Chris Thornton

This chart from Yardeni Research reveals what's happening in the market. As profits have marched upward, the price of stocks has essentially plateaued. This is even though FY27 EPS estimates are not looking too shabby either. I sense investors are reducing risk and taking some money off the table.

Sustainability of the AI Trade: It comes down to whether demand growth continues to outpace supply. In 2026 demand has taken off, but enterprises are struggling to find a measurable return on investment. Supply is set to explode in 2027. And if demand growth falters? www.barrons.com/articles/cor...

Dow Theory Forecasts: Early 3Q earnings have provided some optimism, resulting in the DJIA rebounding >3.5% from the low on 9/30, and the Transports about 3.3%. FactSet estimates S&P 500 Index 3Q26 earnings to climb 29%. Encouragingly, estimates for 4Q26 and FY27 have also edged higher since 9/30.

Dow Theory Forecasts: "The market entered earnings season on the back foot, with stubbornly high inflation keeping bond yields near 24-yr highs. . . We view the pullback since Aug. 5 as a correction. Given a meaningful rebound, the lows reached will be considered significant under the Dow Theory."

I recently caught this recording on PBS’s Austin City Limits show. Sienna Spiro is another R&B singer from London, of the same mould as Amy Winehouse, Adele and Olivia Dean. She is only 21 but is confident, talented, and more mature than her age would suggest. www.pbs.org/video/sienna...

Dow Theory Forecasts: Tech' has affected the market beyond each stocks’ individual performance. The last 3 months, the cap-weighted S&P 500 Index has returned 4.2%, vs –1.4% for the S&P500 Equal Weight. In fact, the tech' portion of the S&P 500 returned 14.6%, vs –1.5% for the rest of the index.

Dow Theory Forecasts: "Stocks are expensive relative to trailing 10-yr earnings, but ave P/Es for the S&P500 and broader S&P1500 are in line with the norms since 1994. Large companies, which have delivered outstanding growth, trade at a substantial premium. Sentiment is bullish, but not euphoric."

Dow Theory Forecasts: When prices near previous highs, investors can lock up profits at a level that triggered past selling. It is bullish if the price advances further. When prices near a previous low, investors can buy at a level of previous support. If the price breaks that level, it is bearish.

Jeff Hirsch's presentation at AAII San Diego. "Be aware of the Mid-term Cycle. The Trump cycle is unique as it includes a seasonal spring bottom. 2026 appears on track to repeat 2018. Expect a correction of –10% from the beginning of October through year end." aaiisandiego.com/events/past-...

Dow Theory Forecasts: "The FactSet consensus projects earnings growth will decelerate in 2027. This is expected given that the growth projected for 2026 (32%) is unsustainable. With the Dow Theory still bullish and the S&P 500 Index up more than 11% so far this year, we are holding 94% in equities."

Alex Karp, CEO of Palantir: “LLM companies are essentially asking for societal regulation. . If your technology has a 10% chance of destroying the world, civil and criminal liability is attached to it. The only way to deal with that liability is to say to the government, Regulate us! Please!”

Dow Theory Forecasts: “The CEOs at Anthropic and OpenAI urged companies to slow their pace of AI development. OpenAI, Anthropic, and Alphabet are looking to form a partnership to address safety concerns. Meanwhile, Microsoft published a code of conduct for training new AI models.” www.dowtheory.com

Dow Theory Forecasts: “Year to date, the DJII has gained 9%, the S&P 500 12%, and the Dow Transports 20%. After such gains pullbacks are not surprising. But given the Dow Theory’s bullish stance and our ability to find fast-growing stocks at reasonable prices, any pullback is a buying opportunity.”

Here's the link to a great article, "Songs of Experience: Reminiscences of a Strategist" by Liz Ann Sonders, Chief Investment Strategist at Charles Schwab & Co. Liz Ann writes about her influences and experience over her 40 years on Wall Street. Originally posted on 'X' t.co/zoQEwMagBf

Dow Theory Forecasts: “The benchmark 10-yr Treasury bond yield reached 4.76% in early September, the highest level since Jan ‘25, as oil prices rose on renewed skirmishes between the U.S. and Iran. A move above the 19-yr high near 4.9% reached in Oct ‘23 would be bearish.” www.dowtheory.com

Dow Theory Forecasts: Sep & Oct are volatile months for U.S. stocks. September is the worst for the S&P 500. It has seen more losses than gains, and an average decline of 1.1% since 1928. Midterm election years are especially bad. February is the only other month with an average decline of 0.01%.

