Weekly Markets Infographic Report
Readable stacked charts: shutdown noise, PCE in-line, GDP revision, Jobs Friday risk, AI leadership, and stock ideas.
TL;DR
Rate-Cut Odds (Illustrative, per futures pricing)
Q3 Market Leadership Concentration
Note: Contributions illustrative based on discussion ranges.
Earnings & Headlines
- Comps +5.7%, EPS +11%
- Elite operator; valuation stretched
- Margins â150 bps; long-term build-out intact
- Near peak historical valuation
- Litigation headlines vs. steady DCF
- Trades on probability-weighted outcomes
Five Ideas (Barbell)
| Ticker | Name | Theme | Valuation Lens | Key Notes |
|---|---|---|---|---|
| TSM | Taiwan Semiconductor | AI Supply Chain | ~11% below FV | Process leadership; geopolitics risk |
| MSFT | Microsoft | Cloud + AI Copilots | ~15% below FV | AAA balance sheet; pricing power |
| HSY | Hershey | Cost shock recovery | Low-uncertainty 4â | Cocoa normalization; ~3% yield |
| IONS | Ionis Pharma | Small-cap biotech | 4â , ~13% below FV | Phase 3 momentum; high uncertainty |
| CRSP | CRISPR Therapeutics | Gene editing | 4â , ~42% below FV | Commercial foothold; very high uncertainty |
Stars/discounts shorthand from discussed frameworks. Not advice.
Playbook
- Trim excess beta into Jobs Friday; set rebuy levels.
- Treat short shutdowns as noise; duration is the risk.
- Stay barbelled: quality growth + defensives; small biotech optionality.
- Diversify beyond mega-cap leadership.
Disclaimers
For education only. Markets/probabilities change rapidly. Check primary sources and consider professional advice.
Whatâs On Investorsâ Radars This Week: Shutdown Jitters, Sticky Inflation, AI Tailwinds, and Where Value Still Hides
Based on a recent Morningstar âMorning Filterâ conversation with Susan Dziubinski and Chief U.S. Market Strategist Dave Sekera (paraphrased and synthesized). This article is for information and educationânot investment advice.
Quick take (for the busy)
- Shutdown risk â surprise: Markets largely treat a short U.S. government shutdown as âseen this movie before.â Economic impact is typically limited unless it drags on materially.
- Inflation: in-line, not in-sight: Core PCE matched expectations, leaving the Fedâs near-term stance broadly unchanged.
- GDP revised up, probabilities wobble: Stronger Q2 growth briefly dented odds of near-term rate cuts before markets re-anchored to expecting one.
- Jobs Friday is the swing factor: A stronger-than-expected payrolls print could reduce odds of an October cut and pressure equities; a softer print does the opposite.
- Earnings color: Costco = great business, stretched valuation; AutoZone = steady top line but margin pressure; Kenvue = undervalued on fundamentals but trading on litigation probabilities.
- AI still the marketâs engine: Strategic tie-ups (e.g., Nvidia + OpenAI) bolster long-term narratives; Marvellâs upbeat guide calms share-loss fears.
- Lithium chessboard: Policy support (e.g., potential U.S. equity stakes) introduces price floors and project viability optionality; Albemarle remains a value name in the space.
- Dividend caution at UPS: Still cheap, but a cut could be prudent to protect balance sheet flexibility.
- Gold winnerâs dilemma: Barrick has run; if you believe gold normalizes toward marginal cost, trimming profits can be rational.
- Where to shop today: Select AI bellwethers still in fair-value territory, quality defensives healing from input shocks, and a barbell of small-cap/biotech optionality.
1) Shutdown talk: Why markets are yawning (so far)
Even if Washington edges into a funding lapse, the base-case market reaction is subdued. Investors have a decent playbook: some federal services pause, non-essential employees are furloughed, andâhistoricallyâback pay is awarded once a deal is struck. The economic dent tends to be modest unless the impasse extends unusually long. The longest modern example (35 days across late-2018/early-2019) didnât materially change the longer-run growth path.
