Posts filed under ‘inflation’
The Multi-Trillion AI Tsunami Sweeping the Market
Not only has Artificial Intelligence (AI) dominated headlines, but a multi-trillion-dollar investment tsunami is creating a rising tide that has lifted many AI-related stocks to market leadership. Since the seismic launch of OpenAI’s ChatGPT in November 2022, investors have rushed to participate in what may be one of the largest technology investment cycles in history.
At my firm, Sidoxia Capital Management, we have been positioned in the AI rush for several years—well before ChatGPT became a household name. Close followers of my work know I have been tracking the AI revolution for years (see my previous analysis on my Investing Caffeine blog.
Goldman Sachs recently published an in-depth report highlighting the various AI scenarios and assumptions underlying an estimated $4 trillion to $8 trillion spending boom on compute (AI chips), data center infrastructure, and power investments over the next five years. As shown in the chart below, Goldman’s baseline capital expenditures scenario models a staggering $7.6 trillion in spending from 2026 to 2031. While variables like the lifespan of NVIDIA GPUs can shift annual AI spending estimates by hundreds of billions of dollars, the numbers remain enormous under virtually any scenario.
Source: Goldman Sachs
Market Momentum: Another Record-Breaking Month
For the month, the major indexes once-again vaulted to new record highs, driven by the AI capital expenditure cycle and a record level of profits:
· S&P 500: +5.2% (+10.7% year-to-date)
· NASDAQ: +8.4% (+16.1% year-to-date)
· Dow Jones Industrial Average: +2.8% (+6.2% year-to-date)
As I highlighted in last month’s post, it isn’t just speculative spending driving stock prices higher; it is an active AI productivity revolution that is causing corporate earnings to roar. This is especially true within the large-cap technology sector, which serves as the primary engine behind the S&P 500’s record-breaking performance.
It may seem counter-intuitive, but even as stock prices have reached record heights, valuations have actually become cheaper (sitting at a 20.9 forward P/E) compared to the peak price-to-earnings ratios seen in 2025. How is this possible? Quite simply, the denominator of the P/E ratio (earnings) has been growing at a faster clip than the numerator (stock prices), compressing the overall valuation multiple – see chart below.
Source: Yardeni.com
The Quest for Efficiency
Ultimately, the objective of every publicly traded company is straightforward: increase profits and cash flow. For most businesses, labor remains the largest operating expense. One of the most effective ways to reduce labor costs and improve efficiency is through technology investment. The chart below highlights the growing role technology plays within the economy as companies increasingly invest in automation, software, cloud computing, and AI. These investments often improve productivity, expand margins, and enhance long-term profitability.
Source: Yardeni.com
As this disruptive AI revolution permeates all sectors of the economy, we are witnessing the early stages of a productivity renaissance. Even as unemployment rates slowly creep higher (reaching 4.3% from a 2023 low of 3.4%), corporate profit growth is accelerating while nominal GDP continues to chug along at a steady rate (see chart below).
Source: Yardeni.com
The Infrastructure Winners
Underlying this economic growth are the individual companies building the foundation of the AI boom. Just five months into the year, a select group of infrastructure and semiconductor hardware companies have posted astronomical returns in 2026*:
Underlying the growth in profits and the economy are the individual companies driving the AI infrastructure boom. Even though we are only five months through the year, here is a small list of companies benefiting from and contributing to the rocketing growth in 2026 (YTD % Gains)*:
· Sandisk Corp. (SNDK) +604%
· Micron Technology Inc. (MU) +240%
· Dell Technologies Inc. (DELL) +234%
· Intel Corp. (INTC) +211%
· Western Digital Corp. (WDC) +208%
· Sterling Infrastructure Inc. (STRL) +181%
· Powell Industries Inc. (POWL) +168%
· Comfort Systems USA Inc. (FIX) +96%
· Vertiv Holdings Co. (VRT) +95%
*Sidoxia Capital Management and/or its clients hold positions in some of these companies (see Complete Strategy Performance and Disclosure at the bottom of this article or Click Here).
A major tailwind supporting these companies is the roughly $700 billion of capital expenditures expected in 2026 from hyperscale technology leaders such as Alphabet, Microsoft, Meta Platforms, and Amazon. These firms continue to aggressively invest in AI infrastructure to maintain competitive advantages and satisfy surging demand for AI-powered services – see AI Tech Spending article.
The Importance of Diversification (Even in a Hot Market)
At Sidoxia, our concentrated equity portfolios have significantly outperformed the S&P 500 index in 2026, as well as on a 1-year, 3-year, and 5-year basis. However, our winning exposure in AI infrastructure stocks has been partially offset by underperformance in the cryptocurrency, healthcare, and software/SaaS sectors. This includes drags from holdings like Exzeo Group, Inc. (XZO, -43% YTD), Salesforce Inc. (CRM, -28%), and Roper Technologies Inc. (ROP, -27%).
Ultimately, this underscores the necessity of a balanced portfolio: the positive contributions from our top-performing names heavily outweighed the negative drag from the laggards, allowing our concentrated strategy to come out ahead.
No Signs of Slowing, But Watch the Horizon
Euphoria surrounding the AI spending wave shows no signs of abating in the near term. The highly anticipated upcoming Initial Public Offerings (IPOs) from private giants like SpaceX (SPCX), Anthropic, and OpenAI will likely add fuel to investor excitement. This naturally begs the question: are we inflating another technology bubble?
Trees don’t grow to the sky forever, and the same fundamental law applies to investing—eventually, the parabolic gains will slow or reverse.
The AI tsunami is currently in full force, and while it has created massive wealth today, historical market cycles remind us that unmanaged momentum can eventually cause financial damage to unprepared investors. Right now, there is no shortage of demand for AI services and infrastructure, keeping the market tide exceptionally high. Sidoxia and its clients have benefited tremendously from this secular trend, but we remain highly vigilant and active in managing risk for when the tide inevitably turns.
Stay tuned, and ensure your portfolio is properly structured to navigate the waves ahead.
Wade W. Slome, CFA, CFP®
Plan. Invest. Prosper.
Important Performance Disclosure: The specific positions discussed above were extracted based on the top and bottom performers from our overall Concentrated Equity Strategy portfolios. To see how these selections fit into our broader historical track record, please review our
Full Strategy Performance Sheet & Required Legal Disclosures (PDF)
Sidoxia Capital Management (SCM) and some of its clients hold positions in GS, STRL, POWL, FIX, VRT, XZO, CRM, ROP, and certain exchange traded funds (ETFs), but at the time of publishing had no direct position in any other security referenced in this article. Past performance is no guarantee of future results. Selections referenced in this article represent the top and bottom material contributors and do not reflect all positions bought or sold during this period.
ADDITIONAL DISCLOSURE: No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Each investor’s situation is unique so please work with a professional financial adviser, tax accountant or legal representative, as applicable, to develop an individualized plan or address any questions you may have. Investing involves risk including the possibility of loss of one’s investment.
