The Ultimate Pricing Power | The Week in Charts (5/29/26) | Charlie Bilello | Creative Planning

本站添加: 2026-05-30

[00:00:01]Hello. Hello everyone. Welcome back to another episode of the weekend charts.

[00:00:04]Charlie Blo here bringing you once again the most important charts and themes I'm seeing today in markets and investing.

[00:00:11]You're watching this on YouTube. Join over 70,000 subscribers to the channel and hit that subscribe button for all the latest content from us. So much to talk about today. The ultimate pricing power. We're going to discuss Nvidia latest results there. An all-time high a day. It feels like that in the stock market. I'll tell you why that is the case. The memory mania that's going on is just unbelievable to watch. We'll run through that. Supply is coming. So, you know, SpaceX IPO, we'll talk about that and put it in perspective in terms of IPOs historically. Inflation is taking its toll. I'll show you two charts that illustrate that. Behind the curve, that will be the Federal Reserve. And we'll end with something positive as we always do, more affordable rents. Here we go.

[00:00:56]The ultimate pricing power that would be Nvidia illustrated once again in their quarterly report here. 81.6 billion was the number beating expectations by a wide margin. That was the 15th consecutive quarter where Nvidia has outpaced expectations heading in. And so that's almost four years where Nvidia has blown away expectations consistently. So analyst expectations are high and Nvidia is exceeding those high expectations. Now on a year-over-year basis, that's an 85% increase in terms of the first quarter of this year versus the first quarter of of last year. And their expectation, their projection for Q2 is that that revenue number is going to jump up to 91 billion. And if it these numbers are any guide, we're likely to see it exceed that because that's what it's been doing for almost four years now. And so that would be a 95% increase if that happens.

[00:01:52]And we're seeing a reaceleration of growth for Nvidia, which almost seemed impossible because once you hit this peak number in terms of the year-over-year growth, usually it just trends lower. Now it's trending up once again. So the demand is still there.

[00:02:08]Clearly increasing demand now illustrated by increasing revenue numbers. And the net income numbers here are just stunning. 58 billion in terms of quarterly net income. That's by far the best quarter for Nvidia ever. It's a 211% increase over what they did last year. So more than tripling. And Nvidia, which is already the largest company in the world with a market cap over 5 trillion, is fastly becoming here the number one company in terms of profits at 159 billion. It only trails Google by $1 billion, likely to surpass it in the second quarter. So, here's the pricing power that I was talking about there.

[00:02:49]The ultimate pricing power is really being able to charge whatever you want for your product. Nvidia is able to do that today. And the illustration of that is its record profit margin here. Net profit margin 71% in Q1. Nothing we've ever seen before comes close to this.

[00:03:08]So, basically, whatever they want to charge for their product, there's so much demand in the AI space, they can charge it. So even though their share of the market has come down, the market has grown and Nvidia has the ultimate pricing power for now. How long will it last? No one knows. But just a stunning increase over the last decade, we're talking about a 12% net profit margin back in 2016 and today 71%. So really, if we look at the S&P 500, this is a chart I update every quarter. It's Nvidia and everyone else over the last decade in terms of returns and in terms of earnings growth. You put the two together, Nvidia is in the top right of this chart and there's everyone else.

[00:03:48]20,000% return over the last decade for Nvidia when it's doing earnings growth of over 50% per year over that period of time. We've never seen that before for a company this size in history. So, if we look at valuations here, that's always the question. Is Nvidia overvalued? Is it undervalued? Well, that depends on what you think about future earnings. So if you think earnings are going to continue to grow and you believe the expectations, then some might even argue Nvidia is cheap here on a forward earnings basis. You can see it's trading about 17 times f forward earnings.

[00:04:22]That's below the S&P 500 uh forward earnings of about 21 times and much lower than what we see in terms of Walmart 36 times and Costco 44 times. So the reason that we're seeing this lower multiple is likely investors are skeptical that these high profit margins will persist and that earnings growth will slow in the coming quarters. But hard to look at this and say that Nvidia is very expensive if you believe the earnings growth estimates that are out there. Let's talk about an all-time high a day. It feels like that in the S&P 500. I'm recording this on Friday. We're likely to hit another all-time high today. That would bring the number up to 22 for the year in 2026. We're only 5 months into the year. We still have 7 months to go. 22 a pretty fast pace in terms of all-time highs, especially considering we did have that 10% correction. Uh just a short while ago, but from that bottom in terms of the March low at the end of March, the S&P has gone vertical. So, it's up eight weeks in a row and likely to be nine weeks. Uh if if we look at the numbers today, it's likely to be nine uh straight weeks higher and one of the biggest nine weeks advance ever. I'm showing you the 8week numbers here. 17% 8week gain for the S&P 500. That was the 20th best alltime going back to 1950.

