And to think, I almost forgot to reveal the answer to the trivia question I shared earlier.

Here we go:

Which superhero movie star is partnering with LEGO on a new campaign?

A) Robert Downey Jr. 

B) Paul Rudd 

C) Henry Cavill 

D) Tom Holland

Happy trails my friends, I’m off to put the finishing touches on this week’s Portfolio Weekly Roundup.

Rumor has it we’ll meet again back here late next week.

I’m sure we’ll have quite a bit to discuss.

Have a great weekend!

-CV

Let me give you something to think about over the weekend.

Over the last few trading sessions, we’ve seen the S&P 500 notch record close after record close.

At the same time, we’ve seen consensus EPS expectations for the S&P 500 continue to inch lower week after week.

Back at the end of March, these are the figures tabulated by FactSet:

And here they are as of today:

You’ll notice that both consensus EPS figures for 2025 and 2026 have moved lower.

Simple math tells us then the market’s continued move higher over the last six months or so has been fueled more by multiple expansion than earnings growth. 

And that P/E multiple on consensus 2025 EPS is now at 24.6x.

Barring the recession in 2001 and the pandemic, the S&P 500 peaked at 25.1x last year. 

Against that backdrop and with the Volatility Index back below 15, there is room for the market to be disappointed by the Fed next week.

The CME FedWatch Tool shows the market expecting not one or two, but six 25 basis point rate cuts between now and the end of 2026. 

Given the sum of the data we’ve seen so far, including those rolling GDP forecasts for the current quarter, why would the Fed telegraph that number of rate cuts on Wednesday?

PS — Remember that we don’t buy the market, but we have to be mindful of it.

As you can see below, the pace of corporate earnings slows dramatically next week. Still, we will want to listen to comments on consumer spending from Dave & Buster’s PLAY and assess the sequential findings for Lennar’s LEN booking and backlog levels.

With Darden DRI, how is average ticket and traffic holding up, and how are input costs trending? Is Darden being impacted by folks eating more at home or trading down for fast casual or fast food?

With FedEx FDX, what does it say about the holiday shopping season and overall tone of the economy?

The answer to those questions and others that will crop up along the way will help us prepare for the upcoming September quarter earnings season. That’s right, after this week, there are just 12 treading days left in the quarter. 

Monday, September 15

Open: Hain Celestial HAIN

Close: Dave & Buster’s

Tuesday, September 16

Open: Ferguson Enterprises (FERG)

Wednesday, September 17

Open: Cracker Barrel CBRL, General Mills GIS

Close: Steelcase (SCS)

Thursday, September 18

Open: Darden Restaurants, Factset (FDS)

Close: FedEx, Lennar

As we approach the end of the trading week, let’s get an early look at the economic data coming at us next week. 

Setting the tone for the data, we’ll note that as we exit this week, the Atlanta Fed’s GDPNow rolling forecast pegs GDP for the current quarter at 3.1%. The New York Fed’s Nowcasting models see a slower pace of growth at 2.1%, something it sees continuing in the final quarter of the year with its current 2.2% forecast.

Figures like those don’t suggest the U.S. economy is falling of a cliff anytime soon, but let’s also remember those are rolling forecasts. That means we’ll want to revisit them once next week’s data is in hand.

With that, let’s see what’s coming at us next week:

Monday, September 15

• Empire Manufacturing Index – September (8:30 AM ET)

Tuesday, September 16

• Retail Sales – August (8:30 AM ET)

• Import/Export Prices – August (8:30 AM ET)

• Industrial Production & Capacity Utilization – August (9:15 AM ET)

• Business Inventories – July (10:00 AM ET)

• NAHB Housing Market Index – September (10:00 AM ET)

Wednesday, September 17

• MBA Mortgage Applications Index – Weekly (7:00 AM ET)
• Housing Starts & Building Permits – August (8:30 AM ET)
• EIA Crude Oil Inventories – Weekly (10:30 AM ET)
• FOMC Rate Decision, Updated Fed Economic Projections (2 PM ET)

Thursday, September 18

• Initial & Continuing Jobless Claims – Weekly (8:30 AM ET)
• Philadelphia Fed Index – September (8:30 Am ET)
• Leading Indicators – August (10:00 AM ET)
• EIA Natural Gas Inventories – Weekly (10:30 AM ET) 

At least two expected areas of inflation ahead: French wine and health insurance.

After heat waves, drought and wildfires damaged vineyards, France expects 2025 wine production to drop below the five-year average. And that’s after the 15% import tariff slapped on French wine last month by President Trump.

California wine looks even better.

Not everyone or even many people may be drinking French wine. But in the U.S., health insurance can cost a pretty penny. And, sticking with that analogy, it's shaping up to look more like a nickel.

