Oil eased on Saturday as hopes grew for an agreement to reopen the Strait of Hormuz. By Sunday, the picture had changed. Stock Tweets’ Sunday digest said Trump rejected Iran’s seven-day proposal, and oil jumped more than 1%.
The rate question was already pressing. The 10-year Treasury yield had finished Friday near 5.17%, and traders had priced roughly a 64% chance of an October rate hike. This week’s inflation and jobs readings will give that question fresh numbers.
Oil Changes Direction While Rates Stay High
Stock Tweets’ Saturday digest said the hoped-for U.S. and Iran agreement would be phased. U.S. stocks rose Friday. By Sunday, Brent was around $105 to $106, and WTI was around $93. Talks may still continue this week.
There was pressure on the rate side, too. September University of Michigan sentiment fell to 48.1, while one-year inflation expectations rose to 4.6%.
An article makes the case against another hike. It says AI investment may keep going despite higher financing costs, while housing, smaller businesses, and borrowers who need to refinance feel higher rates first. If a shortage of physical energy supply is pushing prices up, the article argues, raising rates cannot produce more energy.
The Stock Tweets digest also reports a $30 billion reciprocal U.S. and China tariff cut on non-sensitive goods and a formal AI dialogue. It notes Bank of Japan minutes showing that some members wanted faster rate hikes. Trump approved fuel-economy standards that roll back Biden-era rules.
Wednesday’s PCE inflation report and Friday’s September jobs report are the next readings. The digest says hotter numbers could raise the odds of another hike. Softer numbers could ease pressure on bonds.
Meta Puts a Price on Muse
Meta introduced Muse, a personal AI agent app. The company says Muse can book appointments, fill out forms, and monitor home security camera feeds.
Meta AI chief Alexandr Wang said Muse will have a free tier and monthly plans of $20 or $100, depending on usage. Meta says the app runs in an isolated environment, cannot see actual passwords or payment details, and asks before taking sensitive actions. Users must opt out if they do not want their interactions used to train Meta’s AI models.
The launch comes as Meta faces pressure to show returns on its AI investments. The company recently agreed to pay nearly $17 billion to settle claims brought by state attorneys general, and it still faces related lawsuits. Meta says it is inviting outside security researchers to find vulnerabilities.
Muse now has a price, a list of things it can do, and security claims from Meta. The question of returns on the company’s AI spending remains part of the story.
Big Returns Come With Different Questions
A value-investing speaker questions the reward for buying into the AI-driven rise in stocks at current valuations. They say the last time valuations were this high, during the dot-com bubble, the following 10-year real return was minus 60%.
The speaker also cites GMO forecasts of negative likely returns and better likely returns for global value. The earlier result is a warning about the price investors pay today. The speaker does not claim it will happen again.
Leverage brings a separate risk. Ben Felix gives an example: $10,000 put into a 3x S&P 500 ETF at its 2009 launch would be worth $1.3 million today. That is a striking gain.
Felix also describes a 2x S&P 500 ETF falling nearly 80% during the great financial crisis and a 3x fund falling nearly 80% at the start of COVID. The path matters when losses can get that large.
He says a fund’s daily reset alone does not determine its longer-term result. Volatility, financing, fees, and the date of purchase matter too. A paper he discusses estimates that owning a 2x leveraged index ETF could cost above 5% annually at the current risk-free rate. For a 2x single-stock product, it estimates costs close to 12%.
Starbucks, Ethereum, and Retirement Savings
A value-investing speaker says Starbucks stock is down 20% over five years. Comparable store sales have begun improving, and guidance calls for 6% comparable-store growth.
The speaker puts normal-year net income around $4 billion, versus $2 billion over the last 12 months. Their valuation scenarios point to a likely return of 5% to 6% at current prices. They also see a risk that a higher required dividend yield would lower that return. These are the speaker’s estimates.
A Fundstrat Direct speaker makes a separate forecast for Ethereum. They say it has consolidated for five years and point to earlier breakouts of 62x and 17x. They think a move above 5,000 could lead to a 10x gain from here.
Fidelity reports that the average 401(k) balance rose 10.5% from March through June, its biggest quarterly increase since 2020. Average balances were $75,200 for participants in their 30s and $156,800 for those in their 40s. Participants contributed an average 14.4% of pay including employer contributions, just below Fidelity’s recommended 15%.