A Tech Led Rebound to Kick Off the Week
Let’s dig in following an up day on Wall Street to see what’s happened and what to expect.
Iran Concerns Weigh on Stocks as Tech Steadies to End a Volatile Week
Brent topped $116 and stocks pulled back on fears of renewed U.S.-Iran hostilities after the midterm elections. For the week, small caps led with the Russell 2000 up 2% while the S&P 500 and Nasdaq slipped.
Weekly Roundup: Renewed AI Concerns Weigh on the Market and Portfolio
We added to six holdings, and upgraded and lifted a price target on another as favorable AI data conflicted with market emotion.
Those Machines and Algos
I have spoken to several institutional desks.
The buying/strength is being exacerbated by machines and algos — in a changed market structure.
And I am using them as a source of liquidity — reducing $PG, $KO and $KMB.
Position: Long PG (VS), KO (VS), KMB (VS)
P&G and My Staples Plays
Procter & Gamble’s ($PG) beat will likely help collateral staples plays like PepsiCo ($PEP), Coca-Cola ($KO) and Kimberly-Clark ($KMB).
Position: Long PG (VS), KO (VS), KMB (VS)
Staples Slammed
Staples (consumer non-durables) are getting hit over the last few hours.
A reminder, I am down to VS on $KMB, $PG and $KO.
I sold out my entire $PEP holdings.
I would be a buyer of the space on weakness — but not at current prices.
Position: Long KMB (VS), PG (VS), KO (VS)
The Fall of 2026 Is Starting to Resemble the Spring of 2000
* But there are important differences which will likely produce more muted downside to the hyperscalers and more muted upside to consumer staples…
“History doesn’t repeat itself, but it often rhymes.”
– (Attributed to) Mark Twain
The U.S. stock market is starting to look like the spring of 2000 when the dot-com boom came to a halt and technology began a steep slide. At the same time, consumer non-durable (staples) stocks (as well as Berkshire Hathaway ($BRK.A $BRK.B) have began to perform well both absolutely and relatively.
There are, however, deep differences in both periods of time.
* Today’s large-cap technology stocks (as opposed to the dot-com stocks) have deep moats and though their commitment to massive AI spending has transformed some of the tech equities from capital light to capital intensive, they have maintained strong operating and profit profiles. Unlike 26 years ago, the Mag 7 represents a large percentage of the indices — which, amid a backdrop of passive products and strategies (ETFs, quants), means that investor inflows go into and directly/steadily support/buoy the shares of Nvidia ($NVDA), Amazon ($AMZN), Microsoft ($MSFT), Alphabet (GOOGL), Micron ($MU), Sandisk (SNDK) and Meta ($META).
* Today’s defensive consumer staples have faced the competitive threat of generic and unbranded products over the last 15 years. In more recent years, they’ve encountered the introduction of GLP-1 agonists (a new class of medications that can help manage Type 2 diabetes and obesity (by reducing appetite). Unlike 26 years ago, a combination of these two factors are pressuring consumer staples’ top and bottom lines.
As a result of these differences, the downside to the Mag 7 constituents (and memory and semiconductors) is much more muted than 2 1/2 decades ago (vis a vis dot-com ‘ers). And the upside to the classically defensive consumer non-durables is also more limited than 2 1/2 decades ago.
Importantly, given the rise in the risk-free rate of return (using the 10-year Treasury note) to almost 5.3% suggests to me that rather than find a home in the consumer staples space, it is more likely that market participants will seek refuge in fixed income.
Tactics
Though hyperscalers and semis/memory stocks are beneficiaries of a changed market structure, we own no large-cap tech stocks (and are short some on the periphery of Mag 7) because of our AI reservations and concerns. (See our 260 issues of the “More Tales From Nvidia” series).
We have previously taken a position in consumer staples — Kimberly-Clark ($KMB), PepsiCo ($PEP), Coca-Cola ($KO) and Procter & Gamble ($PG). But, given the profit threats, we have treated the space more as “trading sardines” and have recently trimmed all four on strength. (Earlier in the week we got lucky and sold the sharp ramp in PEP shares and sold out of the very small balance yesterday on news that KFC has ditched PepsiCo for Coca- Cola.)
Position: Long KMB (VS), KO (VS), PG (VS)
From The Street of Dreams
$KKR: Morgan Stanley lowered the firm’s price target on KKR to $138 from $147 and keeps an Overweight rating on the shares. With alts down about 27% year-to-date and positioning light, the firm sees upside for alternative asset managers despite near-term realization headwinds. Easing wealth redemption requests, robust institutional demand and resilient fee growth support the firm’s 2027 outlook and re-rating, the analyst tells investors in a research note.
$BX: Morgan Stanley analyst Michael Cyprys lowered the firm’s price target on Blackstone to $165 from $184 and keeps an Overweight rating on the shares. With alts down about 27% year-to-date and positioning light, the firm sees upside for alternative asset managers despite near-term realization headwinds. Easing wealth redemption requests, robust institutional demand and resilient fee growth support the firm’s 2027 outlook and re-rating, the analyst tells investors in a research note.
$APO: Morgan Stanley lowered the firm’s price target on Apollo Global to $150 from $164 and keeps an Overweight rating on the shares. With alts down about 27% year-to-date and positioning light, the firm sees upside for alternative asset managers despite near-term realization headwinds. Easing wealth redemption requests, robust institutional demand and resilient fee growth support the firm’s 2027 outlook and re-rating, the analyst tells investors in a research note.
$AAPL: UBS tells investors in a research note that Apple iPhone availability data shows year-over-year wait times down about 4 days for the Pro and flat for Pro Max, with recent week-over-week declines of 1 and 5 days, respectively, signaling limited estimate upside and potential demand elasticity concerns following Apple’s price increases. The firm maintains a Neutral rating and $296 price target.
$TSLA: JPMorgan keeps a Neutral rating on Tesla after the company unveiled its second-generation Roadster. The car “combines conventional automotive engineering with rocket propulsion technology,” the analyst tells investors in a research note. JPMorgan says production is targeted for 2028, compared with the original 2020 delivery target announced when the vehicle was first unveiled in 2017. Tesla did not disclose final pricing, battery capacity, driving range or anticipated production volumes, adds the firm. It points out that Tesla indicated the Roadster would eventually become its only manually driven vehicle as the broader portfolio transitions toward full autonomy.
$KO: Barclays raised the firm’s price target on Coca-Cola to $98 from $93 and keeps an Overweight rating on the shares. The firm adjusted targets in the consumer staples group as part of a Q3 earnings preview. The “band of interest” within consumer staples remains “quite narrow” as few companies offer a “dependably defensive outlook and attractive valuation,” the analyst tells investors in a research note.
Note: I covered all of my private equity shorts ($BX, $KKR and $APO) on Wednesday at lower prices than Thursday’s close. Yesterday I sold down my small $KO long on the Kentucky Fried Chicken/Pepsico news and as the shares of Coca Cola hit an all-time high.
Positions: Long KO VS
Hotter Inflation and AI Weakness End the S&P 500’s Run Without a 1% Drop
A hotter-than-expected September CPI report and a deepening selloff in AI names sent the S&P 500 down more than 1% for the first time in 54 sessions, with the Nasdaq and small caps falling nearly 2%.
Midday Musings
Consumer non-durables (staples) leading the pack today: $PG, $PEP, $KMB and $KO.
Position: Long PG (VS), PEP (M), KMB (S), KO (VS)