Stocks Soar as Profits Roar
The Geopolitical Dilemma: Iran Gone Wrong
It has been a volatile and unsettling period in the Middle East. Following more than a month of continuous bombing in Iran, the United States reached a tenuous ceasefire. While the active conflict has paused, the U.S. continues to maintain a financially crippling blockade against the Iranian regime.
If that geopolitical stress isn’t enough, oil prices remain elevated at $105 per barrel (WTI), roughly 57% above levels seen before the bombings began. Furthermore, gasoline prices hovering around the $4.40 per gallon threshold are acting like a brake that is slowing down global economic activity.
On the surface, this negative narrative sounds like a disastrous backdrop for financial markets. Yet, last month’s stock market performance tells a completely different story:
· S&P 500: +10.4%
· NASDAQ: +15.3%
· Dow Jones Industrial Average: +7.1%
Why the Disconnect?
Followers of my firm, Sidoxia Capital Management, and my blog, Investing Caffeine, know that geopolitics are rarely the primary drivers of long-term stock performance. Instead, we look to the “four legs of the Sidoxia stool”: profits, interest rates, valuations, and sentiments. For a deeper dive, check out my article: Don’t Be a Fool, Follow the Stool. The vital leg supporting the recent move in stocks has been soaring profits. As illustrated by data from Yardeni.com, S&P 500 profits (red line) are accelerating at a much steeper pace than those of the S&P 400 MidCap (blue line) and S&P 600 SmallCap (green line).
Source: Yardeni.com
A major contributor to this profit expansion is rising profit margins. Today, companies are earning a profit of approximately11 cents per dollar of sales, compared to just 5.5 cents during the 1970s and 1980s. The chart below highlights this phenomenon.
Source: Calafia Beach Pundit
The AI Productivity Revolution
What is driving much of this margin expansion? You guessed it: Artificial Intelligence.
We need to look no further than the mega-cap tech companies that reported Q1 financial results this week (Alphabet, Amazon, Microsoft, and Meta Platforms) to see how AI is helping companies cut costs and grow revenues:
- Combined, these four companies boast a revenue run-rate exceeding $1.7 trillion, with an accelerating growth rate above +22%.
- Meanwhile, headcount growth at these firms has remained virtually flat at < 2%. In fact, Meta and Microsoft recently announced a combined 20,000 in job cuts, raising concerns over an AI labor crisis.
These sales increases and expense reductions help explain last month’s surge in the performance of these stocks:
- Alphabet-Google (GOOGL): +33.9%
- Amazon.com Inc. (AMZN): +27.3%
- Microsoft Corp. (MSFT): +10.2%
- Meta Platforms Inc. (META): +6.8%
AI Driving the IPO Pipeline The AI boom is also creating massive value in the private markets. High-profile expected IPOs – including Elon Musk’s xAI, OpenAI (makers of ChatGPT), and Anthropic – are expected to exceed a combined $2 trillion in valuation. The graphic below shows the gargantuan size of these expected IPOs.
Source: Financial Times
The AI Train is Leaving the Station
AI is impacting every industry and every worker in some way, and this disruptive wave will undoubtedly displace some jobs. However, investors have the opportunity to jump on the train rather than be left behind.
As I noted in my recent article, The Saaspocalypse Has Arrived—or Has It?, if history repeats itself, the rollout of new technologies creates an influx of new industries and jobs that offset initial disruptions. If you work in an industry vulnerable to AI proliferation, taking advantage of the AI profit revolution can help offset potential financial disruption.
Of course, not everything is rainbows and unicorns. The Iranian conflict could still spiral out of control, which could quickly reverse recent stock market gains.
As I recapped for investors last month:
“History reminds us that while geopolitical shocks are terrifying in the moment, their impact on diversified portfolios is almost always temporary… In the world of investing, the best time to stay disciplined is exactly when everyone else is looking for the exit.”
Suffice it to say, geopolitics can and will impact short-term performance, but they rarely dictate long-term trends. When analyzing the market, it is crucial to remember a fundamental truth: When profits roar, stock prices often soar.
Wade W. Slome, CFA, CFP®
Plan. Invest. Prosper.
This article is an excerpt from a previously released Sidoxia Capital Management complimentary newsletter (May 1, 2026). Subscribe Here to view all monthly articles.
DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients hold positions in GOOGL, META, AMZN, MSFT, and certain exchange traded funds (ETFs), but at the time of publishing had no direct position in any other security referenced in this article. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC Contact page.
The SaaSpocalypse Has Arrived…Or Has It?
Well, the new month has started with a bang. Financial markets have not only experienced a bang from another military strike on Iran, but also an explosion of AI paranoia. As hundreds of billions of AI investment dollars flood into the economy, fears are intensifying that the AI displacement of workers could have a detrimental impact on the economy and financial markets.
The Monthly Scorecard
It was a mixed performance in the market last month. Geopolitical headlines surrounding Iran and the Middle East are currently front and center, but under the surface, the real story isn’t just geopolitics—it’s a growing investor anxiety around artificial intelligence and its disruptive potential. Here’s what happened last month:
- S&P 500: -0.9%
- Dow Jones Industrial Average: +0.2%
- NASDAQ: -3.4%
The “SaaSpocalypse” and the Tech Identity Crisis
Software stocks are currently under assault, plunging -9.7% for the month and a staggering -22.8% for the start of the year (as measured by the IGV iShares Software index). Analysts are calling this the “SaaSpocalypse” (Software as a Service)—a phenomenon where the market fear is that AI is “eating” software companies.
High-profile casualties have added fuel to the fire. IBM, for example, suffered its worst trading day in 25 years, dropping -13% in a single day. Concerns came to light that new AI agent coding tools like Anthropic’s Claude Code could threaten IBM’s legacy dominance in COBOL-based mainframe systems.
Paranoia vs. Reality
This “AI Paranoia” has spread far beyond Silicon Valley, infecting industries like transportation, banking, travel, real estate, and food delivery. Two major catalysts fueled this fire:
The Citrini Report: A viral, dystopian report from described an “avalanche” of white-collar firings (see chart below). The report argues that while the government may try to intervene with stimulus, it “won’t change the fact that an AI Claude agent can do the work of a $180,000 product manager for $200/month.”
Source: Citrini Research
- Corporate Reductions: High-profile cuts have validated these fears. Block Inc. (led by Jack CEO Dorsey, former Twitter Founder) announced it is slashing 40% of its workforce due to AI advancements, while Amazon recently eliminated 30,000 white-collar positions (10% of its corporate staff).
However, there is a silver lining to that perspective. While software jobs have flattened since ChatGPT arrived in late 2022, we have yet to see the “cliff dive” in total employment that many predicted. In fact, employment (165 million employed) and labor force (172 million) figures are near record levels, so we have not seen AI kill the economy quite just yet (see chart below).
Source: Yardeni Research and Bureau of Labor Statistics
The Great Rotation: Looking for “HALO”
As investors try to decipher the winners and losers, they are migrating away from technology and rotating into HALO stocks (Hard Asset, Low Obsolescence). These companies are seen as less susceptible to AI disruption. Evidence of this shift is clear in the outperformance of value, small-cap, and mid-cap stocks. Notably, the Dow Jones Industrial Average, an index heavy with hard asset exposure, just posted its 10th consecutive month of gains despite the broader technology stock volatility.