Portfolio implication: Avoid knee-jerk de-risking predicated solely on headline risk. More important for asset prices right now: the path of inflation, the labor market trend, and how those feed into the Fedâs reaction function.
2) Inflation and the Fed: PCE was boringâand that was the point
Core PCEâthe Fedâs preferred gaugeâarrived exactly in line with forecasts. Markets like when the most important number of the week is boring; it means no new hawkish surprise. Headline PCE ticked as expected. Net-net, this doesnât alter the near-term policy outlook, especially with a key jobs print still ahead.
Portfolio implication: With inflation not re-accelerating, the debate shifts from âifâ to âhow fast and how farâ the Fed can easeâtempered by real-time growth signals.
3) Growth re-accelerates (on paper): What GDP revisions do and donât mean
Q2 real GDP was revised materially higher from its initial estimate. Revisions this large grab attention because they challenge the soft-patch narrative. In the immediate aftermath, futures pricing marked down odds of an October cut, before nudging back up as investors reassessed the signal quality. Remember: revisions are backward-looking. The Fed is data-dependent, but itâs trying to aim where the economy will be, not where it was.
Portfolio implication: Expect higher rate-cut path volatility around each big data point. Keep some dry powderâtactical drawdowns may be brief if the easing path remains intact.
4) Jobs Friday: Why one noisy number still moves trillions
Strategists love to hate monthly payrolls: itâs noisy, frequently revised, and often misread. But with the Fed explicitly citing labor-market cooling as a rationale for easing, one more jobs print before the next FOMC matters for cut odds and risk sentiment:
- Upside surprise: Raises doubts about an October cut â risk-off wobble.
- Downside miss: Reinforces the cut narrative â extends the equity âmelt-up.â
Portfolio implication: Consider trimming beta into the print if youâre over-extended, and use clearly defined levels to add back on weakness if the policy path doesnât fundamentally change.
5) Earnings color: Three instructive case studies
Costco: A+ fundamentals, C- valuation
Traffic up, ticket sizes up, EPS up double-digitsâthe Costco machine keeps humming. Minor margin compression doesnât dent the long-term compounding story. But at a rich premium to fair value, even elite operators can become âhold, not buy.â Technically, the chart even hints at momentum fatigue (think double-top risk).
Investor takeaway: Great business â great stock at any price. If you own it, a disciplined trim can be rational; if you donât, wait for multiple compression or a growth inflection that resets the risk-reward.
AutoZone: Solid engine, but check the margin gauge
Top line tracked expectations, but 150 bps of margin compression dinged earnings. Shares dipped, then recovered, underscoring a market thatâs forward-lookingâespecially on the build-out of the professional channel. Long-term thesis: mid-single-digit sales growth, some unit expansion, and margin rebuild drive high-single-digit EPS CAGR. Valuation sits near the upper end of historical ranges.
Investor takeaway: A compounding franchiseâbut priced for execution. Favor buy-on-dips, not chase-the-rips.
Kenvue: Fundamentals vs. headline risk
A DHHS communication about acetaminophen exposure in pregnancy and autism risk knocked shares. Morningstarâs fair value was unchanged given lack of new scientific consensus and past legal precedents where expert testimony fell short. Still, the market discounts probability-weighted liabilities, not just base-case DCFs. With Tylenol a large brand, investors mentally run scenarios from âno changeâ to âtail liability.â
Investor takeaway: Attractive on fundamentals, but headline-driven path. Position sizing and time horizon discipline are key.
6) AI remains the center of gravity
Nvidia + OpenAI: Strategy > spreadsheets (for now)
A strategic partnership keeps Nvidia at the beating heart of AI deploymentâgiving it line-of-sight into real workloads that can shape next-gen chip architecture. Even if the headlines donât alter fair value models immediately, they reinforce a durable thesis: cash-rich leader + ecosystem intimacy = sustained moat. Shares sit in fair-value territory in some frameworksârare for a name with this growth cadence.
