Overvalued ?

“Overvalued” and “Undervalued” are incredibly subjective words, especially when used to describe markets.

We have seen this chart a few times during the week:

Depending on the weapon of choice, anybody can make a compelling argument for their chosen metric as to whether it is expensive or cheap.

We prefer to stick with a basic old multiple, Price to Earnings.

We will leave the judgement up to the reader, but considering the level of expected productivity gains soon to be derived from AI,  who is to say what a fair multiple is these days?

The companies themselves do not seem to think the multiples are excessive.

Aren’t these guys the ultimate insiders?

But somehow that still does not deter the Investment professionals, at least the ones polled by BofA.

Guess we could call this a healthy market dynamic?

WIRP Very busy week with Economic Calendar releases:

Which did have a benign impact on TSY rates:

But did sway the WIRP page on Bloomberg a bit when it comes to the odds of a September meeting cut.

All said and done we ended up in the same place we started Monday when it comes to the odds of a 25-bps cut, 89% chance.

All this taking place despite the unease produced from the hotter than expected PPI prints on Thursday.

Next week the Jackson Hole Conference begins on August 21^st and runs to the 23^rd. The theme for this year’s conference is “Labor Markets in Transition: Demographics, Productivity, and Macroeconomic Policy”, according to the Kansas City Fed.


Delinquencies

We have addressed this issue before and continue to see more and different charts surrounding it. Today we were listening to an interview on CNBC with Ivy Zelman, for those of you cagey vets out there you might remember when she could really impact the Homebuilder space, anyway while discussing the state of the new homebuyer she specifically points to student loan delinquencies becoming an issue. Student debt was only an issue for 7% of the respondents to their survey in June, but that has been steadily moving up and was at 10% in July.

Link to interview, the comment occurs just under 3 minutes in:
https://www.youtube.com/watch?v=sRCIPtafiqY  

The chart making the rounds:

The commentary that accompanied the above chart:
“US serious delinquencies are skyrocketing: The share of credit card debt that is delinquent 90+ days reached 12.3% in Q2 2025, the highest since Q2 2011. This is just 1.4 percentage points below the all-time high. Furthermore, 5.0% of auto loans are now seriously delinquent, only 0.3 percentage points below the record set in Q4 2010. Meanwhile, student loan serious delinquencies spiked 9.4 percentage points over the last 2 quarters to 10.2%, the highest since Q1 2020. US consumers are falling behind on debt payments at rates rarely seen before.”

Is the tightening of discretionary spend beginning to show up elsewhere?

According to the NFIB, business owners are beginning to worry about Poor sales. While small business sentiment improved in July, more firms are noting “poor sales” as their single most important problem. This series rose to 11 in July, the highest since February 2021. When firms fret about weak sales, unemployment is usually rising.

Lumber

In case you had not already seen it this week, probably one of the most popular charts.

Longer term perspective, it approached previous high levels and rolled over.

AI Capex perspective

Final Thought

Tongue in cheek, but a good question to ask: what if the Fed cuts rates and the market goes down?

Have a great weekend!

Best,

Meraki trading team