In this episode, we talk a pay homage to Will’s mentor by focusing on value and discipline, two things very much out of favor in the market at present. It is easy to see why as in the wake of five consecutive months of market gains, statistically the odds favor further appreciation. Moreover, even though valuations are high, historically valuation has proven a sub-optimal timing tool as it relates to near-term returns. With the Fed now more inclined to look more at weakening employment versus inflation, accommodative monetary policy seems supportive of valuation even at these elevated levels.

In terms of what has been working recently, it is a strange combination of the largest technology stocks, which are now involved in myriad deals reminiscent of the late 1990s in terms of vendor financing and capital spending, and speculative retail favorites, many of which have no revenue, much less positive earnings. We still find opportunities and lower valuations among smaller and mid-cap stocks, especially those that are higher quality.

However, since 2010, we have seen two very different markets. In the wake of the financials crisis, from August 2010 through August 2010, high quality stocks outperformed low-quality stocks by a factor of almost 3x. However, since that time, low quality stocks are up 140% versus high quality gaining only half that much. Retail investor speculation and the gamification of “investing” are contributing factors.

We also discuss the challenge facing consumers in terms of housing affordability, especially as the lower and middle income cohorts experiencing declining wage growth . To simply return to pre-Covid levels, it would take one of three things, or a combination thereof:

• Home prices fall 38%.
• Incomes to rise 60%.
• Mortgage rates to decline to 2.35%.

With the first two seemingly unlikely, can the Fed get there with rate cuts, or is some form of yield curve control required.

We are hoping for a Red October on the baseball diamond but not in the market, but only time will tell.

Learn more about Formidable Asset Management, Will Brown, and Adam Eagleston by visiting www.formidableam.com.

In this episode, we talk a lot about the job market, which is anything but hot, and its implications for the Fed, which is under pressure. All of the below tend to support President Trump’s criticism of Powell being “too late”:

• weakening job growth this summer (only +22k jobs in August, mostly in health care).
• likelihood of significant negative revisions this week.
• unemployment that would be over 5% if not for lower labor force participation.

Although unemployment is not an issue (yet), the risk in the labor market is a dearth of new jobs, with the odds of finding a job if you lose on today only 45%, the lowest level in over 12 years. We believe that AI is having an outsized effect on job openings, especially at the entry level.

All of these factors, along with a shift away from a focus on inflation by the Fed, support the market’s consensus view of a rate cut being on tap for next week, with two or three more likely to follow in quick succession. Historically, this has been a positive for equity markets if (and that is a big if) a recession can be avoided. the Fed has cut rates after an extended pause (like the one we are in now) eight times in the last forty years; four times we avoided a recession, and markets gained, on average, around 15%. the other four times, we entered a recession, with markets typically experiencing a 10-15% drawdown. Although there are some parallels between now and the late 1990s, valuations are not quite as stretched at the top, with the median P/E of the top 10 stocks around 31x versus a 41x multiple in 1999. However, investor allocation to equites is now at 55%, above its prior peak in 1999.

We also discuss the reasons why, despite Fed rate cuts, the all important 10-year yield may not cooperate. Chief among these are the lagged impact of tariffs on prices and the relatively high (and growing) level of U.S. government debt. Will the U.S. be forced to suppress yields a la the bank of Japan in order to unlock the housing market, and is that what is causing tempers to flare between members of the administration?

Learn more about Formidable Asset Management, Will Brown, and Adam Eagleston by visiting www.formidableam.com.

In this episode, Will and Adam examine former Secretary of Labor Robert Reich’s comments comparing today to the Gilded Age. We acknowledge there are several similarities, including increasing wealth disparity, the emergence of disruptive technology, and widespread commingling of government with business. We specifically discuss the recent discussion around the government taking stake in public companies, which, though has a precedent, was used in the past during times of financial crisis, i.e., to keep automakers afloat during the financial crisis.

We discuss the (until just recently) ebullient vibes in the stock market, and why some of the forefront of the AI revolution are starting to sound a little more cautious about what AI can deliver in the near-term. However, that has not stopped investors from returning to familiar favorites from the 2021 run-up, with this rally’s best performers including:

• Non-profitable tech
• Most shorted stocks
• Meme stocks

With Fed chair Powell on tap for Jackson Hole, we look at the recent Fed minutes, which indicating a focus more on inflation than jobs, and why that could change if job revisions continue to be revised lower. However, with the inflation effect of tariffs expected to shift from businesses to consumers soon, will the Fed have the flexibility to cut rates as much as investors currently believe? With both anecdotes and hard data indicating a struggling consumer, the Fed is in a tough spot and under continuing political pressure.

We conclude with why it is important to remain systematic and focused on long-term investing success and resist the temptation of the continued gamification of stock trading, with platforms like Robin Hood now exploring the addition of traditional sports wagering alongside retail investment accounts.

Learn more about Formidable Asset Management, Will Brown, and Adam Eagleston by visiting www.formidableam.com.

In this episode, we provide a recap on earnings so far in Q2, which, so far, have been good enough for the market to remain near all-time highs. We also delve a little deeper into some of the megacap earnings, especially as it relates to whether accounting rules are optically improving earnings while cash flow is shrinking as spending on capital expenditures, specifically AI chips, is draining corporate coffers. To wit, free cash flow versus capex for the four biggest spenders (GOOG, META, AMZN, and MSFT) is as follows (in billions):

• 2024
• • FCF - $233
  • Capex - $226
• 2025
• • FCF - $207
  • Capex - $351
• 2026
• • FCF - $240
  • Capex - $445
• 2027
• • FCF - $289
  • Capex - $512

In other words, these businesses, which once generated massive amounts of free cash flow for things like buybacks, are becoming much more capital intensive. However, since 2021, it has been only the 10 biggest stocks that have had earnings that have exceeded inflation; the other 490 have barely kept pace with overall price increases.