Olivia Dean is another product of London's BRIT school of the performing arts. She's a genuine artist, exhibiting beauty that is more than skin deep. This article shows her as happy, balanced and comfortable with her new fame. I hope she one day finds true love. www.wsj.com/arts-culture...

$40T! "Wars, the bursting of the dot-com bubble sent budgets off course in the 2000s. The 2007–09 recession drained tax revenues and prompted stimulus programs, as did the pandemic. Meanwhile, an aging population increases Medicare and SS spending as lawmakers pass and extend tax cuts." @wsj.com

News just in: US debt has surpassed $40 trillion. This comes during a week dominated by headlines about bond yields. It follows the Treasury's announcement earlier today that it is doubling its long-bond buybacks in an attempt to push down yields there. (CNBC headline below.) #economy #markets #debt

Dow Theory Forecasts: The capital-spending boom for AI equipment and data centers is so big it is putting upward pressure on bond yields, including U.S. Treasurys. Massive debt-financed gov. spending, along with stubbornly high inflation, and diminished expectations for rate cuts is neither helping.

Dow Theory Digest: The small-cap’ S&P 600 Index has gained 24.4% this year; compared to 13.5% by the S&P 500. This is in contrast to eight of the last nine years, when the S&P 500 dominated. This year’s difference in performance demonstrates the importance of holding some small and mid-cap’ stocks.

Dow Theory Forecasts: The S&P 500 Index is rolling over after a four-year rally. Changes in leadership often triggers a correction, and mega-cap stocks that led the advance have lost momentum. Bulls argue that investors have simply been rotating into other groups, such as health care and financials.

Dow Theory Forecasts: Analyst consensus targets for S&P 500 stocks for 2Q26 earnings imply 29% growth for the broad index; the best since 4Q21. This is followed by 30%+ growth for 2H26. The economic conditions could of course change. Such lofty targets imply confidence in the business environment.

Albedo 0.39 An album released by Vangelis in 1976, and a property that represents the fraction of incoming sunlight that planet Earth reflects back into space. According to @economist.com, Earth’s albedo is deteriorating, thus more of the sun’s incoming energy remains, raising surface temperatures.

Microplastics: How to reduce your exposure? “Eat less processed food and use a steel water bottle. Use an air purifier in your bedroom and opt for natural fibers when buying clothes. Store food in glass or foil and don’t heat anything in plastic.” www.wsj.com/health/welln...

England loses to Argentina. The last time England won the World Cup I was 8 years old. I fondly remember players like Bobby Charlton and Gordon Banks. It was a time when Mini Cooper S cars ruled Britain’s roads and steam trains still thundered through our village on the Great Central Railway line.

Dow Theory Forecasts: “U.S. banks kicked off earnings season, with robust profit growth that exceeded estimates. They revealed strength in consumer and trading businesses, with higher fees from IPOs, mergers, and acquisitions. Delinquency rates for credit cards also trended lower.” www.dowtheory.com

“In the Barron’s Roundtable mid-year review members all offered variations on the same advice: Run from overowned, overvalued tech stocks and seek safety among many promising companies . . that have been left by the stampede into all things AI.” Layman’s conclusion: Then we’re not in an AI bubble.

Dow Theory Forecasts: Small caps (S&P 600 Index) and mid caps (S&P 400 Index) have outperformed this year, with small-caps more than doubling the gain of large caps (S&P 500). The breadth of this market action is appreciated. Our Buy List is 91% stocks; the remainder in bond funds.

In South Northamptonshire, not far from Silverstone, U.K. (Home of F1), stands the ancestral home of George Washington’s family. This is where both flags of the U.S. and U.K. proudly fly. No place better reflects the origins of the two countries’ “special connection”. sulgravemanor.org.uk

Aside the ongoing celebrations of America’s 250-year anniversary, today we also have: • British F1 GP at Silverstone • Stage 2 of the Tour de France • Indy NTT GP at Mid-Ohio • England vs. Mexico World Cup game • Wimbledon tennis So much choice, not enough monitors and a limited amount of time.

Dow Theory Forecasts: Profits have powered the S&P500 Index’s 21% rise the past year. The index’s forward P/E of 20 is little changed from 12m ago. Moves above 22 are historically short-lived. Expectations for Q2 have risen sharply. Per-share earnings are expected to surge 23.1% vs. last year.

