
Details Worth Noting
- Concrete instructions: Blancato's actionable advice is to take advantage of dips by buying quality names that are 5-10% cheaper than before, and to focus on companies in the AI supply chain. Named picks mentioned were Quanta Services, Leco, and United Rentals. Rather than buying broadly, he advises being selective about which companies to pick, since 30-40% annual revenue growth is unlikely to persist across the board.
- Blancato points to power infrastructure, equipment rental, and mining/welding equipment makers as beneficiaries of a manufacturing and grid-rebuilding cycle over the next five years.
- Shaw says a choppy market is likely while yields digest, but expects buyers to eventually push yields down if earnings growth holds.
- Shaw expects earnings to slow from peak levels, with only modest equity gains through year-end and into 2027.
- Shaw says Treasury Secretary Bessent intervening in markets would likely be self-defeating; investors want the Fed to control inflation and the government to address fiscal policy.
- Charles speculates that Berkshire Hathaway, under Greg Abel, might also be interested in similar AI-related names, though he does not cite evidence of actual holdings.
Bottom Line
Expect volatility into the midterms, but the speakers see a rebound and selective buying opportunities if earnings and the broader economy hold up.
