Equity Market Analysis

An influential stream of research finds that companies that emit more carbon have higher stock returns. This "carbon premium" has been interpreted as evidence that emitting companies suffer a higher cost of capital and thus markets are correctly pricing in carbon risk. However, the ESG literature typically interprets higher stock returns as outperformance due to mispricing. In a new paper with Yigit Atilgan, Özgür Demirtaş, and Doruk Gunaydin, we study earnings surprises to disentangle these explanations. We find that emitting companies enjoy positive earnings surprises, and the four earnings announcements per year explain 30-50% of the annual carbon premium. Consistent with prior results, our findings only hold for levels of and changes in emissions, but not emissions intensities or disclosed emissions only. Our results suggest that, where it exists, the carbon premium arises from an unpriced externality - emitting companies are able to "get away with" contributing to global warming. Markets are not fully pricing in carbon risk, highlighting the need for government action. https://lnkd.in/e9QnXars

Markets aren't always rational, particularly in the short term, but market reactions to last week’s earnings announcements from some of the most scrutinized companies on earth — Meta, Google and Microsoft — caught my attention as an important signal. My interpretation is that while all three companies are pouring billions into AI-related capex, Wall Street is increasingly skeptical about whether consumer-facing AI (like Meta’s “personal superintelligence”) can justify the massive capex and deliver sufficient TAM. Meanwhile, Google and Microsoft are being given much more license to invest ahead of revenue and build capacity to meet existing and projected demand for enterprise applications, even if the ROI isn’t yet fully visible. What strikes me is how AI investment is mirroring to some extent the “growth at all costs” playbook — but with capacity spending. Meta's decline suggests to me that investor confidence is wearing thin for consumer-facing AI, while the market seems to be rewarding enterprise software that creates business value with AI. And that seems rational for the longer term given how enterprise software that incorporates AI can transform end-to-end business systems for customers.

Investors are no longer impressed by flashy AI promises from Big Tech. In my opinion, making funny videos isn't a business model, and making announcements isn't a victory. They want to see real results. Earnings reports from major tech companies like Microsoft, Meta, Amazon, and Apple have revealed a slowdown in profits, despite heavy investments in artificial intelligence. This shift has led investors to demand concrete evidence of AI's impact on revenue and productivity. The mixed reactions in the stock market reflect a growing skepticism and volatility as investors move away from large tech stocks and seek safer investments. As the Federal Reserve hints at possible rate cuts and the job market shows signs of weakness, the tech-heavy Nasdaq 100 Index has entered a correction. While some companies like Meta and AMD have shown promising AI-driven results, the overall sentiment is one of recalibration, with investors looking for solid proof of AI's value. 📉 Investor Skepticism: Big Tech stocks like Microsoft and Amazon slid after earnings reports due to fears that their AI investments aren’t paying off yet. 💡 Demand for Proof: Investors now seek concrete evidence of AI’s impact on revenue and productivity, moving beyond mere announcements and hype. 📊 Market Volatility: The Nasdaq 100 Index dropped 11% from its July peak as investors reacted to weaker-than-expected earnings and macroeconomic concerns. 🔄 Shift in Strategy: There’s a noticeable move from large, trusted tech stocks to smaller, riskier parts of the market to reduce exposure to Big Tech volatility. 🌟 Bright Spots: Companies like Meta and AMD provided positive examples, with Meta’s AI-driven targeted ad sales and AMD’s optimistic revenue forecast spurring some investor confidence. In simple terms, recent earnings reports have shown that investors are no longer satisfied with Big Tech companies making bold claims about AI. They want to see actual results that boost revenue and productivity. For instance, Microsoft and Amazon’s stock prices fell after their earnings reports because investors didn’t see immediate returns on AI investments. Meanwhile, Meta’s success with AI-driven ad sales and AMD’s promising revenue outlook offered some hope. This shift means that companies must now prove their AI investments are truly paying off to win back investor confidence. Investors are recalibrating their expectations, moving from AI hype to a demand for real-world results. #AIEarnings #TechInvesting #BigTech #InvestorSkepticism #MarketVolatility #AIResults #StockMarket #MetaAI #AMDAI #TechNews 

📣 The era of aluminium surplus is over. 🛑 According to a powerful analysis by Andy Home at Reuters, the global aluminium market is "sleepwalking into the biggest deficits in 20 years." For decades, the market has been defined by excess, but a structural shift is underway. Here’s why: 🇨🇳 China is at Capacity: The world's largest producer (60% of global output) is hitting its government-mandated cap of 45 million tons per year. Their relentless production growth is grinding to a halt. 📉 Inventories are Draining: LME stocks have plummeted from over 3 million tons four years ago to just over 700,000 today. Sanctions are diverting Russian metal to China, further squeezing Western exchange liquidity. ⚡ The Energy Transition is a Double-Edged Sword: Demand is surging from solar and EV sectors, while high energy costs are stifling smelter restarts outside of China (e.g., closures threatened in Mozambique). 🇮🇩 New Supply Can't Keep Up: Hope rests on Indonesia, where Chinese companies are building new smelters. But analysts at Citi project new capacity will fall far short of expectations, reaching only 2.3M tons by 2030 due to high costs and energy challenges. The result? Citi analysts predict prices will need to rise sustainably above $3,000/metric ton (from ~$2,700 today) to prevent a shortage. This isn't just another trader squeeze; it's a fundamental reshaping of the market. The next crisis won't be caused by too much metal, but by too little. #Aluminium #Metals #Commodities #EnergyTransition #SupplyChain #Mining #Economy #Reuters 