[00:05:45]And what I keep pointing out here, if we look at the forward returns following most of these other periods, you tend to actually see the market continue to go higher. Investors tend to chase this performance. There's something called the momentum effect and what investors tend to do is chase these strong returns and push the market up even higher. That has happened on average in the past. Not always, but most of the time you see actually above average returns over the next year. As crazy as it seems, you would think that when you have a extremely strong move higher, well then you would see the market move lower and pull back. That isn't what usually happens. What usually happens is the market goes up even more. And the big reason we're seeing the market hit an all-time high almost every day in the past couple of weeks is because earnings expectations continue to go up. So now what people are expecting for 2026 is actually 24% earnings growth. And so usually at the start of the year you have an expectation and that number tends to trend lower throughout the year. This year it's trending higher.

[00:06:49]companies keep guiding higher. 24% now is the expected earnings growth number for 2026. And really, I haven't seen this before. If you go back in history, look at numbers this strong. So, a 24% increase for a year. It always has come after you have a downturn in earnings, after you have a recession, after you have a bare market in terms of earnings.

[00:07:11]Well, then you get a snapback and a big advance. This time, we're seeing it after two strong years for earnings.

[00:07:18]We're seeing this spike higher and we know what a big contributor to that is the AI boom and that is really changing the game here in terms of these expectations. And in terms of milestones, we hit a few more today here. NASDAQ composite 27,000 for the first time. This was the third 10,000 point milestone of the month. We've never seen a month hit three of these milestones ever. So really the market is in a meltup phase here, particularly in the tech stock space. But even looking at the Dow here, 51,000 now for the first time. So we're seeing the Dow tripling essentially after uh over the last decade. A very strong move in the markets higher for the last 10 years.

[00:08:01]And in terms of the stocks uh that are contributing to this, more and more stocks are being pulled into this AI boom. And I just noted today two interesting ones that I think weren't expected at the start of the year are Intel and Dell now being pulled into this AI movement higher. Both tripling on the year and two of the biggest stocks in 1999. Intel and Dell. And it feels a lot like that environment again today. Five months into the year we got both of these stocks up over 200% more than tripling on the year. Let's talk about the memory mania here. Memory stocks are just going bananas. We're seeing the uh memory stock ETF which just came out in early April. So it came out April 2nd. It already has $12 billion in assets into in it. This is the fastest ETF ever to cross above the $10 billion mark. Usually ETFs never reach this level of prominence and this has done it here in less than two months. Why are investors chasing this ETF? Well, you could probably guess the reason they're chasing performance here.

[00:09:12]Up 128% since it came out in early April. Just a stunning move higher. And what's contributing to that is just a a few stocks here. It's a very concentrated ETF. So, you have Micron uh technology, you have SKHEX, a South Korean company, and Samsung, of course, South Korean company. those three contributing to the bulk of the weight in terms of this ETF and contributing to the bulk of the gains. And in terms of the South Korean market, SKHENX and uh Samsung are up tremendous amounts this year and that's pushing up the South Korean stock market overall because of their big waiting in the index. What I'm showing you here is all of the country ETFs around the world. And South Korea since the start of 2025 has now more than quadrupled up 315%.

