Weekly Research Briefing: The Lift Remains Open

@lisaabramowicz1: Investors are holding one of the lowest proportions of cash in modern history: November BofA global fund manager survey. "Cash levels of 3.7% or lower has occurred 20 times

@al_xdpg: $SPX Breadth has really improved over the past 10 days.

BofA Global FMS on Year Ahead: institutional investor positioning & expectations for 2026 per Nov’25 BofA Global FMS… On assets: investors believe best performing assets in ’26 will be international stocks (42%) & US stocks (22% - Chart 6), best performing equity indices will be MSCI Emerging Markets (37%) & Nasdaq (13%), best performing currencies will be Japanese yen (30%) & gold (26%); note one year ago predicted winners were US stocks, Russell 2000, and the US dollar.

Sales on Black Friday rose from a year earlier, according to a key data provider — a sign that US consumers are continuing to spend despite persistent economic concerns.

Retail sales, excluding autos, increased 4.1% on the day after Thanksgiving, according to data from Mastercard SpendingPulse. That surpasses last year’s 3.4% growth. The figures, which are not adjusted for inflation, draw from both online and in-person purchases to give a broad view of economic activity…

In-store sales rose 1.7%, above last year’s pace. Online sales rose 10.4%, lower than last year’s gain.

As loyal Republicans, Reece Payton said that he and his family of cattle ranchers in Hogansville, Ga., had one thing on their minds when they cast their ballots in November for the state’s utility board — “to make a statement.”

They were already irked by their escalating electric bills, not to mention an extra $50 a month levied by their local utility to cover a new nuclear power plant more than 200 miles away. But after they heard a data center might be built next to their Logos Ranch, about 60 miles southwest of Atlanta, they had enough of Republicans who seemed far too receptive to the interests of the booming artificial intelligence industry.

“That’s the first time I ever voted Democrat,” Mr. Payton, 58, said…

As the price of electricity has risen, more American customers have fallen behind on their utility bills, or have had their power cut off.

Georgia ranks 35th in energy affordability, in part because of cost overruns and delays associated with its new Plant Vogtle nuclear generators in Waynesboro, according to the American Legislative Exchange Council, an influential conservative policy group.

So it wasn’t a surprise when Attorney General Chris Carr and Secretary of State Brad Raffensperger — candidates in the Republican primary to succeed term-limited Gov. Brian Kemp — called November’s results a referendum on affordability. “You’re a fool if you don’t recognize that,” Mr. Carr said.

On a bitterly cold mid-November morning a line of people wound down a quiet alleyway and spilled on to an adjoining street, waiting for essentials from the New Bethany food pantry in Bethlehem.

Five days a week, 20 to 30 families use the facility. In 2019, it was three to five. New Bethany’s soup kitchen used to serve hot meals to about 50 people a day. Now it provides breakfast and lunch to as many as 200. In addition, its 54 temporary housing units are all occupied.

“People are stressed and people need more than they’ve ever needed before,” said Marc Rittle, 52, executive director of New Bethany.

“We see a lot of people who have been evicted because they couldn’t pay their rent, because they had a car accident and then couldn’t pay their medical bills . . . I think that’s the sort of homelessness that we’ll start to see a lot more of.”

Across the US, five years of fast price rises have taken a toll. Annual inflation is at about 3 per cent, down from 9 per cent in 2022. But the cost build-up has left many low-income Americans under severe strain.

Rittle said: “There’s a bottom dropping out that I hadn’t, even as recently as last year, imagined would ever be the situation.”

Housing is an acute problem. The Atlanta Fed estimates the median home price has risen more than a third since 2021 to just under $400,000.

For that to be considered affordable — requiring less than 30 per cent of income in payments — a household would need to earn more than $120,000 — but the median household income in the US is $85,000.

@lisaabramowicz1: More US families are renting homes because it’s much cheaper. Pretium estimates that to restore cost parity between owning and renting, mortgage rates would need to drop by about 2.5 percentage points from current levels, from 6.2% to 3.7%, holding other variables constant.

Buying a home has long been seen as a way to lock in predictable housing costs. But the fast-increasing burden of insurance is catching some homeowners by surprise.

Last year, Ms. Rojas’s brother-in-law, who lived down the road in Lafitte, decided to sell his home to escape the area’s rising premiums. It sold for $150,000, which is what it cost him to build it in 1984. He estimated he lost about $75,000 on the sale, after accounting for the cost of renovations.