Here’s a signal that we’ll share on Saturday morning, one that is part of a larger collection of signals that speak to the Pro Portfolio’s strategies and positions:

"U.S. health insurers, reeling from slumping share prices, are raising insurance premiums by the most in 15 years, adding to fears that American consumers are struggling under the weight of high costs… The cost of companies’ health insurance plans for employees is expected to jump by an average of 6.5 per cent in 2026, the biggest increase in 15 years, according to a report by Mercer. For people who buy health insurance on government exchanges, the median increase for 2026 is 18 per cent — more than double last year’s 7 per cent rise, according to KFF, a non-profit health policy research group."

Read more here

I’m seeing that the Justice Department filed a lawsuit against Uber Technologies UBER for discriminating against passengers with disabilities, including those who use service animals and mobility devices such as stowable wheelchairs. Now, we know that Uber is what we call an asset-lite company given that Uber drivers use their own vehicles.

This could present a really sticky situation.

Will Uber need to revisit its terms of service and risk backlash?

Will Uber need to adjust its payouts to drivers to account for potential issues or damages that might arise?

The other solution is for Uber to accelerate its adoption of autonomous vehicles, but that could also have a dramatic change from current Uber’s business model. Capex would become an item to watch but there would be other ramifications.

Could Uber partner with the likes of Hertz Global Holdings HTZ or one of its competitors that will see their business under pressure if/when autonomous cars go mainstream?

Certainly possible.

And yes, Uber already has a relationship with Alphabet’s GOOGL Waymo. 

Black Rock Coffee Bar opens at $26.50 after pricing IPO at $20/share

Folks, I’m going to grab a quick bite to refuel for the final hours of the trading week. As I do that, here are some of the articles I’ll be reading:

"Good Old IBM Is Leading the Way in the Race for ‘Quantum Advantage’"

"If Pepsi Wants to Win, It Has to Play Coke’s Game"

"U.S. Imports of Swiss Watches Were 107% Higher in July Than June"

"Nvidia and OpenAI to spend billions on UK data centers - report"

"A Wave of Bank Mergers Is Just Getting Started"

"You See That? The Nasdaq Summation Index — Gasp! — Ticked Up"

Amid reports discussing a potential bidding war for Warner Bros Discovery WBD, there was one line in a related NY Post article that caught my attention:

"The Trump Administration, meanwhile, has signaled a lighter regulatory touch in terms of mergers than Biden’s regulators in the Justice Department’s antitrust department and the Federal Communications Commission, who for years throttled nearly every merger proposal coming out of nearly every industry."

Candidly, it’s a comment that many have been expecting.

However, it follows comments from Goldman Sach GS CEO David Solomon about a significant uptick in M&A activity. Tim Ingrassia, co-chairman of global mergers and acquisitions at Goldman Sachs, has projected that global deal flow this year —estimated at around $3.1 trillion — will rise to $3.9 trillion by year-end or early next year. This would surpass the previous record of $3.6 trillion set in 2021.

Citigroup C CEO Jane Fraser added that the firm’s clients have become “much more active” in capital markets, investing and dealmaking after greater clarity on taxes, tariffs and deregulation.

One of the next items to watch is the Fed’s updated set of economic projections on Wednesday, and where it pegs the Fed funds rate by the end of 2026. As of now, I question the probability of the Fed telegraphing the six 25 basis point rate cuts shown in the CME FedWatch Tool. But anything more than the few rate cuts for 2025 to 2026 it forecasted back in June could help grease the skids for M&A activity. 

I know Sarge likes to share baseball trivia and quizzes when he fills in for Doug. In that vein, here is a trivia question for the Diary. Weigh in below and I’ll share the answer later today.

Which superhero movie star is partnering with LEGO on a new campaign?

A) Robert Downey Jr.

B) Paul Rudd

C) Henry Cavill

D) Tom Holland

The preliminary University of Michigan Consumer Sentiment reading for September checked in at 55.4, below the market consensus of 58 and also much lower compared to the final reading of 58.2 for August. For context, the index stood at 70.1 in August 2024.

The key takeaway from the report is that the pullback in consumer sentiment was paced by fading economic views among lower-income and middle-income consumers. We heard this from Wells Fargo WFC CEO Charlie Scharf earlier this week when he said that low-income consumers are “living on the edge.”

This supports our bifurcated view of the consumer over at the Portfolio and our positions in TJX TJX and Costco COST.

Getting back to the September Consumer Sentiment data…. by the numbers:

The Current Economic Conditions Index dipped to 61.2 from the final reading of 61.7 for August. In the same period a year ago, the index stood at 63.3.

The Index of Consumer Expectations dropped to 51.8 from the final reading of 55.9 for August. In the same period a year ago, the index stood at 74.4.

Year-ahead inflation expectations held steady at 4.8%.

Long-run inflation expectations jumped to 3.9% from the final reading of 3.5% for August. That is a figure the Fed will take notice of as it gets ready for next week.