[00:10:07]Far and away the best performer. Next on the list is 120% from Peru. And if you look at the US all the way down at a 31% gain. Still a very strong return for the US but South Korea is in a league of its own in terms of performance because of those two stocks and because of the memory stock mania. If we look at the ETF there, the EWY, which is the South Korean ETF there, 29% in SKHEX and 24% in Samsung. So just an unbelievable move higher and just shows you AI is really pulling in these other areas. It started with Nvidia and that space and now it's pulling in Dell, Intel, and the memory stocks. All of these things being pushed higher because of the AI demand, the AI story. So unbelievable move. We haven't seen anything really like this since the late 1990s, which is why supply is coming. So you don't get an IPO wave, IPO fever, until you have the perfect market conditions, until the market seems to only go up and risk appetite is extremely high. We have that now today, which is why we're going to see an IPO wave that maybe is the biggest in history. And of course, SpaceX is going to be leading that. Coming out in the next two weeks, sometime in June, we're going to see the SpaceX IPO. And the difference here is the market cap it's going to come out out at is bigger than anything we've ever seen. So likely to be 1.75 to two trillion. It's already valued in the private markets at 1.5 trillion. 10 years ago is a 10 billion company. Now a trillion and a half. very different IPO market today with companies waiting longer and longer to go public. Peter Maluke and I covered this on a recent Signal or Noise episode, so check that out where we talked about why companies are staying private longer. But SpaceX going SpaceX going public is really going to really change the dynamic in terms of what we're seeing in terms of supply for this year. it's going to push it up by itself to one of the biggest IPOs uh markets in terms of annual issuance that we've ever seen. And if we put them together here, so we're going to get SpaceX in June and then likely Open AAI and Anthropic in the fall. They're projecting maybe September, October. We put them together, we're approaching 4 trillion in terms of expected market cap. To put that in perspective, if we look at all of the IPOs from the 1995 to 2000 period, the.com bubble, there were 2600 IPOs. They all totaled three trillion.

[00:12:50]And that's adjusted for inflation. And then we have three companies today that are going to exceed that. So just stunning, stunning concentration in these few big players here. And that this chart I'm showing you right here is going to look a lot different a month from now after the SpaceX IPO and then by the end of the year likely to look much much different after we have Anthropic and Open AAI and probably a lot of other companies coming public too. So what I'm expecting here is to surpass definitely 2020 in terms of issuance and likely rival 2021 as perhaps the biggest IPO year in history.

[00:13:29]And so the question then uh arises is this a signal for the broader market of risk appetite being too high? Is it some type of top indicator? And all we can say is that you don't tend to see this type of issuance during bare markets.

[00:13:46]You only tend to see it in bull markets and really later stage bull markets because you need that risk appetite to hit a point where it's been multiple years of gains for the market. big gains on the upward side and that's when you tend to see those private investors say listen we got we have to cash in we have to do this issuance now so that's where we are today history would tell you for investors to lower their expectations following these periods because of course after 1999 2000 we had a few difficult years in the market after 2021 we had 2022 which was a bare market year anything can happen going forward every time is different but clearly when everyone is off to the races here and expecting big things in terms of these IPOs and we've seen these amazing returns, you should try to keep your FOMO in check and try to remain disciplined and not get too over excited because as we saw during the last mania here in 2020 2021, most of the IPOs actually went on to underperform and we had a pretty deep bare market there in 2022. Not saying that's going to happen again, but of course if it happened before, it could happen again. And this looks a lot like a mania in terms of we're going to see just this enormous amount of supply and will the market be able to absorb it? So back in 2020 2021 for a period of time it looked like it was able to absorb it and then very quickly the environment changed. So how long will the IPO wave continue? It'll continue as long as ris risk appetite remains high. As long as prices are going up, you're going to see more and more issuance. And then when prices start moving in the opposite direction, we saw very quickly in 2022, we saw the IPO market dry up. So again, I'm going to update this in a few weeks. We'll cover the SpaceX IPO, but a very different IPO market than what we saw in the '9s because companies are so much bigger today going public. You had Amazon going public in 1997 at a $400 million market cap and SpaceX today likely to go public at close to a $2 trillion market cap. Nothing comparable to that. And already we're going to see SpaceX be among the biggest holdings in the market, biggest waitings within the market on day one when it comes out.

[00:16:11]That was not the case for Amazon and that wasn't the case during the tech boom that we saw in the 1990s. Let's talk about inflation here taking its toll. I'm going to show you two charts that really illustrating that. Number one would be the rise in delinquencies here. Credit cards highest since 13.11% highest that we've seen since 2011.

[00:16:35]Student loan delinquencies 10.3% highest we've seen since 2020. and likely to show more increases to come. And auto loans highest ever 5.6% of balances are now 90 plus days of Lincoln highest we've seen ever with data going back to 2003. So this would indicate some stress on consumers, not all consumers, but if consumers who have this type of debt, who carry a credit card balance, have a lot of student loans, and have uh auto loans that are exceeding their ability to repay them. We're seeing increasing stress on this segment of the market.