In parts of the hail-prone Midwestern states, insurance now eats up more than a fifth of the average homeowner’s total housing payments, which include mortgage costs and property taxes. In Orleans Parish, La., that number is nearly 30 percent…

It’s not just the hurricane-prone coasts that have been affected by the reinsurance shock. In Colorado, where wildfires and hail pose the biggest threats to homes, the average homeowner’s premium has more than doubled in the last decade and median premiums have increased 74 percent since 2020.

Steve Hakes, an insurance broker with Rocky Mountain Insurance Center in Lafayette, Colo., has seen clients consider homes in wildfire-prone areas, only to back out when they can’t find affordable insurance. High prices and limited availability have pushed him to advise buyers to look for insurance early in the homebuying process.

@LizAnnSonders: November ISM Manufacturing PMI down to 48.2 vs. 49.0 est. & 48.7 prior … new orders down to 47.4 vs. 49.4 prior; prices paid up to 58.5 vs. 58.0 prior … employment down to 44.0 vs. 46.0 prior

@RenMacLLC: Fading factory jobs. The ISM Manufacturing employment sub-index slid to 44.0, a three-month low. Since 2021, the ISM employment index has seen a 0.67 contemporaneous correlation with the month-over-month changes in actual manufacturing payroll employment.

• @boes_: Today's jobs report for September shows U.S. private-sector employment has declined in each of the last five months outside of the health care and social assistance and leisure and hospitality sectors—an occurrence that's never happened in the past 35 years outside of recessions
• @justinwolfers.bsky.social: "If you look at job growth between January and September ... for the past 15 years, it's only been worse once, and that was during the pandemic ... It is the worst first nine months for the labor market in 15 years."
• @lisaabramowicz1: Continuing US jobless claims rose to the highest since 2021 in today's claims report, implying that people who don't have jobs are having a harder time finding new ones.

The deterioration in the job market for college-educated workers is particularly notable. As of September, the unemployment rate for college graduates aged 25+ stood at 2.8%, which doesn’t sound too bad but is 1pp, or about 50%, up from its 2022 low. The rate for college graduates aged 20-24 has climbed to 8½%, which is 3½pp, or about 70%, up from its 2022 low (although these estimates are noisy). College graduates account for over 40% of the US labor force and an estimated 55-60% of US labor income. A further deterioration in employment opportunities for this key demographic—perhaps reflecting AI and other efficiency-enhancing measures—could have a disproportionate negative impact on consumer spending and prompt further rate cuts over time.

San Francisco Fed President Mary Daly said she supports lowering interest rates at the central bank’s meeting next month because she sees a sudden deterioration in the job market as both more likely and harder to manage than an inflation flare-up.

“On the labor market, I don’t feel as confident we can get ahead of it,” she said in an interview Monday. “It’s vulnerable enough now that the risk is it’ll have a nonlinear change.” An inflation breakout, by contrast, is a lower risk given how tariff-driven cost increases have been more muted than anticipated earlier this year, she said.

Daly’s views are notable because, while she doesn’t have a vote on monetary policy this year, she has rarely taken a public position at odds with Fed Chair Jerome Powell. The chair is likely to play the key role resolving differences on a divided rate-setting committee about whether to cut rates or pause at its meeting Dec. 9-10.

Daly said she still thinks the Fed can bring inflation back to its 2% target without an increase in unemployment—and that failing to do so would represent a policy failure.

ChatGPT’s domination of the chatbot market looks set to continue, even as Alphabet Inc.’s Google creeps up the rankings.

Google’s own ChatGPT clone, known as Gemini, captured the limelight with an update in November that jumped ahead in industry benchmarks, seeming to surpass its rival. Salesforce Inc. CEO Marc Benioff tweeted that after two hours of testing Gemini 3, he would permanently switch from ChatGPT after using it daily for three years. “The leap is insane,” he tweeted. “Reasoning, speed, images, video… everything is sharper and faster.”

But in terms of market share, Gemini is still far behind. In October there were 153 million monthly visits to its web-based version, according to data from market-research firm Similarweb. ChatGPT got 1.1 billion. In recent months, use of OpenAI’s tool has also been growing faster than Gemini’s, that same data shows.

There are a few reasons why Gemini’s growth probably won’t accelerate, leaving it a distant but respectable second over the next couple of years. Despite the impressive credentials as the “better” chatbot — and the huge distributive powers Google has to integrate Gemini into search and its Android mobile operating system — Google has often struggled to replicate the so-called network effects that propel an online platform to stratospheric user numbers.