Resource Capital Funds latest read on the mining cycle is out and it’s a great read. They’ve taken their 9 indicator framework and mapped where each major commodity sits across supply, demand, pricing, valuation, and capital flow. The result? A brutally honest assessment of how fractured the cycle really is and why that’s actually a good thing if you know where to look. Gold and copper? Still mid cycle. Decent margins, tight inventory, strong M&A, but lacking the conviction capital to break out. Lithium, nickel, cobalt? Fully through a crest, correction, and into contrarian territory. Oversupply + China dominance = sentiment wreckage. Which is exactly why RCF sees opportunity the pain's priced in, and demand hasn’t gone anywhere. But something I keep screaming about exploration is nowhere near where it needs to be. Out of $12 billion in global exploration spend last year, $6B went to gold and $3B to copper. That’s 75% of the global budget on just two commodities. Drilling activity is dropping not just in metres, but in the number of distinct projects being drilled. That’s how supply gaps form. Quietly. Slowly. Then all at once. We’re seeing a bifurcation: the few juniors that drilled aggressively over the last 18 months who’ve defined real resources and de-risked targets are now sitting on tomorrow’s Tier 2+ projects. Everyone else? Years behind. The project pipeline isn’t thinning it’s evaporating. And yet… capital is finally starting to move again. Private money now makes up over 20% of total mining finance, the highest since 2016. Public equity still dominates, but the fact that institutional and private funds are showing up now while margins are thin and prices are average says a lot about where we are in the cycle. Real capital doesn’t follow headlines. It follows scarcity. If you’re running a serious team, with a serious project, in a serious jurisdiction this is your window. The smart money isn’t scared of volatility. It’s scared of being late. #Mining #MiningCycle #Gold #Copper #Nickel #Lithium #Exploration #CapitalMarkets #PrivateEquity #RCF #MiningFinance #CriticalMinerals #BatteryMetals #Commodities #ResourceInvesting #Drilling Source: – Resource Capital Funds, Mining Cycle Review, April 2025 (Internal research & proprietary modelling from RCF across 9-cycle indicators)

IPOs are equal to gambling. Bajaj Housing Finance IPO closed 2 days before. And the oversubscription? Highest ever. But what’s more shocking is that oversubscription was common for both. Bajaj Housing Finance and A small  bike dealer in Delhi The IPO of a bike dealer who was to raise ₹12 crores got 400X oversubscribed to ₹4800 crores. Why the madness?  The lure of quick profits. More than 54% of Indian IPO investors dump their shares within one week,  and about 70% of them hold onto their shares for less than a year. And wait, there’s more data on how IPOs are plain insanity. 1. Profit equals oversubscription is a beautiful lie. Zomato and Paytm’s IPOs were massively oversubscribed.  But their stock prices didn’t rise immediately post-listing. But 3 years later Zomato Stocks prices nearly 2Xed Paytm? The investors went broke. Both tell a very different story today. Bottom line: Listing gains equal liquidity and investor sentiment (buzz) While long-term performance is based on its existing financials, position in the industry, and how the management steers it going forward. Oversubscription tells you nothing about the next 5 years. 2.  The maximum you’ll make is a few week's worth of grocery expenses. Let’s do some math About 87% of IPOs in FY 25 had a positive return, with an average of 33.5%. But to keep your IPO dream alive, we assume you made a 100% gain. And you are allotted ₹15,000 worth of securities  (max  in case of oversubscription) Meaning, the BEST case scenario would be earning ₹12,000 after taxes. Or 6-7 weeks of grocery expenses in Mumbai. But if you invested even one-third or one-fourth of this in a decent mutual fund. You’ll make a lot more going forward. 3. Most issues are grossly overvalued. Think of this;  you own a house valued at ₹1 crore and wish to sell it. Will you list it at ₹1 crore? There is NO way. You’ll list it at a minimum of ₹1.3 crores.  Your buyer will negotiate and hopefully, you’ll be able to sell it at ₹1.1 crores. Paytm was absurdly valued at $20 billion, -> for a company that earned $0 -> In an overcrowded fintech space -> with no distinct business advantage and many users. How did they get away with it? Early investors made their money and so did the investment banks underwriting the issue. Look how that turned out, nearly 75% of investor wealth eroded. So does it make sense to take such huge risks for a measly amount of ₹15,000? (Which by the way has a minuscule chance of even coming to you) Stop gambling your money away, stay disciplined, and invest in sensible assets.