A Massive Bet on the Future
Despite the “bubble” murmurs, the AI juggernauts are doubling down. OpenAI just closed the largest private financing in history, raising $110 billion—including $50 billion from Amazon, $30 billion from NVIDIA, and $30 billion from SoftBank. The demand for compute and data centers remains insatiable, supported by the $700 billion being spent by the large hyperscalers (Amazon, Alphabet-Google, Microsoft, and Meta Platforms) this year.
Geopolitical and Legal Headwinds
Adding to the month’s complexity are external shocks:
- Middle East Tensions: Military strikes on Iran recently killed the Iranian Supreme Leader, Ali Khamenei, and other key leaders, injecting significant geopolitical risk.
- Tariff Uncertainty: The Supreme Court recently ruled against the IEEPA tariffs instituted by the Trump administration. While temporary alternatives are in place, the markets are waiting for a permanent solution to work through the courts.
Resilience in the Face of Technological Change
It is easy to get lost in the dystopian narrative, but history offers a more hopeful guide. Technology has been replacing human workers for centuries—from the looms of the Industrial Revolution to the tractors of the Agricultural Revolution – see chart below (1790 – 2025). In every instance, while specific roles were displaced, new industries emerged that not only soaked up the unemployed but expanded the labor force into areas we couldn’t have previously imagined (see also The Fallacy Behind Technological Innovation).
The reality today is that the economy remains remarkably strong. Employment data is resilient, labor force participation is near record levels, and corporate profits are breaking out to new all-time highs. Furthermore, the ISM Manufacturing PMI (Purchasing Managers Index) recently spiked to 52.6, signaling an expansion in a sector that had been declining for years (see chart below).
Source: Trading Economics
We are not witnessing the end of work, but rather a high-speed evolution. As we’ve seen before, the human capacity for innovation and adaptation usually outruns the machines.
Wade W. Slome, CFA, CFP®
Plan. Invest. Prosper.
This article is an excerpt from a previously released Sidoxia Capital Management complimentary newsletter (Mar. 2, 2026). Subscribe Here to view all monthly articles.
DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients hold positions in AMZN, GOOGL, META, MSFT, NVDA, certain exchange traded funds (ETFs), but at the time of publishing had no direct position in IBM, XYZ or any other security referenced in this article. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC Contact page.
Scary Headlines Abound as Dow Knocks on 50-Thou…What Now?
The Dow Jones Industrial Average first crossed the 40,000 milestone in mid-2024 (see Investing Caffeine – Dow 40,000), yet barely 18 months later, the index has notched another record closing high and is now knocking on the door of 50,000.
For the most recent month:
Dow Jones: +1.7%
S&P 500: +1.4%
NASDAQ: +1.0%
Remarkably, as we enter 2026 flirting with these major milestones, this marks the third consecutive year of double-digit gains across the major stock indices—despite what feels like a nonstop barrage of alarming and often unimaginable headlines.
And that’s the key point.
A World on Fire… According to the Headlines
• Greenland Takeover Threat: Over a year ago, President Trump declared U.S. control of Greenland an “absolute necessity” for national security amid rising Russian and Chinese Arctic influence. Last month, tensions escalated when a proposed tariff regime—starting at 10% and rising to 25%—was announced against Denmark and several European allies. Markets ultimately breathed a sigh of relief after tariffs and military threats were reversed following the announcement of a negotiated framework.
• Venezuelan Invasion: In early January, U.S. forces executed a high-precision raid of the Venezuelan capital of Caracas in the middle of the night, when President Nicolas Maduro was successfully extracted without any Americans killed. Maduro now faces narcoterrorism and corruption charges in federal court in Brooklyn. Meanwhile, Secretary of State Marco Rubio has spearheaded a plan that prioritizes the rebuilding of Venezuela’s oil infrastructure by seizing tankers and millions of barrels of sanctioned crude oil to finance the reconstruction.
• ICE Protests in Minnesota Turn Deadly: Immigration protests in Minnesota escalated last month, resulting in two high-profile fatalities as demonstrators clashed with federal ICE authorities (Immigration and Customs Enforcement).
• Government Shutdown (Again): A partial government shutdown began January 31, 2026, after six of twelve appropriations bills expired. Political gridlock—particularly surrounding DHS (Department of Homeland Security) and ICE funding—has once again sidelined Washington as lawmakers attempt to negotiate a resolution. House members gather back from recess on February 2nd in an attempt to end the budget standoff.
• Federal Reserve Leadership Uncertainty: Fed Chair Jerome Powell’s term expires in May. President Trump has nominated Kevin Warsh as his successor, criticizing “Too Late” Powell’s pace of rate cuts for years. Warsh, a former Fed Governor during the 2008 Financial Crisis, is widely respected but faces scrutiny regarding Fed independence, in part because he shares the President’s view that interest rates should be lower in the current environment. His Senate confirmation remains pending.
• Middle East Tensions in Iran: Following last year’s U.S. strikes on Iranian nuclear facilities, tensions have reignited amid reports of mass protester killings by Iran’s IRGC (Islamic Revolutionary Guard Corps). The U.S. has since mobilized substantial regional military assets, signaling possible intervention in support of regime change.
• Supreme Court Tariff Ruling Looms: The Supreme Court has yet to rule on the administration’s use of the International Emergency Economic Powers Act (IEEPA) of 1977 to impose sweeping global tariffs. A ruling against the government could trigger over $100 billion in retroactive refunds. The next decision window is February 20, 2026.
• U.S. Dollar Weakness: After declining roughly 10% in 2025, the dollar continued to weaken in January 2026 (-1%) – see chart below. Precious metals surged alongside the move—gold up +12% and silver +17% for the month—despite sharp end-of-month pullbacks.
• Cryptocurrency Collapse: Bitcoin has fallen roughly -38% from its October 2025 peak near $126,000 to about $78,000, once again challenging its “digital gold” and “store-of-value” narrative.
• Ongoing Ukraine War and Gaza Conflict: The Russia-Ukraine conflict drags into its fifth year, while violence persists in Gaza despite a loosely agreed ceasefire, with casualties continuing to rise.
Source: Yardeni Research
Don’t Believe the Hype
That’s a staggering amount of uncertainty. So how has the stock market responded?
By soaring.
S&P 500 Returns:
2023: +24.2%
2024: +23.3%
2025: +16.4%
The verdict on 2026 remains unwritten—but so far, the trend remains intact.
For most of my professional career, I’ve urged investors to tune out fear-driven media narratives (see Turn Off the TV). History repeatedly shows there is little correlation between scary headlines and long-term stock prices.
In fact, I’ve argued before that bad news can often be good news for markets (see Bad News is Good News). Conversely, in 2022 we witnessed strong employment and solid economic growth—yet both stocks and bonds suffered significant losses.
What Actually Moves Markets (“The Stool”)
Rather than reacting to noise, investors should focus on what truly drives long-term returns. At Sidoxia Capital Management, we emphasize four foundational forces (see Don’t Be a Fool, Follow the Stool):
1. Profits
2. Interest Rates
3. Sentiment
4. Valuations
These four legs of the “Sidoxia Stool” exert far more influence over market direction than daily headlines ever will.
