In this weekly Jarvis Update, Left Brain’s Director of Research Brian Dress, CFA, is joined by CEO/CIO Nolan Langford to review the latest market action and the opening of Q3 earnings season. They note that major indices were essentially flat but volatile, with morning rallies that failed to hold and the 10‑year Treasury yield hovering near 4.25% while the VIX stayed above 30. The hosts discuss earnings beats from companies such as Netflix, Wells Fargo, Bank of America, Interactive Brokers, Charles Schwab, Lockheed Martin, United Airlines, IBM, Lam Research and Applied Materials, highlighting the positive reaction of their stocks. They contrast this with disappointing results from Tesla, Allstate, and several Wall Street‑focused banks (Morgan Stanley, Goldman Sachs, Northern Trust), attributing the weakness to higher rates and reduced capital‑market activity. The conversation then shifts to what would signal a market bottom: a sustained drop in volatility, a halt to rising interest rates, and stabilization of earnings expectations. They advise investors to be patient, consider high‑yield investment‑grade bonds (6‑8% yields) as an alternative to low‑return cash, and to position for the long term while remaining cautious in the short term. The episode also promotes Left Brain’s research service, the Jarvis newsletter, and a “chosen report” featuring a favorite stock and bond opportunity.
Chapters
Earnings, earnings, earnings. It's that wonderful time of year in the investment calendar. We cover that and much more in this week's Jarvis Update. I'm your host, Brian Dress, Director of Research here at Left Brain, joined as always by our CEO and Chief Investment Officer and fearless leader, Nolan Langford. Nolan, welcome to the program.
Thank you. Glad to be here talking stocks, talking sports. Got the NBA season in full swing. We have the football season full swing. We had a Thursday night game tonight and we're in earnings season. What could be better?
Well, no one's still trying to get over that loss last week by the Chiefs against the Bills. A tough week in the markets didn't help. All right. Quick preview for everyone. The broader market was almost unchanged this week, but it was anything but uneventful. We had a number of morning rallies that failed in the afternoons this week. And again, we ended up about unchanged on the week. We got two topics for you as we usually do. The first is our first set of earnings for the month. Our second topic, what would be signs of stabilization for the markets? We'll answer that question for you. Before we get started, a few announcements. First of all, we produce this show for you, the everyday investor, whether you've got a 401(k) or an IRA for your retirement. You manage your own money or you work with an advisor, we'd love to be a resource for you and give you a second opinion on your portfolio positioning. If you'd like a second opinion in a difficult market here, you want to hear more about opportunities that we're seeing, especially in fixed, fixed return securities. We'd love to talk. Make sure you call us on the number below. Also, if you're an institutional investor, we've got something for you as well. That's our research service, Left Brain Investment Research. We put out 8 to 10 full-length stock reports per month. This week we have our chosen report. That's our favorite stock and favorite bond opportunity. So click the link below if you want to take a look at that and get access to our hundreds of reports in our library. Either way, sign up for our biweekly newsletter, Jarvis Newsletter. It's off this week, but we'll be out with all the content we have this week, including a video we just put out on bonds versus bond funds. If you want to get on our mailing list, fill out the form below. We'll get you on the mailing list and you get that in your inbox every Saturday morning. And finally, if you find these videos useful, please like and share the videos. It helps other investors find them. And also subscribe and hit the bell for notifications so you'll find out next time the videos are out. And we're out every Friday morning with these. Let's jump right into the market recap. So all the 3 indexes that we follow were down this week, although they were, although they were close to unchanged. S&P was down just 0.1%, the tech-heavy NASDAQ was down 0.3%, and then the Russell brought up the rear this week at down 1.4%. That's actually a little bit of a reversal of what we've seen over the last few months where small caps have been outperforming large caps. Again, it's been a volatile week. We've had a series of failed rallies. There's been a lot of hope still that we're close to a bottom. We're going to talk a little bit more about whether we think we are and what would be signs of a bottom. A lot of attempted rallies that were good in the morning this week failed in the afternoon. Interest rate increases definitely continue to drive everything. We keep telling you about the 10-year US Treasury rate. It's almost a 4.25% this week. We're also starting to hear again from Fed governors. That tends to weigh on markets, uh, at least over the last few months. And then the VIX, that's the volatility index, remains elevated just above 30. Uh, we'll talk a little bit more later in the video about what we think would be a more normal VIX reading, but 30 is certainly pretty high. With that all being said, Nolan, what are your initial thoughts on this week's action?