We also talk about inflation, specifically the shift toward the greater use of estimates versus actual inflation data, as well as the smoke signals from the economic intelligentsia hinting at a shift away from the fed’s long-standing 2% inflation target. In the spirit of government estimates, we also review the recent (abysmal) jobs data, and revisions, and connect that with the demise of certain professions, which ties into the massive AI spending driving corporate earnings and capital expenditures.

We close with a look at the strong recent performance of speculative stocks, the historically large nature of the volume in that trading, and why that has historically boded poorly going forward. Of particular note is the recent record flow into the Ark Innovation ETF.

Learn more about Formidable Asset Management, Will Brown, and Adam Eagleston by visiting www.formidableam.com.

In the first half, we look at the OBBBA, and what its passage may mean for investors, as well as for the government’s balance sheet.

Debt from baseline projection of 154% of GDP to upwards of 200% of GDP with the OBBBA. Deficits from around 6% of GDP to over 7% with the OBBBA.

Despite the ballooning deficits and debt, markets are celebrating the prospect of fiscal stimulus, as well as favorable tax treatments on investment as well as other corporate goodies.

In the second half, we discuss President Trump’s penmanship as it relates to his letter to Chair Powell on interest rates and why the “hottest country in the world” should “LOWER THE RATE!!!” We also look at the risk associated with the loss of Fed independence due to either political pressure or a dual role for the Treasury Secretary.

At some point, we finally get around to talking about the stock market, and note the historic rebound in equities in Q2, which was the largest in record by some measures. The biggest winners were growth stocks, which led value by a wider margin than during the tech bubble, and retail favorites, which are often highly speculative names; these soared over 60% in Q2. We also look at the expectations embedded in markets at this point in terms of earnings and multiples, and what effect passive investing is having on markets as over half of U.S. fund assets are now passively invested.

Learn more about Formidable Asset Management, Will Brown, and Adam Eagleston by visiting www.formidableam.com.

In the first half, we examine the (rumored) literal fisticuffs in D.C., and the implications of the proposed “Big, Beautiful Bill” on taxes, spending, the deficit, interest rates, and the dollar. We discuss the timing of tax cuts versus spending cuts, especially in light of the employment data we have seen since 2022, wherein:

• Private sector job growth -> a little over 1% cumulatively.
• Public sector job growth -> over 7% cumulatively.

In the second half, we discuss the market’s rapid rebound from its April nadir and juxtapose returns (and valuations) for different parts of the equity market. Is it finally time for diversification to help after a 15-year run for the U.S.?

• U.S. large caps +3% YTD
• U.S. small caps -2% YTD
• Developed non-U.S. +17% YTD
• Emerging markets +11% YTD

While the collapse in the volatility index and the huge rally from the lows normally portend further gains, valuations for the S&P 500 are historically high on any number of measures. While the so-called Magnificent Seven are more elevated, the other 493 are also expensive, and have grown earnings a lot more slowly than the tech titans. Contrary to our forecast entering 2025, fewer than one in three stocks are outperforming this year, putting a premium on stock selection. While multiples are high, we think active managers willing to go further afield can find values.

Learn more about Formidable Asset Management, Will Brown, and Adam Eagleston by visiting www.formidableam.com.

In this episode, we have a no-holds-barred conversation featuring Kalee Kreider, a seasoned political strategist and expert in climate policy.

Together, we dig into the uncomfortable truths about markets, politics, and the economic pressures facing everyday Americans. From election forecasts and the appeal of government gridlock to the harsh realities of student debt, the conversation is unscripted, unfiltered, and unexpectedly funny.

We explore why investors often prefer a slow-moving Congress, how middle-income families are still reeling from financial burdens nobody talks about, and why economic narratives need more honesty and a lot less spin.

What You’ll Learn:

• Why political gridlock can actually calm the markets
• The ongoing impact of student debt on families earning six figures
• What’s really driving midterm election outcomes—and what to expect next
• How public perception influences both policy and portfolio performance
• Why clarity in communication is just as valuable as a solid balance sheet

Learn more about Formidable Asset Management, Will Brown, and Adam Eagleston by visiting www.formidableam.com.

In the first half, we discuss the showdown between the U.S. and China on tariffs. While the headlines have been stolen by who is calling whom first, we look into the effect the tariffs are already having on container ship volumes, and what implications that has for the rest of the supply chain, and the economy. Tariffs are just starting to hit consumers as they look to buy online, with the tariff exceeding the purchase price in some cases. While there is optimism over a resolution, historically trade agreements have involved lengthy negotiations, and we are weeks away from the initial impact of being felt, making this akin to a slow moving shipwreck. We also discuss the impact of student loan payments turning back on after years of forbearance.

In the second half, we discuss the rebound in U.S. equities, which are anticipating a quick and painless resolution to the trade war, along with three or four cuts by the Federal Reserve during the rest of this year. In our opinion, that number of cuts would only occur if we saw the onset of a recession, which has significant market implications.

• Since World War II, the average recession sees gross domestic product (GDP) decline 2.3%.
• The average earnings decline for the S&P 500 is 11% during a recession
• However, around 1/3 of the time, earnings decline 5% or less.

Many market strategists are celebrating the recent equity rebound, which has been broad based and triggered a number of positive market breadth signals. While these are normally positive portents, valuation is not part of the calculation, and any disappointment in terms of the current earnings estimates leaves little room for error, making us mindful of seeking opportunities outside of the index, which continues to be dominated by a handful of stocks.

Learn more about Formidable Asset Management, Will Brown, and Adam Eagleston by visiting www.formidableam.com.