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The most important charts and themes in markets and investing…
1) Are We in an Income Bubble?
Earnings are increasing rapidly, there is no doubt about that. The growth rate is expected to reach 24% in 2026, a sharp acceleration from the increases we saw in 2025 (+13%) and 2024 (+10%).
But the question investors need to ask is how much of this increase is due to a) one-off investment gains and b) a capital spending cycle that may be approaching peak growth.
In the first quarter, only 3 companies (Google, Nvidia, and Amazon) made big profits in the “other income” category from their private investments in companies like SpaceX and Anthropic.
Total “other income” of $69 billion was roughly 10% of the S&P 500’s overall net income for the quarter. Without this improvement, S&P 500 YoY earnings growth would have been 15% in Q1, well below the reported figure (+28%).
A second, perhaps more important question: is the capital spending cycle at or near its peak growth rate?
If this happens, the big boost to S&P 500 earnings growth that we saw from the semiconductor sector will start to slow while the reality of depreciating AI infrastructure for hyperscaler companies will begin to emerge.
Why might we be approaching peak growth rates?
Take a look at the following graph. If AI spending continues as expected, hyperscaler cumulative free cash flow will turn negative next year. At the same time, semiconductors will inherit the earth.
I doubt it will play out as expected (shareholders of hyperscaler companies will likely start revolting before we get to this point), but if it does, it will certainly mean a slowdown in growth as there will be no free cash flow left to fund the boom. It is true that we could see additional debt and equity offerings as a stopgap (this has already happened), but this is unlikely to be enough to drive sustained accelerated growth.
2) The Floodgates Open
SK Hynix, the South Korean memory chip giant, conducted its US IPO last week via a Nasdaq-listed ADR (Ticker: $SKHY). It raised $26.5 billion in funding and was oversubscribed more than seven times.
This made it the second largest US IPO, after SpaceX – which had its IPO less than a month earlier.
We’re only halfway through July, and 2026 is now about $1 billion away from surpassing 2021 as the largest US IPO year on record.
And Anthropic and OpenAI could still arrive before the end of the year.
The floodgates are officially opened.
3) “Buffet Indicator” Hits Record High
The ratio of US Stock Market Value to GDP – the “Buffet Indicator” – has risen to a record high of 234%. Today, it is more than 3 standard deviations above its long-term historical average.
When valuations are this high, attractive opportunities become harder to find.
This may explain why Berkshire Hathaway holds a record amount of cash.
4) We Don’t Grow Up to Cope
The idea that we will “climb our way out” of the national debt crisis is not supported by the current numbers.
Real GDP growth slowed to 1.3% while the national debt increased by more than $3 trillion in just one year.
When debt grows faster than the economy, the math gets worse, not better.
5) How a Costco Cashier Became a Millionaire
Costco cashier Tony Barzar is so beloved that longtime customers greet him with hugs – and after four decades of saving in his 401(k), he’s now a millionaire (read the WSJ article here).
His story is proof that extraordinary wealth can be gained from doing ordinary jobs very well.
Save consistently, invest for the long term, and never pass up a job opportunity.
6) Some Interesting Statistics…
a) 41% of American men under 30 believe they could score on a penalty kick in the World Cup if given the chance. Every sofa has a world-class striker sitting on it.
b) The median rent for a one-bedroom in NYC just hit a record $4,000, up 54% over the last decade. Rent control helps the lucky few who already own apartments. Everyone is competing for shrinking housing at ever higher prices.
C) Only 135 of the S&P 500 constituents in 1996 are still in the index today. The lesson: companies change, leaders fade, and innovation never stops.
And that’s all for this week. Thanks for reading!
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