In this Jarvis Weekly Update, host Brian Dress, CFA, and CEO Nolan Langford discuss the week’s market dynamics, focusing on three main areas. First, they recap a broadly weak market where the S&P 500 and Nasdaq moved in lockstep, three short‑term price spikes were quickly sold off, and sector ETFs showed widespread declines except for energy (XLE). Second, they analyze the Federal Reserve’s recent meeting, noting the Fed’s decision to hold rates steady, its clear signal of a March rate hike, and the planned end of its bond‑purchase program, while debating how quickly rates will rise and how that speed influences valuation multiples across industries. Third, they turn to earnings season, highlighting upcoming reports from major companies and examining the disconnect between strong earnings fundamentals (e.g., Microsoft, Tesla) and muted or negative price reactions, which they attribute to higher discount rates and market sentiment. Throughout, they argue that this environment creates risks for passive indexing—especially given the heavy weighting of large‑cap growth stocks—and underscores the need for active management, careful sector rotation, and vigilance against value traps such as the recent AT&T earnings disappointment. The segment ends with a preview of the Jarvis newsletter, which will cover active‑management rationale, high‑yield bond opportunities, and novel growth‑security strategies.
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Hello again, and welcome to this week's Jarvis Weekly Update. And what a week it's been. I'm your host and director of research here at Left Brain, Brian Dress. This week on the program, we cover two major topics. The first is the Federal Reserve Board meeting ended just this past Wednesday. And the second is the earnings season, which continued again in earnest this week. But first we have two announcements. Here at Left Brain, we're active managers, and this has been a week of action. If you're unsure of how to proceed with your portfolio in light of the most recent market volatility, Click the link in the description box below and our investment team will reach out to schedule a free portfolio review for you. And secondly, the Jarvis Weekly Update is just a small sampling of the topics that we cover on the Jarvis newsletter each week. Click the link below to get on the list to receive the newsletter in your inbox every Saturday morning. And if you like the video, make sure you like, comment, and subscribe. It helps other investors find it. With that all being said, I'm going to welcome in our CEO, Nolan Langford. Nolan, welcome.
Good afternoon, Brian. Uh, excited to be here talking markets once again.
With that, let's just jump right into the topics, Nolan. Um, first is a quick market recap. Um, I'm gonna put up a quick chart up here of the S&P and the NASDAQ charted against one another, and you'll see quickly a couple of things. First, the two charts look pretty identical, so there's not a lot of disconnection between the two indices. And then secondly, uh, we saw three major pops this week that were all met with major selling. So, Nolan, what are your thoughts on that? Um, looks like pretty weak action on the tape today, this week.
It does. It's sort of, um, a continuation of what we've been seeing really for months, starting— certainly starting to accelerate somewhat. Um, But yes, we'll talk about this when we get to earnings. It has been weak market action. Um, you can tell that even when we open on highs, closing on lows, that sort of thing. And then if you look at the, uh, the tape with the advancers versus decliners, even on up days you're seeing weak action. So for the moment, um, the market's tending to trend very cautiously.
And here on the screen, we're going to spin through a few of the, the key SPDR ETFs. First, you'll see XLE, the energy ETF, was the only one really up this week. XLF was down slightly. And then, you know, we saw a lot of selling, of course, in technology and consumer discretionary. That continues a pattern that we've seen before. But we also saw weakness in a lot of what we consider safe haven sectors, and that's utilities Healthcare and staples all had some weakness this week. Um, so it's just showing you it's a broad-based, uh, amount of selling going on in the markets. Um, the key stories this week were the Federal Reserve, GDP, and then earnings. So those are the two— the main topics for this week's video. So for topic one, we're going to talk about the Federal Reserve meeting this week. Federal Reserve met for the first time this year Tuesday and Wednesday. We got the rate announcement Wednesday. We got the press conference with Jerome Powell on Wednesday. Obviously a big market-moving event. Fed stated they were going to stay, stand pat this week, telegraph a rate increase for March and also end their bond purchase program in March. So, Nolan, what are your key takeaways from the Fed meeting this week?