Cash flows and balance sheet capacity are unlikely to constrain large public AI hyperscaler capex spending in 2026. The hyperscalers spent $107 billion in capex in 3Q 2025, including AI and non-AI expenditures, representing a year/year growth rate of 76%. Analysts expect this growth rate will slow sharply to 53% in 4Q 2025 and further to 25% by the end of 2026. However, analysts have been consistently too conservative with their estimates during the past two years. The magnitude of spending in historical technology investment cycles suggests upside to spending estimates today. The recently demonstrated willingness of the large public hyperscalers to employ the strength of their balance sheets in funding capex also indicates upside to consensus estimates.

NVDA - “Blackwell sales are off the charts, and cloud GPUs are sold out,” said Jensen Huang, founder and CEO of NVIDIA. “Compute demand keeps accelerating and compounding across training and inference — each growing exponentially. We’ve entered the virtuous cycle of AI. The AI ecosystem is scaling fast — with more new foundation model makers, more AI startups, across more industries, and in more countries. AI is going everywhere, doing everything, all at once.”

Barclays estimates that investment in software, computer equipment and data centers boosted GDP growth by around 1 percentage point annualized in the first half of 2025. AI explained much, though not all, of that.

Chips such as those sold by Nvidia make up the bulk of AI spending, but most are imported and must be subtracted from total investment to arrive at the impact on domestic production. Accounting for that, AI spending still increased output by an annualized 0.8% in the first half of the year, Barclays estimates. GDP grew by an annualized 1.6% during the period. In other words, absent the growth in AI-related spending, growth would have been a sluggish 0.8%.

Since 2009, the total amount of public IG and HY bonds outstanding has grown from $3 trillion to $11 trillion, see chart below. Most of the growth has been in BBB and A-rated corporate bonds, and those two ratings combined now account for 79% of all corporate bonds outstanding by market value.

These numbers have to be compared with the roughly $2 trillion outstanding in private credit, up from $1.2 trillion in 2009.

The bottom line is that public credit markets have grown much faster than private credit markets both in percent and in dollars.

The costs of being a public company are staggering, which may incent companies to stay private longer until they need liquidity. IPOs have debuted larger from post GFC until recently. Tech IPOs are much more mature than in the 80s. We have also heard the view from investors that many of the “attractive” small caps get acquired right away. Below suggests that VC-backed start-ups have been exiting via acquisitions. Deregulation and the lowering of costs for public companies could shift activity back to more IPOs, but most investors expect private markets to remain a larger player in the capital allocation spectrum on a run-rate basis.

Sword Health’s 41-year-old founder isn’t shy about his ambitions — or his lack of interest in taking the conventional path to the public markets.

“Right now, running a publicly listed company sounds terribly boring,” said Virgílio Bento, who is also chief executive officer of the digital health startup valued at $4 billion in a June funding round. “We want to build a trillion-dollar company that really wants to change health care all over the world.”

Speaking this week from Athens, where Sword Health just signed an agreement with Greece’s health ministry to use artificial intelligence in the national health-care system, the Portuguese entrepreneur now leads a company worth more than nearly every listed firm in his home country…

Sword Health uses AI to deliver digital pain therapy and monitor patient progress in real time. The goal is to free clinicians to focus on their most complex cases. Sword Health is backed by top-tier US venture capital such as Founders Fund, known for investing in SpaceX and Palantir Technologies, as well as Khosla Ventures, and General Catalyst…

Sword Health aims to shift health care from a human-first to an AI-first model, with machines handling 80% of cases and clinicians the rest, Bento said. Revenue is set to top $200 million this year and double to $400 million in 2026, he said.

But the company’s biggest challenge isn’t raising money, it’s finding the most talented people.

“If I wanted to raise a $200 million round, I could raise a $200 million round now,” said Bento. “Access to talent is the bottleneck for our growth, not capital.”

The "return of M&A" is here: 2023 saw the lowest level of global M&A in 30+ years (adjusted for the size of the economy). That's over, with 3Q25 announced volume +43%Y across aggregate strategic and sponsor deals. We continue to expect a major, multiyear rebound in activity, aided by strength in global equities, lower rates, open capital markets, greater corporate confidence, less policy uncertainty, positive regulatory change, and growing pressure on private asset managers to act. Looking ahead, we forecast global M&A announced volumes to increase by 32%Y this year, 20%Y next year, and reach $7.8 trillion in 2027, inclusive of strategic, sponsor, and buyback deals.

Fewer reasons to wait. More reasons to go: Uncertainties that led corporate actors to wait continue to fade. As they do, we see "more reasons to go": easy fiscal policy, easing regulatory policy, easing monetary policy, wide-open capital markets, and a step-change in corporate investment.