📈 The surge of private equity-backed IPOs in 2025 creates strategic opportunities for Family Offices managing multi-generational wealth. Nine of ten major IPOs from 2024 exceeded their listing prices, with half achieving gains above 100%, signaling robust market appetite for quality offerings. Today's IPO candidates like Medline and Genesys represent a departure from 2021's speculative listings, bringing proven profitability and established operations to public markets. This shift aligns with Family Offices' focus on sustainable value creation. The projected $38 billion in IPO activity demands precise portfolio positioning. Strong public valuations and president-elect Trump's expected policy changes suggest optimal timing for private equity position reviews. However, the broad market's 70% rise from 2022 lows, concentrated among select large-caps, requires careful entry point analysis. Upcoming fintech offerings from Klarna and Chime will provide valuable benchmarks for private technology holdings. Family Offices should focus on companies with proven business practices, using established relationships to secure preferred investment access while maintaining long-term portfolio balance. Working directly with over 100 Family Offices across three continents, we've observed a marked shift in IPO participation strategies. Many are building dedicated teams to evaluate these opportunities, combining traditional investment analysis with new approaches to assess management quality and growth sustainability. Several Family Offices have successfully negotiated cornerstone positions in recent IPOs, securing board observer rights and maintaining influence similar to their private market investments. The true value in this IPO wave extends beyond immediate investment returns. Family Offices that position themselves as strategic partners rather than passive investors often secure advantages in deal flow, co-investment rights, and governance participation. This approach has proven particularly effective in mid-market offerings where Family Office capital and expertise can significantly influence outcomes. As IPO activity accelerates through 2025, successful Family Offices will distinguish themselves through selective participation, focusing on companies where their industry expertise and long-term capital can create mutual value. This renaissance in public offerings marks not just a liquidity event, but an opportunity to reshape how Family Offices engage with public markets for generations to come. #IPO #FamilyOffices

Charts of the Week: Muted Reactions to Good Earnings. Stocks have had a pretty good earnings season, beating estimates by an average of 6-7%. But the average stock reaction has been pretty muted on the day of the beat, well below the upside we’ve experienced in the last few years. It turns out muted reactions tell you more about what stocks have done than what they are going to do. The bigger the market move over the last 6 months, the more likely it is that EPS beats receive little reaction – exactly our case. Importantly, this lack of reaction doesn’t signal a problem for forward returns. The pattern behind earnings might be more interesting. Like stocks, the more muted the reaction to earnings beats has been, the more likely it is that numbers have already been coming up – also the case currently. Once that process has started, history suggests it is likely to continue over the next 6-12 months. Ironically, a minimal reaction to an earnings beat – historically speaking – may be the pause that refreshes. #Markets #Earnings #Investing #Stocks #EPS

I was quizzed in Copenhagen by the business paper Børsen on the outlook for European equities. We’re positive and here’s why: 1. Earnings. European earnings have accelerated and we believe this momentum can continue. 2. Economics. Falling inflation led to the European Central Bank cutting rates ahead of most big central banks. This should spur the economy, in our view. 3. Valuations. European shares still trade at a historically wide discount to U.S. peers, and also at a discount versus their past average. 4. Quality. We see great companies across a broad range of sectors and industries, including semiconductors, construction, luxury, financials and healthcare. In our view, as I said in the interview, “it is time for investors to turn their eyes more towards Europe.” Capital at risk

Always a pleasure discussing markets with Julianna Tatelbaum and Stephen Sedgwick at CNBC's #SquawkBox this morning. As we head into Q4, several macro & markets themes are shaping the investment landscape. 🇪🇺 Euro-area Equities: European #equities have outpaced their U.S. counterparts YTD, aided by USD depreciation and relatively fair valuations. Short-to-medium term tailwinds like Germany’s EUR 500bn fiscal package and increased EU-wide defence spending could support industrial sectors such as aerospace and logistics. Importantly, much of this stimulus is earmarked to stay within Europe, potentially benefiting local industries including materials and mid/small-cap companies. However, long-term growth remains constrained by a focus on infrastructure repair rather than innovation. At this stage, the investment case for European equities is grounded in #valuations, rather than earnings momentum or productivity. 📉 Volatility spikes: Recent stress in U.S. regional banks has triggered #volatility and widened credit spreads. While systemic risk appears contained, diversification remains key. As it has been suggested: “When you see one cockroach, there are probably more.” For now, we do not see an infestation but vigilance is warranted. 🥇 Gold’s surge: Gold is rallying, but not purely on safe-haven flows. Inflation hedging, tech bubble fears, fiscal deficit concerns, and USD debasement are all in play. Commodities more generally continue to show positive inflation beta, a valuable trait in today’s environment. 📌 As always, staying diversified and grounded in fundamentals is essential. Curious to hear how others are positioning in light of these dynamics. #PortfolioConstruction #EuroEquities #Gold #Vanguard