I think one of the things, it's clear. I think all investors are aware that interest rates are finally on the way up. I think that is clear. Federal Reserve Board has telegraphed their intentions for months, and I think most investors knew it was coming. I think, um, the issue becomes how fast. How fast do interest rates go up? I think them going up, most people think, are inevitable. And, um, so I think the speed of it and the duration— how long is it going to last— is what the new information I think that's tripping people up. Um, if inflation is going to be rampant and persistent, that's a different pace of rate increases than just a strong economy.
Because of the way that the Fed is starting to change course, fundamentals are starting to become divorced from market action. So I don't know if this is the Fed or something else or what your thoughts might be, but It seems to me that the new Fed regime has changed the way that market participants are looking at stocks in almost every industry, and the fundamentals don't seem to mean as much in the short term here.
I will push back a little bit. We've seen really good price action, as an example, this week in Corning. GLW is the ticker. And we had follow-through buying following a good report. Blackstone, same thing, had been weak, but they reported good numbers. Uh, the stock did well. We saw that with Bank of America. So you have to be a little bit more careful. It isn't all things, uh, get rewarded with a good print. You remember the market's forward-looking, and I think, um, the market's concerned a couple things. One, I think some— most earnings, or a good chunk of those earnings, will hold up. But as you always say, Brian, you know, the price is a function of two things. It's, you know, it's the earnings and then what we're willing to pay for them. That is what is getting discounted. And, you know, if you go back and look, uh, we— you and I were talking about this in our director research meeting. I did a little work. And if you go back, there's a lot of sectors over the last 5 years, the multiples have just expanded. You know, we have spent a lot of time talking about the hypergrowth stocks that, you trade at over 20 times sales, up from 10. But there's a lot of these companies that trade at EV to EBITDA. That's, for the non-professionals, that's enterprise value to earnings before interest, taxes, depreciation, and amortization. It's another way of looking at a P/E ratio for a company that doesn't have reported GAAP earnings. Even those have gone up. There's a lot of industries where the normal multiple there was 8 to 10. And you look now and it's in the mid-teens, and that's for a lot of industries. So it is a little bit of, I don't think the earnings have to crash. I think right now investors are telling us we're willing to pay less money for the earnings we're getting.
So with that, we'll move on to the second topic. So, Nolan, earnings season, always important for us. We're right in the thick of it this week. We saw many earnings reports this week. Usually we're looking for fundamentals and, and what's going on with the fundamentals, and of course we are this, this time as well. But what we really think is interesting has been the reaction to those earnings, and I think that's what we're looking for going forward into the coming earnings next week. Next week we have ExxonMobil, UPS, Chubb, General Motors, Starbucks, Qualcomm, ConocoPhillips, Honeywell, and Ford among many others reporting Nolan, what are you thinking generally, uh, in terms of how earnings are coming out and what the reactions are looking like? And then when we— after that, we'll get into a couple specific examples.
You know, we always pay attention to, um, these big earning release quarterly, uh, days. They're really important for us, like the NFL playoffs. I mean, we really— we tune in and we get 4 of them a year, so it is really important. And, uh, what it tells us is, unlike stock prices, you know, at the end of the quarter we get to hear from the CEOs and, uh, we get to hear what the play is like actually on the field in the trenches, and they don't always match. So I'm most looking forward to this batch of companies you mentioned next week and others, hearing what the CEOs are saying about the business, the business climate, not only just the earnings that they've just printed Are they having a problem with labor? Are they having problem getting supplies, uh, because of the supply chain issues? Are they having to pay more for labor? What's the competitive dynamics like? Um, that sort of thing is a lot more telling as far as a future direction of where things are headed. Uh, so those are the things I'm going to be really paying attention to. And then the other thing that allows us to catalog is companies that may not print a good quarter for whatever reason, and, uh, sometimes they're punished fairly, but a lot of times there's an overreaction. So that would be the other thing I'm going to be looking forward to, uh, in the earnings notes. You'll notice you've seen a little bit of that with Netflix this week. Um, you know, a lot of people think that maybe they were treated way too harshly with their share price, and you've seen an activist in the name this morning that drove the stock up. So, that's another thing we don't talk about, but as these really, really good businesses get cheaper, you know, for the longer-term investor, it's not a time to really cry. It's time to make a list and sharpen your pencil because if you get some of these businesses, you know, cheaper, and in some cases a lot cheaper, it's going to make your forward returns, if it works out, very, very handsome, and the catch-up can happen very quickly. So, That would be the other side of that.