Yeah, we— a little bit disappointing. We came in Monday this week and we had a huge rally. And Tuesday, investors tried to continue that rally, although it softened a little bit in the afternoon. We closed off the highs. Since then, we have not been able to hold these gains. We're in earnings season right now, so we're heavy into how individual businesses are doing. The good news is we are— we have seen some companies that have done very well with earnings. We're going to talk about a few of them, and their share prices have been rewarded accordingly. This is a very positive sign that the stock market is still a market of stocks. We've also seen some companies that haven't done so well, and their stocks have been accordingly punished. That's also as it should be. On a broad basis, we haven't seen a lot of bullish activity across the board. It's been very discriminate. And so we would like to see that widen a little bit before we got a little bit more optimistic.
Yes. And it's times like these, like you said, it's a market— a stock market is a market of stocks. It's really in stark relief in times like these. We'll jump right into our topics. So topic 1, earnings. It begins. Last quarter, earnings were generally pretty awful. The economy definitely had a downshift in the last couple of quarters. And that was borne out in the earnings results that we saw last quarter. We definitely heard CEOs lowering expectations pretty broadly and pretty dramatically. Now we're starting to come around to the next quarter, see how companies perform relative to those lower expectations. This week we heard from a number of companies that did beat expectations. I'm going to name a few of those. Among those included Netflix, that's NFLX. Uh, we heard from a number of financial companies, mostly money center banks Last week we heard from Wells Fargo and Bank of America that did pretty well. And we also heard from Interactive Brokers, IBKR, and Charles Schwab, SCHW. We also heard from Lockheed Martin, that's the defense contractor, LMT. Heard from airlines, including United Airlines, UAL, had a report that was in excess of expectations. IBM, and then a couple of chip stocks, that's Lam Research, LRCX, and Applied Materials, AMAT. Nolan, that's a buffet of names for you to talk about. Did any of them stand out? And then what's the context for companies that are beating in a lower expectation environment?
It was good to see some companies beat and it was good to see their share prices go up. There are a few that stood out for me. One is the chip stocks that you mentioned. The semiconductor stocks have been in a huge correction. Prior to last week, they had hit new 52-week lows. So it was interesting to see the companies in the chip sectors report and the stock prices actually move up. So it was a bit of a surprise that told you that maybe investors had gotten a little too pessimistic on what to expect. And so the commentary on the chip stocks was more bullish than you would expect, especially given the new government regulations as it relates to selling technology to the Chinese, which had brought earnings expectations down even more. The other one that stood out is travel. You know, on last week's video, we talked a lot about travel. Delta had reported last week, and we spoke about how well the consumer was holding up in experiences. That means they're out traveling more, and we got further confirmation of that this week from the cruise lines as well as American Airlines this morning, uh, saying demand is, is really, really strong, and so is pricing. So those two areas really stood out to me.
Yes, Nolan, I'm definitely traveling. We're all traveling, and that's a theme that does seem to be permeating throughout the markets. We did have disappointing results from a number of companies, although fewer than I kind of expected going into, you know, given the pessimism throughout the markets. But we did hear disappointing results from Tesla, TSLA, from Allstate, the insurance company, and then especially from the Wall Street-focused banks. So that'd be Morgan Stanley, MS, Goldman Sachs, GS, and Northern Trust. What are your takeaways from this group of disappointing earnings?
Not a lot of surprises there. You know, the money center banks or the Main Street banks that just do traditional banking, you know, mortgage business, passbook savings accounts, checking accounts, credit card, auto loans. It makes sense. They get a real big boost there from the deposits. Federal interest rates are up. So they're getting a lot more money from the Fed on the deposit balances that they hold. But they're not passing those higher interest rates on the consumers just yet. So they get a huge increase in net income. I think the Wall Street banks, the fact that they haven't done as well doesn't surprise me either, because they get the majority of their revenue from capital markets activities, that is mergers and acquisitions when companies buy another, or companies that are borrowing money, or IPOs. And all three of those areas are down right now.
Very much so, Nolan. And then, you know, what you mentioned with net interest margin in banks reminds me of a theme that we've been talking about, which cash in the bank It's not paying you very much. So if you're looking for a way to get more than what you're getting in the bank, definitely talk to us. We've got a bunch of investment-grade bonds that are yielding anywhere between 6% and 8%. We'd love to talk to you about those, see if they're a fit for your portfolio. You know, as long as your bank is only paying you 1%, you got to find some other way to beat inflation. With that being said, we'll move on to topic 2. So topic 2, we're asking a question: What would be signs of a stabilizing market? Nolan, it's been, I think, over a year now that we've been in a bear market, you know, depending on how you define that. Obviously, investors are looking for where's the bottom going to be. They're looking for signs of hope.