When JPMorgan offered to stump up all of the $20 billion in debt financing for the record LBO of Electronic Arts, it was the most audacious display of the bank’s lending power to date—and in a year that had already seen it write some pretty big checks.

The deal came with a fee of around $500 million for JPMorgan and the other banks that joined in later. The fact that JPMorgan was willing to go it alone, however, underscored its position as the dominant force in a financing field crowded with Wall Street lenders and proliferating private credit providers.

JPMorgan is on track to take the top spot for buyout financing this year, having backed deals like 3G Capital’s acquisition of footwear maker Skechers and the take-private of drugstore operator Walgreens.

• Abbott Laboratories (ABT) agreed to acquire cancer diagnostics company Exact Sciences (EXAS) in a deal valued at about $21 billion, as Abbott looks to compete in the burgeoning market for multi-cancer early detection tests. Exact Sciences shareholders will receive $105 a share which represents a 51% premium to Exact Sciences’ closing price on Nov. 18. The transaction is among the biggest in life sciences this year. It gives Abbott exposure to the fast-growing cancer screening market. Exact Sciences offers cancer screening and diagnostic products, including Cologuard, a colorectal cancer screening test.
• AkzoNobel (AKZA) and Axalta Coating Systems (AXTA) said they reached an agreement for an all-stock merger that is set to create a global paint giant with a combined market value of some $17 billion, dusting off a deal they discussed back in 2017. The merger is set to bring together Amsterdam-based AkzoNobel, which has a market capitalization of 9.7 billion euros ($11.24 billion), with Philadelphia-headquartered Axalta, valued at $6 billion, combining two paint makers with roots dating back to the 18th and 19th centuries, respectively.
• Palo Alto Networks (PANW) to acquire Chronosphere, Next-Gen Observability Leader, for the AI Era, for $3.35B in cash. This acquisition will strengthen Palo Alto Networks' ability to help organizations navigate a world where modern applications and AI workloads demand a unified data and security foundation.
• Veolia (VIE.fr) to acquire Clean Earth from Enviri (NVRI) at $3.0B valuation. Clean Earth is a leading US Hazardous Waste player with prime assets including 700 operating permits. Will double the size of Veolia US Hazardous Waste becoming the #2 player in the US. $3bn valuation = 9.8x 2026e EBITDA post run-rate synergies.
• Brookfield Asset Management Ltd. and Singapore’s GIC Pte offered to buy Sydney-listed National Storage REIT (NSR.au) in a deal valuing the self-storage provider at A$4.02 billion ($2.61 billion). Investors in National Storage will receive A$2.86 for each share, the company said Wednesday. The shares jumped 19% to A$2.70 at the close of trade in Sydney. National Storage operates more than 270 storage centers across Australia and New Zealand. It’s the largest self-storage provider in Australia.
• GE Healthcare (GEHC) To acquire Intelerad for $2.3B cash, advancing cloud-enabled enterprise imaging across care settings. This acquisition demonstrates GE HealthCare’s continued commitment to cloud-enabled and AI-powered solutions across care settings and furthers the company’s aim to triple its offerings of cloud-enabled products by 2028. Intelerad is a leading medical imaging software and digital enterprise workflow solutions company with a significant presence in outpatient ambulatory care settings.
• EQT AB agreed to acquire a majority stake in European environmental service company Desotec from Blackstone Inc., four years after it sold the business to the US private equity firm. While financial terms weren’t disclosed, people familiar with the matter have said the deal values Roeselare, Belgium-based Desotec at about €2 billion ($2.3 billion) including debt. The majority stake sale in Desotec represents a 20% internal rate of return on an annual basis on Blackstone’s investment, according to people familiar with the matter, who asked not to be identified as the information is private. Founded in 1990, Desotec provides mobile filtration solutions using activated carbon to purify water, gases and air.
• Goldman Sachs Group Inc. (GS) will pay $2 billion to buy Innovator Capital Management, an issuer of exchange-traded funds. Innovator specializes in defined-outcome ETFs, which seek to limit investors’ downside risk in exchange for capping upside potential, and has over $28 billion of assets under supervision. The acquisition will instantly vault GSAM’s assets under management from $51 billion in ETFs to $79 billion, putting the firm among the 10 largest active issuers.
• Dycom (DY) acquires Power Solutions, LLC, one of the Mid-Atlantic’s largest electrical contractors serving data centers, for a total consideration of $1.95B cash-stock. Power Solutions specializes in providing electrical infrastructure solutions for data centers and other critical facilities in the Greater Washington D.C., Maryland, and Virginia area, the world’s largest data center hub. Power Solutions’ annual revenue is expected to be approximately $1.0 billion for calendar 2025. The company’s compounded annual revenue growth has been approximately 15% over the past four years, a trajectory that is expected to continue in calendar 2026. Power Solutions has consistently delivered Adjusted EBITDA margins in the mid-to-high teens, and this level of profitability is expected to be sustained in calendar 2026. This outlook is supported by a total backlog that currently exceeds $1.0 billion.
• Adobe Inc. (ADBE) has agreed to buy the marketing software company Semrush Holdings Inc. (SEMR) for $1.9 billion. The all-cash deal will value Semrush at $12 per share and sent shares of Semrush surging as much as 75% to a record $11.83. Semrush is a platform that allows businesses to analyze and optimize their online marketing, including how their company appears in AI search results.
• Somnigroup International (SGI) has offered to buy Leggett & Platt (LEG) for about $1.63 billion in an all-stock deal, a move that would add the adjustable-bed and mattress-spring maker to its bedding empire. Somnigroup, formed from Tempur-Sealy’s acquisition of Mattress Firm, on Monday proposed to acquire all of Leggett & Platt’s outstanding shares for $12 apiece. The price represents a roughly 30% premium to its average closing price over the past 30 days, the mattress maker added.
• Targa Resources (TRGP) agreed to acquire Stakeholder Midstream, which provides natural gas gathering and processing services in the Permian Basin, for $1.25 billion in cash. Targa said the acquisition will grow its sour gas treating capabilities and expand its gathering and processing footprint in the Permian Basin.
• Callaway Golf (MODG) will sell a 60% stake in its Topgolf business to Leonard Green in a deal valuing the business at $1.1B. Topgolf Callaway Brands expects to receive approximately $770MM in net proceeds. Callaway had been a longtime minority investor in Topgolf, but in 2020 struck a $2bn all-stock deal to acquire the privately held company outright when golf boomed during the pandemic.
• A consortium led by private-equity firm KKR & Co. has sold its holdings in a Hyatt Regency luxury hotel in Tokyo for over $800.0 million to an unidentified buyer, people familiar with the situation said. KKR and Asia-based multi-asset investment manager Gaw Capital Partners had acquired the property in 2023 for an undisclosed sum. The sale likely yielded twice the amount invested, the people said, without elaborating. Built in 1980, the Hyatt Regency Tokyo is a luxury hotel with over 700 rooms located in Shinjuku, one of Tokyo’s busiest business and retail districts. KKR and Gaw Capital acquired the hotel from Japan’s Odakyu Electric Railway Company.