Marvell: Guidance that changes the mood music
Management outlined a minimum ~18% revenue growth in the stated fiscal/calendar period, assuaging concerns about custom AI accelerator share loss. No model changes, but sentiment reset mattersâespecially for a name that had been dogged by narratives rather than numbers.
Investor takeaway: The AI stack is broadening beyond one ticker. Second-derivative beneficiaries (infrastructure silicon, interconnects, specialized accelerators) can outperform on sentiment turns.
7) Lithium: When policy puts a thumb on the scale
Lithium Americas rallied dramatically on reports of potential U.S. government equity participation alongside a major DOE loan. Weâve seen this playbook in other critical materials (e.g., rare earths). The effect: price floors and funding visibility that can render projects economic even if spot prices lag. Morningstar held fair value steady pending details; broader lithium view remains structurally undersupplied through the decade.
Whereâs the value now? While the headline name may have run past fair value, Albemarle still screens as a discounted, higher-quality way to express long-run EV/battery demandâunderstanding, of course, that commodity capex cycles are volatile.
8) UPS: Cheap can get cheaperâbut thatâs not the end of the story
Analyst work suggests dividend is maintainable, yet a prudent cut could accelerate balance-sheet resilience in a softer volume environment. Headwinds: Amazon mix down, FedEx share skirmishes, China trade uncertainty, and a near-term growth lull. Tailwind: eventual operating leverage as fixed costs are rebased and volumes re-accelerate with the economy.
Investor takeaway: A value with patience risk. If you can tolerate dividend-headline volatility, the 2025â26 setup improves.
9) Gold and Barrick: The winnerâs dilemma
Gold minersâ intrinsic values hinge on forward curves and mid-cycle price assumptions. If you buy the base case that gold mean-reverts toward marginal cost as central-bank buying normalizes and jewelry demand reacts to price, then premium valuations after a big run argue for partial profit-taking. If you think higher-for-longer gold is the new regime, the upside runway lengthens.
Investor takeaway: Let your macro view on real rates, fiscal dominance, and de-dollarization guide your trim vs. hold decision.
10) How the quarter was won: Concentration at the top
A small clubâApple, Alphabet, Nvidia, Tesla, Broadcom, Oracle, Palantirâdid outsized work lifting indices. Many âreal economyâ names lagged or fell: chemicals, transports, a swath of industrials, and even over-owned restaurant leaders corrected. Style-wise, core outperformed thanks to concentration; small caps showed a brief revival before ceding leadership back to mega-cap tech.
Investor takeaway: Breadth remains narrow. Thatâs not inherently bearishâbut it argues for diversification and selectivity rather than buying broad beta indiscriminately.
11) Whatâs left to buy? Five ideas across the barbell
Philosophy: In a rising tape with light near-term catalysts, you want names that can outrun the market yet still carry valuation supportâand a mix of defensives and growth to handle data-path volatility.
1) Taiwan Semiconductor (TSMC)
Why now: Still one of the few AI-levered platforms trading at a discount to fair value. It is the keystone fab for the highest-end GPU/accelerator nodesâwhere yield, cycle time, and process leadership are true competitive moats. Shares have moved a lot off the lows, which likely means the easy money is gone, but structural demand (AI, edge compute, advanced packaging) persists.
Risk check: Geopolitics and cyclicality. Position size accordingly; itâs a core enabler, not a speculative flyer.
2) Microsoft
Why now: A rare blend: defensive cash flows (Office, Windows, LinkedIn) + durable secular growth (Azure, AI copilots) + fortress balance sheet. Even after a strong YTD move, some frameworks still see a double-digit discount to fair value given the TAM expansion from AI-native productivity.