While the current environment presents a mixed picture across these factors, monitoring them—rather than reacting emotionally to media narratives—offers investors far greater clarity on where markets may head next. And whether the Dow reaches 50,000… or 100,000 likely won’t be decided by headlines. It will be decided by fundamentals.
Wade W. Slome, CFA, CFP®
Plan. Invest. Prosper.
This article is an excerpt from a previously released Sidoxia Capital Management complimentary newsletter (Feb. 2, 2026). Subscribe Here to view all monthly articles.
DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients hold positions in certain exchange traded funds (ETFs), but at the time of publishing had no direct position in any other security referenced in this article. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC Contact page.
Green Lights Everywhere… But Is It Time to Tap the Brakes?
The economic and market fundamentals appear to be flashing green lights everywhere. Growth is strong, inflation has cooled, and financial conditions have eased. Yet even with clear skies and open roads, experienced drivers know conditions can change quickly. It may not be time to slam on the brakes—but it could be time to keep a foot hovering nearby.
After the Federal Reserve aggressively applied the brakes in 2022 with seven rate hikes—taking the federal funds rate from 0.25% to 4.50%—the stock market declined nearly 19%. Since rates peaked at 5.50% in 2023, the Fed has cut rates six times, lowering them by a cumulative 1.75% to approximately 3.75%. Those cuts have helped pave the way for a smoother ride, providing a meaningful tailwind to equity markets.
That said, the most recent quarter-point cut produced mixed results. Last month, the Dow Jones Industrial Average rose +0.7%, the S&P 500 was essentially flat at –0.1%, and the NASDAQ lagged with a –0.5% decline.
Navigating the Winning Streak
We have encountered a few economic speed bumps along the way—tariffs and geopolitical events earlier in 2025, for example—but once investors realized those tariffs were more bark than bite (as I discussed previously in Tariff Sheriff), stocks resumed their impressive run. The market has now delivered three consecutive years of strong returns: 2023 (+24%), 2024 (+23%), and 2025 (+16%).
With these strong gains, today’s environment can feel like cruising on a national highway—clear roads, sunny skies, cruise control engaged, and little traffic in sight. The momentum could continue. Three strong years in a row do not rule out a fourth or fifth. In fact, the late 1990s offer a powerful reminder: from 1995 through 2000, the stock market averaged approximately 29% annual returns through the March 2000 peak (see table below). However, once the technology bubble burst, it took more than 13 years for the market to reclaim new year-end highs.
Source: Gemini
After more than three decades of investing, one lesson remains clear: trees can grow for years—but they do not grow to the sky forever. Bull markets often last longer than expected, but they eventually end.
Why the Forecast Looks Rosy
Several factors are supporting today’s strong market backdrop:
- Strong Economic Growth: Third-quarter GDP growth of 4.3% marked the fastest expansion in two years (see chart below)
Source: Trading Economics
- AI-Driven Productivity: GDP growth has remained robust even as unemployment has risen from 4.0% earlier in the year to approximately 4.6% today. Growth outpacing employment is the definition of productivity, and the proliferation of artificial intelligence is accelerating this trend. Large companies such as Amazon.com (AMZN), Microsoft (MSFT), Alphabet-Google (GOOGL), and Meta Platforms (META) have reduced headcount significantly by tens of thousands in recent years while revenues and profits continue to surge (see also Mag 7 Takes Cash to the Bank).
Source: Trading Economics
- Taming Inflation: Crude oil prices have fallen roughly 20% over the last year, and Owner’s Equivalent Rent (which makes up about one-third of CPI inflation) has been steadily declining—both positive signals for inflation pressures ahead (see chart below).
Source: Calafia Beach Pundit
- Lapping Tariffs: Tariffs represented a one-time price increase. As we move into 2026, their inflationary impact should diminish as those increases roll off.
- Narrowing Budget Deficit: While debt and deficits remain headline risks, federal spending has been flat over the past year while revenues have increased roughly 10%, according to Scott Grannis (see chart below).
Source: Calafia Beach Pundit
- Tax Cuts & Higher Refunds Ahead: Many provisions of the One Big Beautiful Bill (OBBB) will be felt more fully in 2026, including 100% bonus depreciation for businesses, higher SALT deduction caps, increased standard deductions, no tax on tips or overtime, and a higher Child Tax Credit (CTC). Collectively, these could result in refunds up to $1,000 higher per individual.
Together, these factors could support continued market strength into 2026. But weather, road conditions, and markets can change quickly.
Reasons to Keep Your Foot Near the Brake Pedal
While the road looks smooth, several caution signs deserve attention:
- Elevated Valuations: Forward price-to-earnings ratios (P/E) are at their highest levels since the late 1990s, outside of the brief post-COVID period. (see chart below).
Source: Yardeni Research
- Animal Spirits Are Back: Speculation has expanded well beyond traditional markets. Prediction platforms such as Kalshi, Polymarket, FanDuel, DraftKings, Robinhood, Coinbase, and others now allow bets on everything from political outcomes to economic data—further evidence of speculative behavior.
- Gold and Silver Speculation: Despite a relatively stable U.S. dollar over the past six months, gold rose +64% and silver catapulted +145% in 2025—moves difficult to justify by fundamentals alone (see chart below).
Source: MarketSurge
- Investor Complacency: The Volatility Index (VIX), often called the “fear gauge,” currently hovers near 15, well below its long-term average of 20. Historically, true fear doesn’t surface until readings exceed 25.
- Market Concentration: The “Magnificent 7” stocks represent roughly 1% of the companies in the S&P 500 but account for about 37% of the index’s weighting (see Mag 7 Takes Cash to the Bank)—a concentration reminiscent of the late 1990s. When leadership narrows, downturns can be sharper.
The Sidoxia View
At Sidoxia Capital Management, we have implemented all-weather, time-tested strategies through decades of both bull and bear markets. We believe diversification and disciplined risk management are essential—not fruitless prediction attempts. Rather than attempting to time short-term market moves, we focus on adapting portfolios to changing conditions and navigating inevitable financial potholes.
We don’t always get it right, but over the long run, this approach has allowed us to earn and retain the trust, loyalty, and confidence of our clients.
After three years of strong performance, it’s easy to assume clear roads and blue skies will continue indefinitely. But history teaches us that the most dangerous moments often occur when confidence is highest. This is not a call to abandon the journey—only a reminder to stay alert. When markets accelerate this quickly, discipline, diversification, and risk management matter more than ever.
Wade W. Slome, CFA, CFP®
Plan. Invest. Prosper.
This article is an excerpt from a previously released Sidoxia Capital Management complimentary newsletter (Jan. 2, 2026). Subscribe Here to view all monthly articles.
DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients hold positions in MSFT, GOOGL, AMZN, META, and certain exchange traded funds (ETFs), but at the time of publishing had no direct position in ORCL or any other security referenced in this article. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC Contact page.
Rational or Irrational Exuberance?