[00:17:15]And another way to look at that this is to see how much are people actually saving. And that would suggest that there's also stress with the savings rate now being its lowest level since April 2008 at 2.6%. So I'm saying that inflation has a big uh part of this because we're not yet seeing a recession. We're not seeing outright job loss. So inflation seems to be the biggest driver of this. We saw it back in 2022. Savings rates go down when the inflation rate went up to 9%. We're likely, as I'm going to talk about in a little bit, see inflation move above 4%.

[00:17:51]That seems to be hitting uh people where they don't have as much money to save.

[00:17:56]And if you you have debt at a high interest rate, credit card interest rates still averaging 21%, it's becoming harder to pay that back because prices are rising now and rising for a few years, well above what the Fed is saying is their target rate, which is 2%. So, let's talk about that. Federal Reserve is clearly behind the curve. What do I mean by that? Well, they have a 2% inflation target and they haven't met that for over five years. So, 62 consecutive months with their preferred measure of inflation, which is this core PCE reading, which excludes food and energy. So, it's not uh because of the spike in oil. This excludes uh oil from this analysis. 3.3% highest we've seen in a few years and 62 consecutive uh months above the Fed's 2% target. So over the past six plus years, this is the reason why we have increasing stress, I believe, in terms of those delinquencies and why we're seeing lower savings rates. It's now 4.1% annualized inflation in the US since the start of 2020. So over six years, we're having double the Fed's target in terms of the inflation rate. To me, that indicates a Fed that's behind the curve, a Fed that should be hiking rates, not even thinking about cutting rates. They should be hiking rates. And this inflation number, at least for the month of May, is going to trend higher. So, what the Cleveland Fed is projecting here, 4.2% is the number for May. We're at the end of May now. And so, it's likely to definitely be above 4% in my view. And so I think it's going to be very difficult for Kevin Worsh to come in and suggest that the Fed should be cutting rates. I think you're going to have a more divided Fed than we've seen in a long time. And there's going to be debate this year if this inflation continues to persist. And the I war in Iran doesn't end soon and bring commodity prices back down. I think there's going to be an increasing push within the Federal Reserve to hike interest rates, not in June or July, but at some point later this year. And I think that's what the market is starting to price in here. It's definitely not fully pricing it in at this point. It's going back and forth it seems like every single day, but there's a high there's a higher probability now in if you look at Fed funds futures of a rate hike this year than a rate cut. So it'll be very interesting in the June meeting. They're going to update their dot plot projections and my bet is that the median Fed member is going to say no interest rate cuts this year. So that's a difference from the last time where they said one interest rate cut. I think they're going to have to move that because inflation is much higher than their expectations. And then the step from there will be well are they going to then in the next meeting after that which will be in September where they update the projections again. Are they going to say we're going to hike interest rates? Well a lot can happen between now and then but clearly Kevin Walsh is not going to come in in my view and say we need to cut rates and he's going to have everyone agree with him. I just think there's no situation where that's going to happen. So more divided Fed I think than than we've seen in a long long time and you're going to have these different factions. One pushing for lower interest rates and others perhaps pushing for higher interest rates. You know my view the Fed should be hiking rates because inflation has been much higher than what their target is and now it's been over six years of this. So, let's end with something positive as we always do, and that would be more affordable. Rents is something I talk about pretty much every month because the trend has been going on now for a few years. This is the 36th consecutive month where rents, asking rents are down on a year-over-year basis, 1.4% decline year-over-year here.

[00:21:39]And why is this such good news? Well, we're seeing rising inflation pressures almost everywhere else. So, good to see this. This is the single biggest component for many households in terms of what they spend money on would be their rental payment. So to see this flat to down is a very good thing. So while overall prices have increased a lot over the last four years, asking rents have not, we're talking about nationally here, of course some areas have seen increases, others have seen decreases, but on a national basis you can see here rents peaked in 2022 and they've gone flat to down over that period of time. And for most people, not everyone, but for most people, they've seen their wages go up over this period of time, which means that monthly rent is more affordable because your income is higher and hopefully your rent is flat to down. So, we'll end right there on that positive note. Hopefully, this continues. Thank you everyone for joining me on the weekend charts. If you're watching this on YouTube again, hit that subscribe button. Have an awesome weekend and I'll see you next time on the weekend charts.