Cover:
-Uncle Sam is becoming America's most powerful investor, taking big stakes in companies to strengthen supply chains and generate revenue for taxpayers. This shareholder activism has bipartisan support, suggesting it will likely outlast President Donald Trump's administration. The US is pushing the boundaries of its legal authority to invest billions of dollars in a growing number of companies in return for stock. A third driving force is to beat China, whose control over some materials and manufacturing processes has exposed critical national security weaknesses for the US amid trade tensions. Under Trump, the government has taken stakes in chip maker Intel and critical minerals firms such as MP Materials and Lithium Americas. Some company boards are clamoring to take on the government as a shareholder, while others are wary of giving up equity or control in exchange for permits or approvals.
Interview:
-Dave Bozeman, CEO of C.H. Robinson Worldwide, is a Midwestern-based executive with a background in engineering management and manufacturing design. The company, founded by Charles Henry Robinson, arranges for goods to be shipped via planes, trucks, ships, and rail. Bozeman's company has gained 41% since Bozeman became CEO in June 2023, trailing the S&P 500's 53% gain. The stock has gained almost 40% over the past six months, while the index has climbed 23% higher due to increased profitability. The company's strong performance came after an unexpected 20.8% increase in second-quarter earnings, despite revenue decreasing 8.0% to $8.2B. Investors are expected to see more growth when C.H. Robinson reports its third-quarter earnings.
Tech Trader:
-Meta Platforms CEO Mark Zuckerberg is focusing on disrupting the artificial-intelligence industry by finding creative private financing to fund its capital commitments and reshaping his staff. The company is on track to spend around $70B this year on new AI data centers, with more promised. Meta is buying all this computing capacity for its own use, not to rent it out to customers in the cloud. Despite capital expenditures weighing on Meta's financials, operations continue to excel, with operating profits up 38% in the second quarter. The company added over $10B in new debt last year, and in the second quarter, its debt and lease liabilities exceeded its cash and short-term investments for the first time.
The Trader:
-Microsoft's stock has been largely ignored since its last earnings report, but a "cloudy" outlook could help it regain momentum. The company's fiscal first-quarter 2026 results are due on October 29, and Wall Street forecasts a nearly 11% increase in earnings, driven primarily by Microsoft's Azure cloud-computing unit. Analysts expect revenue in that division to surge more than 30% from a year ago. Microsoft's partnership with artificial-intelligence leader OpenAI, the developer of ChatGPT, is expected to improve Azure's outlook further in the coming years. The stock is worth about as much as its Redmond, Wash.-based competitor.
-Investors are increasingly favoring junk stocks with poor fundamentals and exorbitant valuations over quality companies with healthy sales and earnings growth, solid balance sheets, and attractive prices. Goldman Sachs reported a 24% surge in heavily shorted stocks in the past month. The small-cap Russell 2000 index has seen a 10.6% increase over the past three months, more than doubling the 4.2% rise in the Invesco S&P 500 Quality exchange-traded fund. However, 40% of the Russell 2000 companies are losing money. Analysts at Kailash Capital Research argue that durability beats drama over time. Sticking with durable, high-quality stocks is challenging, especially when speculative markets make winners out of new objects. Retail investors are making up a larger share of daily trading volume, similar to the late 1990s dot-com bubble.
Features:
-Beijing's five-year plan for 2026 to 2030 focuses on economic, scientific, technological strength, national defense, and international influence. The plan, outlined in the Communist Party's Central Committee's Plenum, could further fuel tensions with the US due to the ongoing trade and export control fight. The plan aims to boost domestic demand and improve people's well-being, but also focuses on technology. The plan will be approved at the National People's Congress meeting in March.
-Progressive, the No. 2 U.S. auto insurer, has seen its stock price fall over 20% since its 1971 IPO, with shares flirting with a 52-week low. Despite rapid expansion, Progressive's growth has been slowing, with automobile insurance policies increasing 15% year over year in September. Pricing pressure is also affecting the company, with auto insurance prices increasing by double digits in 2023 and 2024, but a 0.3% decline in premiums in September. Progressive and other auto insurers are also grappling with increasing costs to repair damaged cars. Combined, these factors suggest that Progressive's growth could slow further, with profit margins expected to decline in 2026, resulting in lower earnings relative to 2025. However, Progressive still has advantages in technology and data, making it the industry leader. The stock is reasonably priced, with projected 2025 earnings of nearly $18 a share and estimated 2026 profits of $16.55 a share.
Europe:
-Moody's has lowered its outlook on French government bonds to Negative from Stable, following S&P's downgrade of French bonds to A+ from AA- on October 17. Moody's cited the country's political instability as a risk to the government's ability to address key policy challenges such as an elevated fiscal deficit, rising debt burden, and durable increase in borrowing costs. France has been trying to reform its pension system and get its deficit under 5% of GDP, but has failed to agree on a budget. Prime Minister Sébastien Lecornu resigned after just one month on the job, following François Bayrou's nine-month resignation over his plan to cut the budget by EUR 44B. The inability of France to effectively govern has caused 10-year bond yields to rise from 3.186% at the end of 2024 to 3.436%, higher than those of Greece, Italy, Portugal, and Spain.
Emerging Markets:
-No update
Commodities:
-Rare-earth stocks have experienced losses due to the US's move away from reliance on China for minerals, which are crucial components in electric vehicles, military equipment, and chips. President Trump and Australia's Prime Minister Anthony Albanese signed a critical-minerals agreement to unlock more capital for the sector, including an $8.5B project pipeline. The deal is seen as a significant step towards reducing risk and boosting growth in the rare-earths industry, which has seen rapid expansion in demand compared to 2014. The deal also includes over $3B in critical-mineral projects over the next six months, with recoverable resources estimated to be worth $53B.
Streetwise:
-No Update