The government may be shut down, but the stock market hasn’t noticed. In fact, stocks just capped another record-breaking month. The S&P 500 gained +2.3%, the NASDAQ climbed +4.7%, and the Dow rose +2.5%.
Millions of Americans are feeling the downside of the shutdown—from disrupted travel to stalled services and furloughed workers. Historically, such uncertainty rattles Wall Street. This time? Investors seem more captivated by the transformative promise of artificial intelligence (AI).
So, the key question today: Is this AI-driven exuberance rational—or irrational?
Exuberance Then vs. Exuberance Now
Having invested for more than 35 years, I’ve seen periods of euphoria and fear. I vividly remember December 1996 when Fed Chair Alan Greenspan famously questioned whether markets were becoming “irrationally exuberant.” Back then, the NASDAQ sat near 1,300. Over the next three years it soared past 5,100 (almost quadrupling), only to crash nearly 80% by 2002.
But here’s the twist: it’s true, we did experience a “tech bubble burst”, but where is the NASDAQ index value today? Amazingly, the index stands at 23,000 (see chart below) – an 18x increase above the 1996 level when Greenspan gave his irrational exuberance speech! So, in hindsight, the sound we heard during 2000 was not the tech bubble bursting but rather an internet Big Bang! The internet wasn’t a speculative fad—it was the foundation of a global transformation.
So, what about AI?
Source: Macrotrends LLC
Internet Cycle vs. AI Supercycle
The internet era lifted the number of online users from zero to five billion—over 60% of the planet (see chart below). The AI wave kicked off publicly in November 2022 with ChatGPT’s release. In under three years, the NASDAQ has more than doubled. That pace isn’t sustainable forever, of course. Bubbles form, emotions swing, and markets correct. But dismissing AI as a fad ignores its unmistakable—and accelerating—impact.
Source: BOND – Mary Meeker
With the rapid appreciation in the stock market, it’s important for investors to identify and understand the warning signs of potential bubble bursting or market crash. In fact, I continue to do my part by studying past crashes. My shipment of Andrew Ross Sorkin’s book, 1929: Inside the Greatest Crash in Wall Street History just arrived and all these lessons remind us that not all booms are bubbles, and not all crashes end innovation.
Not All Bubbles are Created Equal
Major market drawdowns are part of a long-term investor’s journey:
- 1929: Great Crash
- 1973-74: Nifty-Fifty
- 1987: Black Monday
- 2000: Dot-com bust
- 2008: Financial crisis
- 2020: COVID crash
Many pundits today are now asking is this AI surge the next bubble? Valuations, as measured by P/E ratios (Price/Earnings), suggest a very different setup than in 2000.
Back then, many tech leaders traded at 100x+ earnings. Today’s Magnificent Seven tech leaders are elevated, but nowhere near dot-com extremes:
- NVIDIA Corporation (NVDA): 57x
- Apple Inc. (AAPL): 36x
- Microsoft Corp. (MSFT): 36x
- Alphabet Inc. (GOOG): 32x
- Amazon.com, Inc. (AMZN): 31x
- Meta Platforms, Inc. (META): 23x
*Source: MarketSurge – only Tesla, Inc. (TSLA) has a P/E higher than 100x.
For the S&P 500 overall, the index has a forward P/E of 22.8x (Yardeni Research), significantly lower than 2000 levels and nowhere near bubble territory.
Source: Wall Street Journal – March 14, 2000
Life After the Internet and Life After AI Introduction
Think back 25 years:
- Renting movies at Blockbuster before Netflix went digital
- Driving to the bank for deposits
- Buying stamps to mail checks before Venmo or Zelle
Today, those activities feel prehistoric. AI is set to reshape daily life on an even faster timeline — from medicine and logistics to entertainment and marketing.
I’m discovering “AI epiphanies” weekly.
- With a few prompts, I created a beautiful Mother’s Day poem and became a poet hero despite never writing poetry before.
- When I recently needed to write an obituary for my mother, AI helped structure and refine it in minutes instead of taking me hours.
- Just last month I needed to hunt down lobster bisque for a shrimp pasta recipe I wanted to make. It turned into a time-wasting scavenger hunt. Thankfully, AI found it in stock, even when multiple apps insisted it wasn’t available. Needless to say, the recipe was incredibly delicious, and my stomach thanked ChatGPT.
And when it comes to investing? Evaluating biotech companies used to take weeks. Now, detailed research can be synthesized in days without sacrificing rigor. AI isn’t replacing insight — it’s amplifying output.
Not All AI Stories Are “Unicorns and Rainbows”
AI boosts productivity. Higher productivity means some companies need fewer people. Amazon recently announced 14,000 layoffs despite reporting amazing financial results. Microsoft and Meta have also announced thousands of employee layoffs even as profits rise.
This isn’t doom and gloom — it’s innovation cycles in action. Technology displaces tasks before ultimately creating new industries and roles.
So… Rational or Irrational?
Although there has been much debate regarding whether we are in an AI bubble, from my perspective, we are in the very early innings of a long AI revolutionary game. There are definitely pockets of frothiness that expose investors to undue risk, but if you can follow a disciplined, diversified, valuation-sensitive investment strategy, like we implement at Sidoxia Capital Management, I feel that the current exuberance is more rational than irrational.
Wade W. Slome, CFA, CFP®
Plan. Invest. Prosper.
This article is an excerpt from a previously released Sidoxia Capital Management complimentary newsletter (Nov. 3, 2025). Subscribe Here to view all monthly articles.
DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients hold positions in NVDA, AAPL, MSFT, GOOGL, AMZN, META, TSLA, and certain exchange traded funds (ETFs), but at the time of publishing had no direct position in any other security referenced in this article. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC Contact page.
Trade & OBBB Deals Sealed, Fed Dread, and AI/Meme Dreams
As the stock market reached new all-time highs, investors had plenty to juggle—both in Washington, D.C., and on Wall Street. The S&P 500 climbed +2.2%, the NASDAQ surged +3.7%, and the Dow Jones Industrial Average edged higher by +0.1% for the month.
The One Big Beautiful Bill
What has fueled the rally? A major catalyst was President Trump’s signing of the One Big Beautiful Bill Act (OBBB) on July 4th. The nearly 900-page legislation spans a broad range of economic issues including tax reform, healthcare, energy policy, and national security.
According to the Congressional Budget Office (CBO), the combined impact of tax cuts, new spending, and spending reductions will result in a net cost of $3.4 trillion over 10 years (see chart above). Supporters of the bill argue that this projection underestimates the long-term stimulative effects of tax relief and strategic investments. Whether the deficit widens as the CBO projects, or narrows thanks to a stronger, growing economy, remains to be seen.
Trade Deals Sealed
Since Liberation Day on April 2nd, trade negotiations have progressed unevenly. The administration’s reciprocal tariff hikes were paused through August 1st to allow final agreements to be reached. Following months of tough rhetoric, multiple major trading partners ultimately signed deals before the deadline—including the European Union, Japan, the United Kingdom, Vietnam, and South Korea—thereby avoiding punitive tariffs.
