Welcome to a new week and a fresh month. If you've been watching the charts, you know the market has enjoyed a spectacular run this year—both the S&P 500 and the Nasdaq are boasting double-digit gains. But as we pivot into September, the landscape is getting significantly more complicated.
Here is what's on the menu for investors this week, and where you should be focusing your attention for Read the Letter.
1. The Friday Main Course: The August Jobs Report
If there is one data point that will dictate the near-term narrative, it is this Friday's US employment report. After a remarkably soft July showing—where payrolls actually declined and previous months were revised downward—the labor market has become the most critical metric for the Federal Reserve.
We are staring down a pivotal mid-September FOMC meeting. The debate right now is whether persistent inflation will force another 25-basis-point hike, or if softening labor demand will compel them to hold. Friday’s numbers will either give the Fed the cover they need to pause and protect the labor market, or corner them into a very tough policy decision.
2. Geopolitical Heat and Spiking Yields
We cannot ignore the broader macro backdrop this week. With the recent exchange of military strikes between the U.S. and Iran over the weekend, spot oil prices have quickly surged, with WTI pushing past $86 and Brent over $91 a barrel.
Energy spikes have a nasty habit of keeping inflation "sticky." We are already seeing bond yields climb in response, with the 10-year Treasury hitting 4.75%—the highest level we've seen in recent years. For companies reliant on floating-rate debt or near-term refinancing, this is a heavy headwind. Keep a close eye on how these higher yields pressure growth and tech valuations over the coming days.
3. Tech Earnings: The Cloud and AI Check-In
We are wrapping up this earnings season with some major tech and enterprise software players stepping up to the plate. This week, we are looking at reports from:
Broadcom (AVGO) & Dell (DELL): The heavyweights for infrastructure and hardware demand.
Palo Alto Networks (PANW): A critical pulse check on enterprise cybersecurity spending.
Snowflake (SNOW) & UiPath (PATH): Key indicators for software, data consumption, and AI integration.
If you are heavily allocated in tech, these reports will offer a real-time look at whether enterprise budgets are continuing to expand or if they are contracting in the face of macro uncertainty.
The Bottom Line
Valuations are sitting at historic highs. The S&P's CAPE ratio is currently sitting north of 40—a level we have rarely seen outside of the dot-com era. While high valuations do not guarantee a crash, they do mean the margin of safety is razor-thin right now.
This week is about risk management. As we navigate the crosscurrents of a pivotal jobs report, spiking oil, and key tech earnings, now is the time to stress-test your portfolio. Look for companies with unshakeable balance sheets, pricing power, and reasonable valuations that can weather a "higher for longer" rate environment.
Stay disciplined,