It's hard.
Unfortunately, I don't think we have a lot of news to bring them that, that should, you know, give them a ton of hope. We've preached caution for the last few months, especially with the economic, geopolitical, and other challenges that are facing companies worldwide. We've got elevated, elevated levels of both interest rates, which we've talked about ad nauseam, and volatility. And then TLT, which is kind of a proxy for the long bond, it's down to 2011 levels after we've had, you know, quite a bull market in bonds for the last decade. Investors still are clinging on to hope, you know, but the VIX hasn't really spiked above 35 for any meaningful period of time. So it looks like we really haven't seen a capitulation event where everyone kind of loses hope and just throws everything out. You know, that's what you sort of normally see at the end of a bear market. Nolan, just a simple question. What is our mood and approach to this market?
Yeah, so at the bottom, the bell's not gonna ring. The big question on everybody's mind is, you know, when do I invest or when do I invest more? And a better question would be, what positions should I take when the time is right? So let's tackle the last one first. Is the time right? Probably not, not yet. We're not going to know an absolute bottom, and investors, it's the mug's game to try to catch it. But here are a few things that we will be looking for that will make us a lot more optimistic on the short-term direction of things. One is the volatility has to come down. These 2% moves, these are not healthy, they're not normal, and they're not the signs of things being bullish. It's the signs of danger. So you have to really be careful. So we're waiting for volatility, those erratic market moves, to sort of slow down. That would be one. The other thing that we're waiting for is for interest rates to stop rising. You mentioned the TLT, and most investors probably are not familiar with that. Basically, that's just industry jargon for saying interest rates. The Federal Reserve Board for over a year has been bound and determined to raise rates. And they say it's to head off inflation. And until they get clear signs, and persistent signs that they have inflation under control, they're sticking to their guns of raising rates. Everything in our economy is based off of interest rates. So when that interest rates continue to go up, mortgage rates continue to go up, credit card, auto loan rates continue to go up, and businesses will continue to pull back. It costs them more money to expand and build new factories, to hire new people, they have to take on more debt, which is more expensive. So rising interest rates really contracts economic conditions, which is why you see investors concerned. And it's probably causing more volatility in the stock market. So we want the interest rates to stop rising, to crest, and then we can sort of level set expectations again. The third thing that we'll be looking for is earnings. That's the second thing that we determine how assets are priced, the amount of earnings that we expect to accrue to a business, and then we can price those earnings. Earnings expectations have continued to come down. In some cases, they haven't fallen enough, which is why you see companies report earnings and the stock prices fall when investors understand that they've been overestimating how much they think this business is going to earn. And so we want earnings estimates to stop falling, and if not for the whole market, at least for specific businesses that we can go take a position in.
Very helpful, Nolan. And, you know, obviously markets fall when there's more sellers than buyers. That means a lot of people have held back their allocations for the last year or sold stock or sold bonds. So they're sitting on cash and probably wondering when the right time is to deploy that cash. I think I know the answer to this question, Nolan, but can investors be patient and kind of wait for their pitch here, or do they really need to start getting this money deployed again?
So yes and no. I think it depends on the investor. I think it depends on their when they're going to need their money back, their liquidity needs, you know, if it's money that they're investing for over a 5 or 10-year time period, I think, yes, they should probably start taking out the shopping list. They can go to our website, Left Brain Investment Research. We certainly have a chosen list and a list of things that we like. And I think they can start getting ready to nibble at positions. For other investors that may be more short-term focused or they're retired or a little bit more worried when they see their statement go down, I don't think you're missing anything. By waiting yet. We're not off to the races on the upside yet, and we could still be in this very foggy position, at least until the Fed stops raising rates. So into next year— into the end of this year, excuse me— things are still fairly uncertain. However, I'm going to caution people, and I think the bulls probably have hit— they do have history on their side that when conditions exist that we're in now, that is, we have a year that's been down this much where universally all assets are down—stocks, bonds, real estate—historically, 6 months, 12 months, 2 years later, the numbers look very attractive as far as the money that can be made on the upside. So I think people are correct in being short-term cautious, long-term bullish, not wanting to miss the upside.
Those are wise words. I hope that's helpful to everyone. I know we've sounded pessimistic over the last weeks and months, But at the end of the day, we're bullish on America and we're bullish on the stock market, just looking for the right way and the right time to get in. So with that being said, thank you, Nolan. Thank you to the viewers, and we'll see you again next week.