In the interest of time, we're going to jump in. We got two examples we want to, want to show you. First of all, I'm going to throw up a chart of Microsoft here. Microsoft reported earlier this week positive dynamics going on inside the business. Obviously, very mixed reaction, as you can see from the chart. And then also the second one was today's earnings of Tesla. Again, The business is strong, fundamentally speaking. But as you can see in the chart here, again, the reaction wasn't so, wasn't so great. And Nolan, I just wanted to get your thoughts on how you view this. This is a pattern that seems to be emerging. What do you take away from it?
More evidence of what we said earlier. Not a lot of buyers around and there's a lot of sellers. Of these stocks, and they're starting— the momentum is starting to unwind the other way. Again, it isn't the business case here. That's the, you know, that's the really big differences. Most of these companies are real sales, real earnings, real profits. They are the new leaders, the king of digital information, internet, etc., and they are going to be around for a very long time. But you you know, the market prices shares on a day-to-day basis. Supply and demand comes into effect, and the reverse momentum comes into effect. And so you could see, you know, when interest rates going up, a big valuation correction, not only in Tesla but in another names that, at, you know, that are like Tesla. Part of what, um, is interesting to me, um, is we've been talking about around the office is a lot of these you know, the market, yes, it on the headlines had a really good year last year, but there was certainly a lot of pain to go around last year from a performance standpoint, particularly if you are a growth investor. But there was, you know, a handful of really big names, Tesla being one, and, and there's some others that had outsized return years, and they were big weightings in the index. So at the index level, it really looked like the indexes did better than probably the average portfolio. And part of me wonders, once those big tentpole companies, their share prices started to soften, you could really see the index numbers go the other way.
It's definitely a risk that I think investors need to consider. And I also think argues for active management, definitely. Indexing has become so popular over the last few years. But what you're saying and indicating is telling us there's an underlying risk to indexing that folks may not be considering. So, you know, we need to be taking a look at these large-cap growth companies and understanding that there's definitely risk to indexing since they make up such a huge percentage of the index.
Yeah, there's one other thing I would like to throw in there, Brian, in this segment. If I could really quickly. I don't think it's just growth. I just want to point this out. You have to be really careful of value traps as well, because it looked like, you know, so far this year, you know, you get a couple sectors that are weak, and then you still see some strength in one or two sectors. And so the buying just rotates from one sector to another. The defense is on the field. So you would expect, you know, utilities, consumer staples, even though they are, they are down this year, you would, you would sort of expect that. But a lot of people have been rolling into these quote-unquote values because they had a little green on the screen, and then they give it up. Case in point is AT&T. You know, prior to them coming out with earnings, AT&T, with that big dividend yield, people are saying, hey, this is one of the dogs of the market. We're in a new year. These type of companies that have cash flow, you know, these are the the type of companies people are going to rotate to. But then once AT&T came out with earnings here a few days ago, um, certainly the shine came off quite a bit. So you have to be really careful as well about just diving in anything that says value or says dividend. The bottom line, they still have to have a strong business. The fundamentals have to be good, the financials have to be going in the right direction, and you have to see some improvement.
Yes, acceleration is always the name of the game for us. Um, so thanks, Nolan. We're going to just give a quick preview of, of the newsletter. We're going to cover those topics, of course. Also why we think active management is so important in times like these, an examination of high-growth stocks over the last 5 years, areas where we see strength and weakness in the markets right now, and also potential opportunities we see developing not only in high-yield bonds but also a novel way to play growth securities when the time is right. So look for all those topics and more in the Jarvis newsletter. Thanks, Nolan, for being with us. Thanks to our, uh, our audience once again for supporting Jarvis. And, uh, we'll see you again next week.
And hey, listeners, don't forget the Jarvis Letter comes out every single week on Friday. And to get the advanced copy, to make sure you're on the list, hop on over to our website, put your name on the list so you can make sure you're getting that thing in your inbox.
