Jurrien Timmer

Bitcoin is looking particularly interesting here as it challenges key resistance at $80k. If it breaks it will confirm a double bottom targeting $100k. https://t.co/aceLKA6nUK

Both the BCOM spot index and Bitcoin continue to be good diversifiers, as are managed futures, REITs, hedged equity, and cash. https://t.co/eKu93hNzzN

In my view, a broadly diversified 60/20/20 model continues to make sense. The chess pieces are always moving, and currently it’s Bitcoin and commodities in the lead, followed by the Mag 7 which has perked up in recent weeks. At the bottom are (what else?) long yields. https://t.co/g9mLuleXin

As disturbing as the near-perfect price analog is between the semis today and the internet stocks 26 years ago (see below), the critical difference is that earnings were non-existent in 1999 and 2000 while they are booming today. So, at forward P/E of 20x, there is no valuation bubble as far as I can see. If the AI theme unravels at some point, my guess is that it will be because investors are choking on the firehose of capital raises as opposed to being deceived by earnings that don’t materialize.

The S&P 500 has not made any lasting progress since early June. The market remains in a state of churn as investors try to assess whether earning growth is peaking, whether the AI boom has ended, and whether the Iran conflict will continue to accelerate as bond yields surpass 5% and oil trades above $100. What’s the catalyst to generate the bull market’s next up leg? For now, I don’t see one. Welcome to September!

The real 10-year yield is now 2.67% and is above the US economy’s potential real GDP growth rate of 2.5%. That is a significant and somewhat troubling milestone. Yes, margins are still rising and credit spreads remain tight and earnings are still booming, but investors are not paying up for what well may be peak earnings growth. The result is an S&P 500 that has treaded water since early June, with only 29% of stocks above their 50-day moving average and 53% above their 200-day MA.

Finally, Bitcoin has been on the move after holding the $60k support zone for almost a year. That’s how long a typical Bitcoin winter lasts, so I’m sensing that a new 4-year cycle bull market is underway. Note that the Z-score of BTC/gold has turned positive after being -100%. In the past that has generally been confirmation of a bottom. What does all of the above suggest? We are in a new secular regime of a higher cost of capital, which suggests that governments will respond with that oldest trick in the book: financial repression.

Here we see the payout growth rate and payout ratio for the Mag 7 against the equal-weighted S&P 500, value, financials, EAFE, and EM. The Mag 7 led this secular bull market from 2014 through 2025, but it looks to me like its reign has ended. https://t.co/7awxkBFins

Exhibit A in the changing financial engineering dynamic is the Mag 7, whose payout ratio has plummeted to 28%. Yes, companies are supposed to invest their free cash in capex and not play it safe with buying back shares. But the ROI on buybacks is known while the ROI of capex is unknown. Uncertainty requires a higher risk premium in both the bond market and stock market, and we are seeing it play out in real time. The Mag 7 is revisiting its highs, which is keeping the S&P 500 index close to its peak levels, but notice below how the relative performance of the M7 peaked in line with the end of the buyback era. Since then, the relative price has diverged from the absolute price.

Exhibit A in the changing financial engineering dynamic is the Mag 7, whose payout ratio has plummeted to 28%. Yes, companies are supposed to invest their free cash in capex and not play it safe with buying back shares. But the ROI on buybacks is known while the ROI of capex is unknown. Uncertainty requires a higher risk premium in both the bond market and stock market, and we are seeing it play out in real time. The Mag 7 is revisiting its highs, which is keeping the S&P 500 index close to its peak levels, but notice below how the relative performance of the M7 peaked in line with the end of the buyback era. Since then, the relative price has diverged from the absolute price.