Risk check: Valuation creep and AI monetization pacing. Offsets: pricing power, distribution, and product bundling.
3) Hershey
Why now: A textbook cost-shock recovery. Cocoa price spikes distorted near-term earnings, but input normalization plus brand pricing power can pull margins back toward trend. On normalized forward metrics, fair value implies meaningful upsideâand a ~3% dividend pays you to wait.
Risk check: Cocoa supply elasticity and consumer trade-down. Mitigants: brand equity, portfolio breadth, and promotional levers.
4) Ionis Pharmaceuticals
Why now: Pipeline depth with credible late-stage assets and recent Phase 3 positives make this an intriguing small-cap healthcare allocation while the sector remains undervalued. Itâs a speculative sleeve ideaâfit for investors who can handle clinical and regulatory volatility.
Risk check: Trial risk, partner dynamics, financing cycles. Size as venture-style optionality within a diversified equity bucket.
5) CRISPR Therapeutics
Why now: A pure-play on gene editing with a commercial foothold (e.g., sickle-cell therapy rollout) and a next-gen pipeline targeting oncology, cardiometabolic disease, and T1D. Despite strong YTD performance, it still trades at a steep discount to modeled fair value in some frameworks.
Risk check: High uncertainty by designâcommercial uptake ramp, payer dynamics, long-term safety, and multi-year timelines. Keep sizing small but meaningful if you believe in platform optionality.
12) The playbook for the week
- Into Jobs Friday:
- If over-levered to high-beta AI winners, consider a tactical trim.
- Pre-set buy zones for quality names you want to add on data-volatility dips.
- Shutdown noise:
- Keep a watchlist, not a panic button. Focus on duration riskâheadlines without duration are usually opportunities.
- Stay barbelled:
- Quality growth (MSFT/TSMC-type) on one side; resilient defensives (HSY-type) and select value cyclicals on the other. Add a measured option-ality sleeve (IONS/CRSP-type) if suitable.
- Look through the revisions:
- GDP is backward-looking. Track leading indicators (orders, claims, credit conditions) to gauge 2026 EPS trajectory.
- Respect concentration risk:
- The top contributors can continue to lead, but build idiosyncratic alpha elsewhere (materials with policy put-options, under-owned industrials post reset, high-quality small caps).
13) Risk management: What could derail the melt-up?
- Hot labor + sticky inflation: Cuts get pushed out â multiples compress.
- Policy surprise: Prolonged shutdown, tariff flare-ups, or a hawkish Fed dot plot.
- AI digestion phase: Capex pauses, or mismatched supply/ demand in accelerator land, could spark a positioning unwind.
- Geopolitics: Taiwan risk premium, Middle East escalation, or shipping/energy shocks.
- Litigation/Regulatory: Consumer-health and biotech names carry headline risk that can dwarf fundamentals near-term.
Countermeasures: Keep position sizes rational, avoid crowded single-factor bets, and pair growth exposure with durable cash-flow defensives. Hold a modest cash buffer or near-cash to play offense on volatility.
14) Bottom line
The market is still AI-led, liquidity-sensitive, and data-dependent. A short shutdown isnât, by itself, a macro regime change. The jobs print can swing cut odds and near-term sentiment, but the medium-term path still looks like disinflation with incremental easing, subject to the usual caveats. In that world, valuation discipline matters: own the champions when theyâre fairly priced, add high-quality cyclicals when resets create air pockets, and sprinkle calibrated optionality where the science and the business model both have credible paths to scale.
In other words: Donât fight the tapeâbut donât fund it blindly. Build a barbell you can hold through the next headline, the next revision, and the next inevitable wobble.
Disclosures & Notes: This article reflects a synthesis of viewpoints discussed by Morningstar contributors and is not endorsed by Morningstar. Tickers mentioned are illustrative, not recommendations. Always perform your own due diligence and consider consulting a fiduciary advisor before making investment decisions.