Do you have plans later?
Well, supposedly there's some Nvidia earnings watch parties going on in the financial district.
Well, the $4 trillion market cap company will be posting earnings after the closing bell, with analysts expecting adjusted EPS of a buck and a cent on $46.2 billion in revenue.
Jenson Huang's company also expected to report. $8 billion hit from the previous H-20 chip export restriction to China.
Well joining me to break all of this down is Eric Belson, partner and deputy CIO of Three Edge Asset Management.
Well, thank you so much for joining me today.
Thank you for having me.
A lot of anticipation heading into the closing bell today with Nvidia earnings.
So first and foremost, what are your expectations?
O, tough call to say, and the market seems to, you know, it doesn't really matter what the earnings are, whether they're good or beat expectations.
The stock price could still go up or down based on that.
But what I'd say is we're definitely seeing signs of bubble forming potentially with this technical technical innovation and the euphoria around AI and the AI infrastructure.
We saw this, you know, time and time again with railroad stocks, you know, steam engine, electricity, internet, and AI and everything surrounding it, you're seeing signs of easy and excessive margin lending.
You're seeing the fear of missing out and momentum trading, you know that this time is different mentality and by the dip.
So a lot of these are typically present social media contagion and meme stock investing.
So many of these things have occurred before with prior bubbles, and so it's possible that the handful of 6 or 7 stocks driving the market today. are in a similar boat.
Yes, Eric, you hit on a lot of key points there and in this day and age of social media, we know that when it comes to investor sentiment, there's a lot of that that's moving around.
So I think it's so important to be able to separate some of that noise from the signal right here and here behind us, we just had the Big 10 ringing the opening bell here at the New York Stock Exchange with A.
So here.
Are some of the mascots from the Big 10 teams right here.
But speaking of which, how do you separate the noise and the signal?
Yeah, well, we have a quantitative investment process and so we're trying to look at specific data points and not get too caught up in the day to day and the headline of the day news, particularly like earnings, but at the same time, like we talked about the potential for a bubble, there's always a chance some catalyst is ultimately going to send the market back down.
Yeah, and speaking of which, you also mentioned concentration risk.
And when we think about valuation here, especially for the S&P 500 and the leaders within the S&P 500, what do you think is important to know as we head into the end of 2025?
Yeah, I mean, I would say valuation is a real big concern for us.
We think the markets, particularly in the US, are very overvalued.
If you go back to the lows of the global financial crisis, February, March time frame of 2009, since then, earnings.
Have grown about 4 times.
Stock prices have gone up 8 times.
Now if you look at earnings and you look at stock prices over very long periods of time, they tend to track each other pretty tightly.
So the fact that there's this much dispersion leads one to believe that either earnings have to massively go up or more likely stock prices are ultimately going to come back down.
But not exactly a tactical timing instrument.
Yeah.
And speaking of timing and overvaluation, I do want to focus on one name, and that is Palantir.
So what's going on with this name?
Uh, well, you know, hard to say exactly what we're going to ultimately see.
Happen with everything yeah and last but not least before I let you go in terms of catalysts that we're paying attention to, big picture, of course we do have the Fed Reserve meeting happening and this does come at a time when we're at the intersection of politics and actual economic data here.
So how are you heading into the final months of 2025?
Yeah, I think it was very interesting.
We have, you know, inflation has been a concern.
The Fed has been unable to get it back down to their targeted 2%.
Uh, following a recent spike in inflation and now we're definitely down at a low, but then you saw Powell at Jackson Hole suggesting maybe a little bit more openness to beginning a rate cut cycle potentially as early as next month.
You know, they're they're in a tough spot.
They have the dual mandate of price stability, but also full employment and with the weakening labor market, but inflation maybe not where they want it, lowering rates might actually bring inflation back up.
If you take a look at the 1970s, you take a look at the 1940s, inflation took a eerily similar path that it's already taken now, rising quite a bit, coming back down, and then ultimately going back up again.
So we'll see if we're going to follow that same path soon.
Also, as many are aware.
The Federal Reserve's term is up next year.
There's a lot of change potentially with other Fed governors underway as well, and that brings into calls into question this concept of fiscal dominance, the idea of a central bank effectively funding the spending for the US government, which would be concerning and likely inflationary.
OK, Eric, thank you so much for joining me here at the New York Stock Exchange and thank you so much for sharing all of your insight.