Talks with our two key trading partners, Mexico and Canada, remain ongoing. While Mexico was granted a 90-day extension amid constructive dialogue, Trump slapped a 35% tariff on Canada (from 25%) due to what the White house said was “continued inaction and retaliation.” The tariff pause with China stops on August 12th.
Here’s a list of the new country tariffs released by the president late yesterday: CLICK HERE
Regardless of all the tariff uncertainty, investor sentiment improved last month as the terms of the signed deals were significantly milder than originally feared.
Adding to the optimism:
- Core inflation in June remained modest at 2.8% (Reuters), and
- Tariff revenues collected through July reached $126 billion, beating initial estimates (Politico) – see chart below. Strategist Ed Yardeni forecasts that 2025 tariff revenues could surge to between $400 billion and $500 billion (Barron’s).
Source: Politico
Fed Dread
Of course, when it comes to financial markets, everything can’t just be rainbows and unicorns without something for investors to worry about—and this month, a key concern remains Federal Reserve policy. Critics, including the president, argue that interest rates are too high, with the Federal Funds Rate currently set at 4.25%–4.50% (Yardeni Research) – see chart below.
By comparison:
- The European Central Bank’s Deposit Facility Rate stands at 2.00%, and
- The Bank of Japan’s overnight rate is only 0.50%.
Source: Yardeni Research
Fed Chair Jerome Powell has held off on further cuts, citing the need for more clarity on inflation and labor market data, especially in light of recent tariffs. Ironically, when the Fed last cut rates by -1.00% late last year, the 10-year Treasury yield rose by roughly +1% (see chart above), reflecting fears of rising inflation.
This week, the Fed held rates steady for the fifth consecutive meeting (YouTube). Notably, two FOMC members—Christopher Waller and Michelle Bowman—dissented, voting in favor of a rate cut. It was the first dual dissent by Fed governors in over 30 years—a clear signal of division inside the central bank.
Meme Dreams
With the major indexes at new highs, speculation has returned in full force. Money-losing, struggling companies like Opendoor Technologies, GoPro Inc., and Kohl’s Corp. saw their shares double, triple, or even quadruple over a short span (WSJ) – see chart below. We saw similar trends occur during the GameStop and AMC meme craze in 2021.
Source: The Wall Street Journal
Adding fuel to the fire:
- Cryptocurrency prices are on the rise again.
- Euphorically priced IPOs (Initial Public Offerings) like Figma, Inc. (FIG), which more than tripled in value ($115 per share) on its first trading day above its offering price ($33 per share) valuing the company above $50 billion – more than 30 times next year’s forecasted revenues.
- SPACs (Special Purpose Acquisition Companies)—often criticized for poor governance—are staging a comeback.
Combined, all these trends raise concerns about froth, which investors have experienced at previous peaks.
Climb in AI Stocks Persists
No discussion of this rally would be complete without highlighting the AI mega-cap giants. Companies like Alphabet (Google), Meta (Facebook), Microsoft, and Amazon all recently announced capital expenditures for 2025 that will likely exceed an astounding $350 billion —most of it allocated to AI infrastructure.
Meanwhile, NVIDIA Corp., the AI-chip juggernaut and major beneficiary of all the AI capex, has seen its share price soar +63% in just three months, reaching a staggering $4.4 trillion market value.
Source: Yardeni Research
Valuations High but Fundamentals Remain Strong
While stock valuations remain elevated above historical averages (the S&P 500 red line trades at 22x forward earnings, according to Yardeni) – see chart above, the macro backdrop remains supportive:
- The economy is strong,
- Unemployment is low,
- Corporate profits are growing, and
- Monetary policy may turn more accommodative in coming months.
In this momentum environment, the market should continue its productive juggling, but if the frothy or economic winds worsen, investors should be prepared for a dropped ball.
Wade W. Slome, CFA, CFP®
Plan. Invest. Prosper.
This article is an excerpt from a previously released Sidoxia Capital Management complimentary newsletter (August 1, 2025). Subscribe Here to view all monthly articles.
DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients hold positions in GOOGL, META, AMZN, MSFT, NVDA, and certain exchange traded funds (ETFs), but at the time of publishing had no direct position in OPEN, GPRO, KSS, GME, AMC, FIG or any other security referenced in this article. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC Contact page.
Mideast War an Investor Bore as Markets Soar
If I told you at the beginning of the year that the U.S. would bomb key nuclear sites in Iran, would you have guessed that Middle East stability would follow—and that global financial markets would soar to record highs? Personally, I wouldn’t have bet on that outcome. But that’s exactly what happened last month. While geopolitical dynamics remain fluid, markets shrugged off the chaos. The S&P 500 rallied +5.0%, the Dow Jones Industrial Average climbed +4.3%, and the NASDAQ catapulted +6.6%, powered largely by artificial intelligence stocks like NVIDIA Corp., which surged +16.9% for the month to a market value of $3.9 trillion (more on AI below). This is an important reminder that trading off of news headlines is a fool’s errand.
Economy Resilient Despite Tariffs and Geopolitical Turmoil
Source: Calafia Beach Pundit
Credit Default Swaps (CDS) act as insurance contracts that protect investors against corporate debt defaults. During financial stress—like the 2008 crisis or the COVID crash in 2020—CDS prices surge as investors seek protection. Today, however, CDS prices are falling across both high-yield (junk bonds) and investment-grade (Blue Chip) debt. As seen in the chart above, the cost to insure corporate bonds has declined steadily over the past two years. This signals bond investors aren’t worried about a recession or a wave of defaults, despite tariff policy uncertainty, geopolitical risk, and modest GDP growth.
Inflation Tame as Tariffs Loom
President Trump has repeatedly criticized Fed Chair Jerome Powell for not cutting interest rates, calling him everything from a “dummy” to a “major loser” and a “stupid person” to a “numbskull”. While the name-calling is colorful, the economic pressure is real: U.S. GDP contracted -0.5% in Q1 2025. Powell, however, wants to see the full impact of upcoming tariffs before making a move. . A new tariff deadline looms on July 9th, and the market is anxiously awaiting clarity. But even if tariffs are implemented, many economists believe the inflationary impact will be temporary—what’s known as a one-time price shock.
Source: Calafia Beach Pundit
The Fed’s preferred inflation gauge—the Personal Consumption Expenditure (PCE) index—has been easing and is now near the 2% target (see chart above). With inflation cooling, Trump’s case for rate cuts gains credibility. Still, the Fed appears in no rush. It will take time to understand the lasting effects of the tariff rollout.
AI Wave Fueling Markets
For a generation, the semiconductor revolution has quietly powered innovation, guided by Moore’s Law—the principle that chip performance doubles roughly every two years (see my article The Traitorous 8). Sixty years after Gordon Moore wrote his seminal article, “Cramming More Components onto Integrated Circuits”, the power of software is catching up. NVIDIA’s Grace Blackwell GB200 chip contains an astronomical 208 billion transistors, supercharging AI software models like ChatGPT.
The AI revolution is fueling trillions in global investment and rapidly transforming industries – from data centers and self-driving cars to robotics and drug discovery. It’s important to realize that this AI arms race is not just occurring in the United States. AI investment spending extends way beyond Silicon Valley to countries like Saudi Arabia, Singapore, and China.
