Weekly Market Overview

Last week, the financial markets left us with two major questions. First, whether Scott Bessent’s announcement marked the start of a larger and longer campaign. And second, whether the stock markets have shifted from a correction in the “AI bottleneck” trade to a regime change.

As for the second question, the answer is nuanced. After seven consecutive sessions of losses, Nvidia surprised the market with better-than-expected results: $96.2 billion in revenue—more than double the previous year’s figure—a forecast of $108 billion (versus an expectation of $104 billion), and an order book exceeding 2,000 billion. Although the broader semiconductor sector reacted positively to this, the market response remained muted: memory stock were sold off, and Nvidia itself is still trading below its all-time high. More interesting is the resurgence of the software and services sector, which had been declared dead. Salesforce gained a whopping 20%, Okta 28%, and CrowdStrike 18%—movements that primarily point to a consensus of underweight positions and a concentration of short positions among leveraged funds. Salesforce CEO Marc Benioff and Anthropic founder Dario Amodei appeared in a video declaring the “SaaS-pocalypse” over and software a beneficiary of AI. The sub-sector’s lows, both in absolute and relative terms, are already a few weeks behind us. It’s reasonable to expect that, from now on, the market will view these stocks through a different lens than it did a few months ago, with a focus on opportunity rather than potential disruption.

The first question was already answered on Monday. The 30-year bond made a “round trip,” prompting Bessent to suggest that more than 4 billion is on hand for further intervention. However, all in all, things remained calm on the bond markets. Even if they have doubts about the effectiveness and rationale behind Bessent’s actions, investors know it’s futile to take on the U.S. government in the financial markets: “don’t fight the Fed,” or in this case, “don’t fight the Treasury.” The go-to safe havens are gold and Bitcoin, both of which have seen sharp price increases amid monetary uncertainty.

Consumers remain the weak link in an otherwise positive macroeconomic narrative: (for now) the losers of the AI era, weighed down by high interest rates and rising energy and food prices, and with their minds clouded by too much doomscrolling. Walmart saw its weakest sales growth in six years, and sports retail giant Dick’s Sporting Goods plummeted 30% following a weak quarterly report.

In the coming days and weeks, two things will become clear. First, whether Kevin Warsh’s presentation in Jackson Hole confirms the “path forward” for U.S. authorities. This would further strengthen the trend in commodities, precious metals, and Bitcoin. Second, whether the renewed optimism surrounding software and services will be confirmed by the launch and adoption of AI-driven applications. This would be positive for the technology sector, given that a bull market driven solely by infrastructure and hardware—without visibility into applications—is inherently unstable. Someone has to foot the bill.