The economy: slowing but still growing
The economy stays relatively strong this year, though growth is slowing. A slowdown that still shows growth is a positive sign given geopolitical tensions worldwide, US trade policy, and the US Supreme Court ruling on tariffs, which cut into US revenue.
The biggest plus is earnings. Companies beating expectations is the common theme across the broader market. Target (TGT) beat and raised. Consumer spending drives the economy, backed by business investment in heavy machinery and equipment.
The consumer
No cracks yet in consumer strength. Companies are being smart and prudent, setting expectations carefully going forward. Home Depot (HD) and Lowe's (LOW) call their consumer healthy but cautious about big-ticket spends and big renovation items among do-it-yourself customers. Sentiment sits near lows, yet spending continues.
The one real worry is mounting consumer debt. Consumers stay resilient and keep spending, holding back a bit to see the outcome of the midterms. A pickup should come around the holidays.
Why strong reports still drop
Markets are finicky. Companies beat expectations but do not exceed them by enough, so stocks dip right after earnings, then pop back up as reality sets in. This happens with Nvidia (NVDA) again and again. At least half the time, clear strong reports get an initial move down.
Can earnings keep stocks rising if growth keeps slowing? It remains to be seen. Price-to-earnings ratios are very high. The Shiller PE ratio is among the highest since the tech bubble. Earnings keep propping it up. The growth of the last couple of years may not continue, but this year should finish positive heading into next year.
Nvidia setup
Nvidia (NVDA) reports next week with a different setup than usual - it has consolidated and traded sideways instead of the parabolic moves seen before. Even AI-space companies posting numbers above whisper numbers on top line, bottom line, and guidance still get downward reactions.
Expect the usual pattern for Nvidia (NVDA): a drop in the stock price after earnings, creating a buying opportunity, then a pop back up within a couple of weeks. The company should at least meet, if not exceed, expectations.
Where the opportunity is
I favor buying dips. Top areas:
Precious metals - silver and gold. A strong opportunity now. Prices are up from the summer lows with lots of room to grow, both physical metal and ETFs. Gold trades at 4,540, up almost 3% on the session.
Miners. More stable than the metals themselves. They keep growing even when metal prices dip and decline. Expect strong growth ahead in both silver and gold miners.
Energy, especially nuclear. The long-term play. AI data centers create a severe energy crunch. Nuclear energy is the best play going forward.
