Daily Briefs

• US equities have fully recovered from their selloff following the announcement of reciprocal tariffs .  Investors believe the US economy will benefit greatly from the adoption of generative artificial intelligence.
• The late 1990s provide a cautionary lesson on the limits of purported productivity gains due to technological changes. Higher AI-induced productivity growth will raise the real neutral federal funds rate.
• High federal government borrowing could raise the funding costs of AI-related capital spending in the private sector.  Borrowing capacity has risen significantly due to the Big Beautiful Bill’s passage. 

• Recap of last week’s events including good inflation news, pressure on Fed to cut interest rates, tensions between Israel and Iran escalating, and market outcomes
• Factors showing risk-on sentiment with sales growth up, EPS growth strong, volatility and quality return on equity fluctuating
• Discussion on factors influencing return on equity and quality, with insights into market trends and data analysis techniques

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• It’s official, our long-term market timing model has confirmed a buy signal at the end of June.
• The S&P 500 is trading at a forward P/E of 22. Can a new bull truly begin at such elevated valuations?
• We interpret the buy signal from our long-term market timing model as a buy signal for global equities, and not just the U.S. market.

• The market is taking on bubbly characteristics. However, momentum is still strong and sentiment is not excessively stretched.
• The market is due for a short-term pullback or consolidation.
• We believe traders should buy the anticipated weakness next week and embrace the bubble conditions as the melt-up has further room to run.

• Following nearly a year of being in the negative, China’s steel mill margins have finally turned positive, primarily driven by a decline in coking coal prices.
• Iron ore prices have bounced 3% WoW, to 96 USD/ton, due to short-lived positive sentiment. We reiterate a short-term bounce to the 100 USD/ton level.  
• In the medium term, we anticipate iron ore prices declining to $85/ton by early next year, when Rio’s 120 million-ton Simandou project commences.

• This follows our insight, Copper Breaches 10k USD: Easy Journey to 11k USD/Ton On Lower Inventories In The Short Term. 
• Informal miners are disrupting Peruvian copper transport at the Las Bambas (320 kt annual production) and Constancia (110 kt) mines owned by MMG (1208 HK) and Hudbay Minerals (HBM CN). 
• Peru is the third largest copper producing country in the world (2.6 million tons or 10% of global production), and so following these disruptions is critical.