Cover:
-Tech investing in 2026 is experiencing significant upheaval due to the influence of artificial intelligence (AI), which is transforming business dynamics. The Tech Roundtable highlights the duality of AI's impact: while it has the potential to enhance productivity and address major global challenges, it also poses threats such as job loss, privacy invasion, reduced profit margins, and complicating the truth. This tension is evident on Wall Street, particularly with stocks like Nvidia, which, despite being a former go-to investment in AI, has stagnated for the past six months. Additionally, the perception of software as a prime business model is shifting, as AI-driven solutions emerge. Companies that once thrived on asset-light tech models now face substantial financial demands, likening them to traditional, debt-laden industries. In summary, the landscape of tech investing has dramatically changed, necessitating a reevaluation of strategies and stock picks to adapt to this new reality.
Interview:
-JPMorgan Chase CEO Jamie Dimon has appointed Todd Combs, a former investment manager at Berkshire Hathaway, to lead the bank's new $10B Strategic Investment Group, marking a rare outside hire for the senior executive team. Combs, who has served on JPMorgan's board since 2016, is familiar with the company’s operations and strategy. His role involves directing investments towards US defense, aerospace, healthcare, and energy sectors, with a focus on revitalizing domestic industries that have been outsourced over the years. Combs aims to invest in middle-market and large companies to help foster growth, having already targeted firms like Perpetua Resources and defense tech startup Shield AI. Additionally, as part of JPMorgan's Security and Resiliency Initiative, Combs is committed to facilitating $1.5T in investments for businesses critical to national economic security, alongside an advisory council led by Dimon that includes prominent figures such as Jeff Bezos and Condoleezza Rice.
Tech Trader:
-This past week, Meta Platforms submitted paperwork regarding incentive plans for senior executives, excluding Mark Zuckerberg, with stock options ranging in strike prices from $1,116 to $3,727. To realize these options, Meta would need a market value of at least $9.6T, necessitating a 580% increase in share price or an annualized 47% over the five-year option term. A Meta spokesperson emphasized that these pay packages will only yield value if the share price significantly exceeds the exercise price and achieves exceptional future success, mirroring growth rates seen in the 2010s during the company's rise in the digital ad space. Meta currently has potential for growth in its P/E multiple, which recently dropped to 17, below the S&P 500's 20. If the stock's P/E were to increase to 30, earnings per share (EPS) would need to rise by 33% annually, while a P/E of 40 would require a 26% annual growth.
The Trader:
-While the Dow Jones Industrial Average (DJIA) declined by 0.9% this week, it has entered correction territory along with the Nasdaq Composite (down 3.2%) and the S&P 500 index (down 2.1%). The ongoing concerns regarding the potential war with Iran have led to increased volatility, as indicated by the Cboe Volatility Index (VIX), which reached its highest level in nearly a year. Despite this, David Rosenberg from Rosenberg Research notes that the market has not yet seen a complete capitulation. President Trump's extension of the deadline regarding Iran may indicate a potential for negotiations, with analysts suggesting that market valuations, currently at just below 20 times forward earnings, are decreasing and may signal that a rebound is due soon. Historically, when similar trends in earnings and valuations occurred, the S&P 500 has gained an average of 10% in the subsequent six months. Analysts believe the current decline is a correction within a broader bull market that began last year, though challenges such as rising oil prices and inflation will likely constrain the Federal Reserve's ability to lower interest rates to aid market recovery.
-The market reacted negatively to the announcement of Jerry Fleeman as the new CEO of Dollar General, with shares dropping 5.8%. The stock is currently undervalued at 24% below pre-Iran conflict levels, due to concerns that dollar stores struggle to maintain profit margins during inflationary periods. However, these fears are seen as shortsighted as Dollar General is modernizing its consumer engagement strategies, which is expected to lead to sustained profit growth. The outgoing CEO, Todd Vasos, who initiated a turnaround for the company, has left behind a positive momentum. Under his leadership, the stock appreciated by 50% prior to the ongoing conflict, and same-store sales growth has recently accelerated to nearly 3%. The company's management has also successfully normalized the gross margin and achieved a 12% growth in earnings per share for 2025, setting a promising tone for Fleeman's tenure starting January 1, 2027.