Almost every bus route in Iowa City is packed these days. Since the city launched its fare-free program in August 2023, ridership has exploded by 30 percent. That’s an extra 388,700 rides in a single year. Not too shabby for a college town.

The numbers don’t lie. Total rides jumped from 1.26 million in 2023 to 1.65 million in 2024. Some routes are absolute rock stars. The South Gilbert line? Up a whopping 53.6 percent. Court Street route? Up 43 percent. People are clearly voting with their feet…

The environmental impact is where things get interesting. For the first time in five years, transportation emissions in Iowa City actually decreased. Nearly 1.8 million fewer vehicle miles were driven in 2024 compared to 2023. Fewer cars, less pollution. Simple math. This initiative aligns perfectly with the global commitment trend toward carbon neutrality that 115 countries have already embraced.

The program has put about $3 million back into riders’ pockets. That’s money not spent on bus fares, gas, or parking. It’s also pushing Iowa City ahead of the national curve – the city’s transit ridership is projected to reach 118 percent of pre-pandemic levels, while nationally, systems are stuck at just 85 percent.

I had heard the adage many times: Man plans, God laughs.

I just never imagined it would apply to my retirement.

Ten years ago, my wife, Karen, and I walked away from full-time work. Just four years later, Karen was diagnosed with Alzheimer’s. Within a year, I was a full-time caregiver, a role I still play today. And the retirement we had spent so much time planning and working toward ground to a halt.

The irony: I had worked for more than three decades as a reporter and editor for The Wall Street Journal—and had spent my final years at the paper writing columns and editing articles about retirement and retirement planning. I even co-wrote a book about later life and “how to plan it, live it and enjoy it,” as the subtitle promised.

So, when I left the Journal and Karen retired from teaching, we were about as confident as any new retirees could be. We had our blueprint. We had our nest egg. We had our health. All that was left was to toast our good fortune and enjoy the ride.