The AI boom is not a U.S.-only phenomenon. Countries like China, Saudi Arabia, and Singapore are pouring capital into AI, creating a global arms race in tech. In the U.S., the four biggest hyperscalers—Amazon, Microsoft, Google, and Meta—are projected to spend over $300 billion on capital expenditures in 2025 alone (see chart below).
To illustrate the scale: Amazon is forecasted to spend more than $100 billion in CapEx this year. For context, that’s 40% more than the company spent over the entire 2000–2020 period combined.
Source: The Financial Times
The Stargate Initiative: AI Infrastructure on a Galactic Scale
A prime example of the AI gold rush is the $500 billion Stargate initiative, with Phase 1 already underway in Abilene, Texas (see rendering below). The initial construction includes two buildings totaling 1,000,000 square feet. Ultimately, the full project will cove about 1,000 acres and be powered by an on-site natural gas facility generating 360 megawatts—enough to support 300,000 homes.
A huge portion of the project costs are dedicated to the budget for NVIDIA super chips. Oracle Corp. has committed $40 billion to purchase 400,000 of NVIDIA’s GB200 chips, making this project a centerpiece of the global AI infrastructure boom. Just this week, Oracle also announced a new $30 billion cloud deal, which will soak up a good chunk of the data center supply created by the database and enterprise software company.
Source: CoStar
The Big Picture: Volatility and Opportunity
There’s no shortage of risk—geopolitics, inflation, Fed uncertainty, tariffs. But the economy is showing surprising resilience. If tariff clarity improves, interest rate cuts materialize, and AI capital spending accelerates, a “boring” market could rapidly turn into a soaring one.
Wade W. Slome, CFA, CFP®
Plan. Invest. Prosper.
This article is an excerpt from a previously released Sidoxia Capital Management complimentary newsletter (July 1, 2025). Subscribe Here to view all monthly articles.
DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients hold positions in certain exchange traded funds (ETFs), but at the time of publishing had no direct position in any other security referenced in this article. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on the IC Contact page.
Animal Spirits to Animal Hibernation
Investor mood or sentiment can change rather quickly. Immediately after the 2024 presidential elections, positive animal spirits catapulted the stock market higher due to hopes of stimulating tax cuts and deregulation legislation. However, those warm and fuzzy feelings soured last month, as investor focus shifted to on-again, off-again tariff talks, and stagflation concerns, which have converted animal spirits into gloomy feelings of hibernation.
As a result, the advancing bull market took a breather and transformed into a weary bear during March. For the month, the S&P 500 (-5.8%), NASDAQ (-8.2%), and the Dow Jones Industrial Average (-4.2%) all fell significantly in the wake of tariffs, inflation, and recession worries.
Lovely Liberation Day or Tariff Trouble?
Since the President took office in January, he has announced, reversed, and implemented tariffs across a wide range of countries and sectors, including China, Canada, Mexico, the EU, Colombia, Venezuela, steel, aluminum, oil, automobiles, digital services taxes, and more.
The day of reckoning begins on April 2nd, designated Liberation Day by the president. This is when the president and the White House officially announce global reciprocal tariffs on foreign countries in an attempt to reverse the nation’s large trade deficit (see chart below) and bring manufacturing back to the United States. For example, if Germany subsidizes BMW cars sold in the U.S. while simultaneously placing tariffs (i.e., additional taxes) on American Ford Explorers sold in Germany, the president wants to impose equivalent reciprocal tariffs on those same BMWs sold in the U.S. in an effort to level the trading playing field. On the surface, a $131 billion trade deficit sounds very significant, but when compared to a $30 trillion economy (Gross Domestic Product – GDP), this negative trade balance represents less than 0.5% of GDP – effectively a rounding error. I have previously written how tariffs represent more of a molehill than a mountain (see Tariff Sheriff), in part because consumer spending and services make up the vast majority of our country’s economic activity, whereas trade and manufacturing are relatively smaller segments.
Source: Trading Economics
Driving home the point that tariffs are more bark than bite, Senior White House trade and manufacturing counselor Peter Navarro recently stated the 2025 tariffs could add $700 billion annually to U.S. revenues, including $100 billion from the recently announced 25% auto tariffs. Many economists believe this collection estimate is too optimistic. However, even if this target is achievable, $700 billion only represents a measly 2% of overall GDP.
Tariffs = Recession or Stagflation?
With the recent stock market downdraft and growing concerns related to tariffs, some economists and pundits are raising the probability of a recession and the possibility of inflation accompanying an economic downturn (i.e., stagflation).
Economic data should clear some of the fog. Fresh employment numbers will be released this Friday, which should shine some light on the health of the economy. Irrespective of this month’s results, the most recent 4.1% unemployment rate (see chart below), though slightly higher over the last two years, does not strongly indicate a recession.
Source: Trading Economics
Other “hard” data, such as GDP, also suggest a slowing economy rather than a recession. For instance, a recent survey of 14 economists estimates the economy is growing at a paltry +0.3% rate in Q1 – 2025 versus +2.3% in Q4 – 2024. Data is continually changing, but if a looming recession were imminent, corporate earnings would likely be trending downward, not upwards, as evident in the chart below.
Source: Yardeni Research
Tariff Inflation Has Yet to Arrive
There is no doubt tariffs function as a tax hike on consumers because U.S. companies that pay the tariffs on imported goods are eventually forced to raise prices to maintain profit margins or limit margin degradation.
Nonetheless, inflation did not spike under President Trump’s first term. Even if the president’s new policies result in more aggressive tariff actions this go-around, inflation will likely remain in check due to the point mentioned earlier – imported goods represent a small percentage of overall consumer and business purchases.
Tariff implementation is just beginning, so only time will tell how pervasive inflation will become. However, what we do know now is that inflation has declined dramatically over the last couple of years and has not yet spiked (see Consumer Price Index chart below).
Source: Calafia Beach Pundit
Where Could I Be Wrong?
I have explained how some of the lagging “hard” data does not signal recession or stagflation, but what could I be missing? For starters, some of the leading “soft” data (e.g., surveys) indicate various cracks in the economic foundation are forming. Take the recent Consumer Confidence data (see chart below), which has weakened dramatically from pre-COVID and even post-COVID levels.
Source: Trading Economics
It’s not just consumers who are feeling uneasy about the economic environment; businesses are as well. Another soft data point flashing red is the NFIB Small Business Uncertainty index, which recently reported its second-highest reading in 48 years (see chart below). Even if my argument that tariffs are too small to materially impact the economy holds, if the psychological effects of tariff uncertainty paralyzes consumer and business economic activity to a standstill, then tariffs could indeed become a substantial factor.
Source: National Federation of Independent Business (NFIB)
What Comes Next After Liberation Day?
Liberation Day is unlikely to trigger an immediate and sustained V-shaped recovery in the stock market because international trading partners will be forced to announce retaliatory tariffs in response to President Trump’s reciprocal tariffs, potentially leading to additional reactionary tariffs by the U.S.