Features:
-High oil prices are expected to persist, potentially lasting until 2027, largely due to the ongoing Iran War, which has severely disrupted global supply chains and closed many oil wells. Karim Fawaz from S&P Global indicated that the opportunity to restore normal market flows quickly has passed. Despite expectations of high profits from energy executives, the industry's reliance on limited supply rather than actual demand growth presents sustainability challenges. Countries like the Philippines and Bangladesh have begun energy rationing amid decreased oil and natural gas availability, with Asian demand projected to decline significantly. Infrastructure damage primarily affects Middle Eastern producers, while Western companies like Exxon Mobil and Shell also face production hurdles. Chevron's CEO noted that current oil prices might not fully reflect these disruptions, as traders remain optimistic about future price drops despite ongoing supply challenges. The situation is further complicated by humanitarian issues affecting stranded crews in the Persian Gulf due to conflicts blocking shipping routes.
-United Parcel Service (UPS) is a well-known logistics company, recognized for its distinctive brown trucks and extensive service network across 5,800 locations in the US and Canada. However, investor confidence has been shaky due to UPS's poor investment performance over recent years, faced with ongoing challenges. Despite management's efforts, a significant turnaround is anticipated in 2026, potentially benefiting from favorable market conditions, a low stock valuation, and an attractive dividend yield, which could lead to a projected 30% gain for shareholders within the next 12 months. This optimism comes after UPS shares have declined around 40% over the past five years, in stark contrast to the 68% rise of the S&P 500 and a 30% increase by competitor FedEx. A combination of factors has contributed to this underperformance, including a volatile post-pandemic shipping environment that peaked in 2022 but faced a severe decline thereafter.
Europe:
-On Thursday, the European Union voted to advance President Donald Trump's trade deal, with a decisive 417 votes in favor and 154 against, following months of delay that had frustrated US officials. The deal includes the elimination of EU levies on US industrial products and introduces a robust suspension clause, enabling the EU to halt the agreement if the US imposes new tariffs or threatens member states’ territorial integrity. Members of the European Parliament (MEPs) will now negotiate with EU governments to finalize the legislation, with MEP Bernd Lange emphasizing the need for strong safeguards and US compliance with the deal terms before any signatures. This trade agreement, originally agreed upon by Trump and European Commission President Ursula von der Leyen in July, aims to clarify trade relations amidst previous tensions that delayed progress, including Trump's Greenland remarks and legal rulings against tariffs.
Emerging Markets:
-Venezuelan opposition leader Maria Corina Machado proposed full privatization of the country's oil industry, envisioning production increases from one million to over five million barrels per day. Speaking to energy executives at the CeraWeek conference in Houston, she suggested dismantling the state oil company PDVSA and inviting private companies to drill, offering stable long-term contracts with capped royalties. Her plan received an enthusiastic response, highlighted by standing ovations. With former President Nicolás Maduro imprisoned and no clear election timeline, Machado expressed confidence in her potential electoral victory. Despite challenges, interest in Venezuelan oil investment remains, although executives cited lingering concerns over legal disputes and government stability. Smaller American companies are exploring opportunities amid the transition to a more productive energy sector.
Commodities:
-Oil prices experienced a slight decline after President Donald Trump announced a 10-day extension on pausing attacks on Iranian energy facilities, set to last until April 6, 2026. Brent crude fell to $100.73 per barrel and West Texas Intermediate to $93.38. Trump's remarks indicated that Iran permitted 10 oil tankers to pass through the Strait of Hormuz, perceived as an olive branch. Despite this, Iran's regime labeled Trump's statements as false. Furthermore, reports suggest that passage through the Strait may come with informal tolls, amounting to around $2 million per voyage. Indirect US-Iran discussions are reportedly ongoing, facilitated by Pakistan, alongside Turkey and Egypt.
Streetwise:
-The US airline industry is facing challenges, including a recent Air Canada runway crash and staffing shortages due to a partial government shutdown, leading to significant delays. Meanwhile, Delta Airlines has notably outperformed the market, achieving a 114% return over three years. United Airlines has also performed well, though it has seen a decline this year. In contrast, American Airlines and JetBlue have struggled, raising questions about sustained stock growth in the industry.
Airlines have shifted away from hedging fuel costs, opting for strategies that reduce complexity, although Delta's purchase of an oil refinery allows it to navigate price fluctuations reasonably well. Current earnings projections suggest Delta's earnings could top $6.69 a share, indicating potential growth ahead, while United's projections have seen only minor reductions. A recent industry truce on hedging means all airlines are facing similar cost structures, preventing underpricing by competitors. Good demand is illustrated by increasing airport congestion, with Delta reporting a 25% year-over-year sales spike while United, American, and JetBlue also report positive growth metrics. Nonetheless, concerns about a drop in travel searches might indicate potential future challenges.