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Could see market upside through year end but it may be choppy, says iCapital's Sonali Basak
11/5/2025, 9:15:05 PM
Economic Summary
- The market is roughly at the fair value expected for year-end; upside exists but the path is likely to be choppy due to upcoming data volatility and investor sensitivity.
- Government data collection problems for October (and possibly November) jobs reports could limit the Fed's information set, increasing policy uncertainty and market swings.
- The Fed is likely to bias policy toward supporting the labor market, with December policy action still considered live given elevated inflation expectations embedded in the SEP.
- Alternative labor data (e.g., ADP) show encouraging signs for the labor market, which supports the case for continued consumer and economic resilience.
- CapEx intensity is high — capex-to-free-cash-flow around 70% and could rise to 75–80% — raising concerns about negative free cash flow and how firms finance the AI capex boom (debt issuance noted at Meta).
- NVIDIA’s upcoming earnings and large reported orders are a potential market-moving catalyst, while market leadership is rotating within the ‘Magnificent Seven’, creating dispersion.
- Financials have shown strong EPS growth (~20%) but trade below the S&P, suggesting potential room for sector catch-up if investor flows rotate toward quality.
Bullish
- Labor data from alternative sources like ADP remain promising, supporting growth.
- NVIDIA's large order commentary could act as a positive catalyst into earnings.
- Rotation into laggards and sectors like healthcare and financials may provide upside.
Bearish
- Government data collection issues could create choppy markets and investor nervousness into Oct-Nov.
- High capex relative to free cash flow risks negative FCF for some AI-capex firms.
- Valuation and debt concerns for AI leaders could amplify volatility around earnings.
Bullish tickers
NVDAADPMETA
Bearish tickers
METANVDA
NVDA
Bullish
Large reported orders from hyperscalers and positive commentary position NVIDIA as a likely catalyst into earnings.
Bearish
Could face heightened volatility if investors reassess AI capex financing, valuations, or if earnings miss lofty expectations.
META
Bullish
After weakness, the company accessed debt markets, suggesting access to capital to fund AI investments and potential recovery.
Bearish
Was a drag on EPS and raises concerns about debt-financed capex and valuation-driven volatility.
ADP
Bullish
ADP’s employment data are cited as promising, supporting the view that the labor market remains resilient.
Bearish
Alternative data like ADP could still be subject to revisions or divergence from official reports, limiting clarity.
People mentioned
Sonali BasakJensen WangScott