Additionally, the reciprocal tariffs announced on April 2nd will likely serve as a starting point for subsequent negotiations with trading partners. Without a comprehensive resolution, investor sentiment will likely remain somewhat unresolved and unsettled. Regardless of your views on the size and impact of tariffs, Liberation Day will at least bring some clarity and reduce the uncertainty surrounding the current murky and chaotic environment.
The multi-year bull market continued its charge after the presidential election, but investor sentiment has weakened the bull run due to tariff uncertainty. In response, the excited bull has temporarily turned into a sleepy bear. Depending on how these tariff events unfold, we will soon find out whether Liberation Day will awaken the bear to hunt for bulls or send it into deep hibernation.
Wade W. Slome, CFA, CFP®
Plan. Invest. Prosper.
This article is an excerpt from a previously released Sidoxia Capital Management complimentary newsletter (April 1, 2025). Subscribe Here to view all monthly articles.
DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients hold positions in certain exchange traded funds (ETFs), but at the time of publishing had no direct position in F or any other security referenced in this article. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on the IC Contact page.
How to Profit from the Trump Crypto Wave
We were honored to have our white paper on the cryptocurrency market published by the California Business Journal last month. Please enjoy the article below.
Newly inaugurated President Donald Trump has wholeheartedly embraced the multi-trillion dollar cryptocurrency and digital asset industry. This is a seismic shift from the anti-crypto stance harbored by the previous administration. In the first week of his second term, President Trump not only appointed crypto-friendly Paul Atkins as the SEC Chairman, but Trump also named David Sacks as the first-ever White House Crypto Czar. If that was not a strong enough signal, Trump issued an executive order on his third day in the Oval Office, entitled, “Strengthening American Leadership in Digital Financial Technology.”
With this massive political and legislative tailwind behind the cryptocurrency industry, what is the best way to profit from this cryptocurrency wave? Is it just as easy as buying Bitcoin? Not exactly, if history repeats itself. Since Bitcoin was introduced in early 2009, the value of the cryptocurrency has fallen by more than -50% seven times. There have been many causes for Bitcoin’s historical volatility, including the hacking of the largest Bitcoin exchange in 2011 (Mt. Gox); China banning Bitcoin in 2013; and the COVID pandemic crash in 2020. Matters got worse for the cryptocurrency industry when FTX, one of the world’s largest crypto exchanges went bankrupt in 2022, and its founder and CEO, Sam Bankman-Fried, was subsequently arrested and convicted for fraud and money laundering.
Investing in a currency or asset class with that much volatility is very challenging. To compensate for volatility and risk, investors require the potential for higher returns backed by robust fundamentals. Unfortunately, to date, many of the broadest use cases for cryptocurrencies have been limited to illicit and illegal activities. There certainly are some speed and security advantages to the blockchain technology and the associated ledger structure of the major cryptocurrencies. However, the benefits have not been so clear-cut that Fortune 1000 companies and mass consumers have adopted it. A relatively small 15.5% of Americans (and 6.9% worldwide) are estimated to own a cryptocurrency, and a smaller fraction of that actually transact in a crypto.
Even though the practical use cases for cryptocurrencies over the last two decades have been extremely constrained, the speculative fervor surrounding this asset class has grown exponentially to the point there are over an estimated 10,000 cryptocurrencies that exist today, including speculative meme coins such as Dogecoin, the Trump coin, and other crude joke coins.
In my more than three decades of investing, I have repeatedly encountered extensive segments of the financial markets that would qualify as speculative bubbles, whether it was subprime mortgages and credit default swaps (CDS) in the 2008 Financial Crisis, or dot-com companies in the 2000 bursting of the technology bubble.
Today, in 2025, the current cryptocurrency wave definitely qualifies as another bubble. But depending on an investor’s time horizon, there is still potential to make significant profits during these frothy investment waves. For example, take Amazon.com, which was at the epicenter of the dot-com bubble as it saw its stock price crater approximately -95% in the 2000-2001 timeframe. Before Amazon’s stock collapsed, its price peaked at $5.65 per share at the end of 1999 – today, the stock price in 2025 has exceeded $240 per share (a more than 40-fold increase). Despite the bursting of the tech bubble, a tremendous amount of money has been made by long-term investors in Amazon and a select few other long-term technology winners.
I believe the same opportunity exists today in the cryptocurrency market. There are a few historical parallels that inform our crypto investment strategy at my investment firm, Sidoxia Capital Management. Let’s begin with the gambling industry that flourished in Las Vegas during the 1940s after the end of Prohibition. It was not the gamblers and speculators that made all the money, but rather the casinos, including some remaining today like the Flamingo and the Golden Nugget.
Currently, the dominant casino in the cryptocurrency industry is Coinbase Global Inc. (COIN). Coinbase is the 800-pound gorilla in the U.S. cryptocurrency exchange space, handling transactions that total more than $4 billion in daily trading volume across hundreds of cryptocurrencies, stable coins, meme coins and other digital assets. And the company is highly profitable with substantial growth. More specifically, the company has generated more than $5 billion in sales and greater than $1 billion in profits over the last year. Just like Las Vegas casinos make money off every gambler’s bets, so too does Coinbase make profits off every crypto speculator’s trades, whether those transactions in Bitcoin, Tether, Ethereum, or meme coins go up or down in value.
Another lucrative way for investors to look at the nascent cryptocurrency industry is to compare it to the California gold rush that occurred from 1848 – 1855. Hundreds of thousands of “forty-niners” (the peak year of gold rush immigration – 1849) flocked out west in hopes of discovering perceived limitless riches – an attitude held by many cryptocurrency purchasers presently. Unfortunately, it was not the forty-niners digging and panning for gold who made most of the money, it was the merchants selling all the picks and shovels to the gold rush speculators that profited the greatest.
The contemporary merchants in today’s cryptocurrency world are companies like NVIDIA Corp. (NVDA), the creator of the graphics processing unit (GPU) semiconductors that power the critical mining operations of cryptocurrencies like Bitcoin. The GPUs serve as the picks and shovels for crypto miners who receive rewards in the form of cryptocurrencies (i.e., Bitcoin) in return for performing computationally intensive calculations, which are necessary to verify transactions on a digital decentralized crypto ledger. NVIDIA GPUs have a broad range of applications beyond crypto mining, including data center applications for artificial intelligence (AI), video games, gene sequencing, virtual-augmented reality, and other large-scale markets. Over the last year, NVIDIA has produced more than $110 billion in sales and created more than $60 billion in net profits. Not only was NVDIA successful commercially, but equity investors were also rewarded handsomely last year with an appreciation of +171% in the share price.
There are plenty of reasons to remain skeptical about the euphoria surrounding the cryptocurrency industry, especially due to the lack of legitimate use cases across the avalanche of digital assets endlessly introduced. However, the pro-crypto wave of Trump regulations and policies allow plenty of ways for investors to profit from this digital gold rush, especially if you can find the winning crypto casino and leading merchant of digital picks and shovels.
By Wade W. Slome, CFA, CFP®, Exclusive to California Business Journal
DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients hold positions in NVDA, COIN, IBIT, and certain exchange traded funds (ETFs), but at the time of publishing had no direct position in any other security referenced in this article. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC Contact page.
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