Dow Theory Forecasts: “The Dow Transports have dipped 4% since 6/12. The index is otherwise up 24% this year. The high on 4/21 remains partly because Avis Budget Group ($CAR) is now 74% below its short-squeeze price on that date. Otherwise the Transports would have reached a new high this month.”

Dow Theory Forecasts: Massive moves in some stocks inevitably triggers selling. Ex. A portfolio that began the year with 4% in Micron Tech ($MU) now has nearly a 12% position. Periodic sales to rebalance winners is one reason stocks seldom move up in a straight line, even when news is still bullish.

America at 250: In 1776 America declared its independence. From this act of defiance came a liberal experiment. America would go on to champion open markets, free societies and human progress. The @economist.com reviews the triumphs, hypocrisies, booms and busts. www.economist.com/interactive/...

Dow Theory Forecasts: With all-time highs in the Dow Transports in April and the Industrials in early June, the primary trend is squarely in the bullish camp. While the recent bull-market confirmation does not preclude a pullback, it suggests any correction should be viewed as a buying opportunity.

Saw ‘The Last Dinner Party’ in west Des Moines, IA last night. This all-girl indie-rock band from London (male bassist a fill in) is very creative, animated, theatrical and artsy. Four members are multi-instrumentalists and could easily be a lead vocalist of their own band. A Grammy-caliber show!

Dow Theory Forecasts: Tech’ is up 18% the last month and 36% the last three months. In 2021 the sector was 25% of the S&P 1500 Index by market cap’. It is now 38%. Collectively, earnings are expected to rise 55% the next 12m. But even with a high forward PE of 26, its PEG ratio is still only 0.7.

Dow Theory Forecasts: On 5/21 the Dow Industrials logged a new high, above 50,188.14 set back in February. This corroborated a previous high in the Transports to reconfirm the Dow Theory’s bullish stance. No new high point will become important until the Industrials suffer a meaningful correction.

Dow Theory Forecasts: A close above 50,188.14 in the Dow Industrials would reconfirm the Theory’s bullish stance. But if they fail to take out that key high, and both the Industrials and Transports retreat below their respective March lows of 45,166.64 and 17,710.92, the Theory would turn bearish.

Dow Theory Forecasts: “Both the S&P 500 and Nasdaq Composite reached new highs in late April. But the Dow Industrials have been unable to surpass the February high of 50,188.14, and the Transports have since retreated from a high on 4/21. Our Buy List has 91.1% in stocks.” www.dowtheory.com

An article in the May 2026 edition of the Kiplinger Retirement Report explained my lower tax bill for 2025. When the ordinary income portion of 'taxable income' is below the threshold, $96,700 (MFJ), LT capital gains and qual' dividends are taxed at 0%; until they push you over that threshold." 🙂

Dow Theory Forecasts: Near-term trading will likely hinge on war-related headlines, oil prices, and earnings, so volatility can be expected. With the primary trend bullish, the broad market showing strength, and quality growers available at reasonable valuation, our allocation is 94% stocks.

Dow Theory Forecasts: When both the Dow Industrials and Transports index hit new highs, the primary trend is bullish. The last signal was in February. Only the Transports have since moved above their February high. A close above 50,188.14 in the Industrials is required to reconfirm the bull trend.

Dow Theory Forecasts: Today the Industrials sit 5.1% below their high of 50,188.14, and the Transports above their own record high of 19,892,36. Closes in both above these highs would send a bullish signal, but dips below the lows (45,166.65–Industrials) and (17,710.92–Transports) would be bearish.

WSJ ‘The 10-Point’: YES! The Federal credits responsible for the annoying feature that shuts off a car’s engine while the brake is engaged, are to be terminated. Trump’s EPA Administrator Lee Zeldin announced the agency is eliminating the credits that contributed to stop-start’s spread.

Investors’ concern with Micron $MU is an eventual oversupply in reaction to the current memory shortage. But the company and its biggest competitors won’t have any substantial new manufacturing capacity online until mid-2027. Until then, the undersupply is only set to get worse. @barrons.com

WSJ ‘The 10 Point’: . . the likely reasons for head-count reductions remain the same; slower sales, shifting priorities and overhiring. “AI washing is pervasive right now,” says J.P. Gownder, VP and principal analyst at Forrester Research. As layoffs are not due to the economy, rate cuts won’t help.