Recent market moves a sign of resilience, says Evercore ISI's Emanuel
Speakers
Julian Emanuel
— Evercore ISI
Summary
Julian Emanuel argues the market is showing resilience despite rising rates and oil, supported by an AI earnings cycle that can run into 2027-2028. He flags $95 WTI and a 10-year yield near 5% as key headwinds, expects hyperscaler capex and earnings to end the rotation between hyperscalers and semiconductors, allowing both to rise and the S&P 500 to break out of its range. He also highlights Korea as a crucial signal to watch for the momentum trade reset.
- Market resilience persists despite 10-year yields near 4.7% and oil around $87.
- AI cycle could power earnings through at least mid-2027.
- $95 WTI identified as the level above which oil becomes a real market headwind.
- A 10-year yield moving toward 5% would be a significant problem.
- Hyperscalers and semiconductors have been rotating but are expected to both rally on upcoming capex and earnings.
- Extremely low volume suggests the market is ready to break out of its 8-week range on earnings catalysts.
- Korea is a critical watch for the leveraged momentum trade reset.
Ideas
$95 WTI is key headwind level.
Identified $95 on WTI as the critical threshold where oil starts creating headwinds for market returns and potentially slows the economy; this level remains a key focus.
Hyperscalers and semis to rise together.
Hyperscalers and semiconductors have been rotating and not rising together, but upcoming hyperscaler capex reports and earnings will likely cause both to trade better and finally rise together as the quarter progresses.
S&P 500 to break range soon.
Trading volume has been extremely low, the market is dull and stuck in an 8-week range, but it will only take a couple of earnings reports over the next week to break out of this mentality and push the market higher.
Watch Korea for momentum trade reset.
In the context of the leveraged momentum trade reset, Korea has been the tail wagging the dog and is a critical signal to watch.