Fashion titan Giorgio Armani left instructions for his heirs to either sell off his eponymous fashion house to peers including LVHM Moet Hennessy (LVMHF), L’Oreal S.A. (LRLCF), or EssilorLuxottica (ESLOF) or go pursue a public offering. I don’t recall seeing such a request on that scale before, but either way, it’s likely a boon for a few bulge bracket investment banks to be named later. 

While an IPO is a possible outcome, it’s going to come down to the management team or the need to find a new one that can handle public company requirements. That includes marching to the quarterly drumbeat. Then again, maybe private equity will swoop in, do what they do, and take the company public down the road… or sell it. File this under “things to watch” 

Per reports on Bloomberg:

The US will urge its allies in the Group of Seven to impose tariffs as high as 100% on China and India for their purchases of Russian oil in an effort to convince President Vladimir Putin to end his war in Ukraine.

The US will also tell the G-7 countries they should create a legal pathway to seize immobilized sovereign Russian assets and consider seizing or using the principle of those assets to fund Ukraine’s defense, according to a US proposal seen by Bloomberg. The vast majority of the about $300 billion of Moscow’s immobilized assets are in Europe…

President Donald Trump has told European officials he’s willing to impose sweeping new tariffs on India and China to push Putin to the negotiating table with Ukraine — but only if nations in Europe do so as well.

Source: Refinitiv

Upgrades

Acadia Realty Trust (AKR) upgraded to Buy from Neutral at Citigroup, target $23

Air Products (APD) upgraded to Buy from Hold at Argus

Alaska Air (ALK) upgraded to Buy from Neutral at UBS, target $90

Aptiv (APTV) upgraded to Overweight from Equal Weight at Barclays, target $105

FactSet (FDS) upgraded to Neutral from Sell at Rothschild & Co Redburn, target $370

General Motors (GM) upgraded to Overweight from Equal Weight at Barclays, target $73

SL Green Realty (SLG) upgraded to Buy from Neutral at Citigroup, target $70

Vornado Realty Trust (VNO) upgraded to Neutral from Sell at Citigroup, target $42

Downgrades

Applied Materials (AMAT) downgraded to Neutral from Outperform at Mizuho, target $175

Array Technologies (ARRY) downgraded to Underperform from Neutral at BofA Securities, target $7

Constellation Brands (STZ) downgraded to Equal Weight from Overweight at Barclays, target $150

Farmer Brothers Co. (FARM) downgraded to Hold from Buy at Craig Hallum; target $2.50

Huntsman (HUN) downgraded to Underperform from Neutral at Mizuho, target $9

Kite Realty Group (KRG) downgraded to Neutral from Buy at Citigroup, target $24

Molson Coors (TAP) downgraded to Underweight from Equal Weight at Barclays, target $50

NextDecade (NEXT) downgraded to Equal Weight from Overweight at Morgan Stanley, target $10

Novartis (NVS) downgraded to Sell from Neutral at Goldman, target $118

Orion S.A. (OEC) downgraded to Underperform from Neutral at Mizuho, target $9

Proficient Auto Logistics (PAL) downgraded to Market Perform from Outperform at William Blair

Restaurant Brands International (QSR) downgraded to Neutral from Buy at Northcoast

RH (RH) downgraded to Market Perform from Outperform at Telsey Advisory, target $220

Tronox (TROX) downgraded to Underperform from Neutral at Mizuho, target $4

Initiations

Circle Internet Group (CRCL) resumed with a Perform at Oppenheimer

Dick's Sporting Goods (DKS) initiated with an Outperform at KGI Securities, target $298

Dole (DOLE) resumed with an Equal Weight at Stephens, target $16

Genius Sports (GENI) initiated with a Buy at Roth Capital, target $16

Limoneira (LMNR) resumed with an Equal Weight at Stephens, target $18

LPL Financial (LPLA) reinstated with a Buy at Goldman, target $405

Mission Produce (AVO) resumed with an Overweight at Stephens, target $17

Protagonist Therapeutics (PTGX) initiated with an Outperform at Leerink, target $73

Revolution Medicines (RVMD) resumed with a Strong Buy at Raymond James, target $72

Sportradar (SRAD) initiated with a Buy at Roth Capital, target $40

StandardAero (SARO) initiated with an Overweight at Barclays, target $32

Theravance Biopharma (TBPH) initiated with a Buy at B. Riley, target $28

Vaxcyte (PCVX) initiated with a Neutral at Goldman, target $38

We do our best at the Pro Portfolio to follow policy and related developments and not get pulled into the quagmire that is politics. That can be challenging, especially in current times, but here is a summary from Politco we’re reading this morning as it relates to DC, the Fed, and when the Trump economy “begins”:

The Trump administration’s legal battle over Fed Governor Lisa Cook is ramping up, with the White House requesting an emergency ruling in its effort to oust Cook, representing “an extraordinary effort by the White House to shape the board before the Fed’s interest rate-setting committee meets next Tuesday and Wednesday,” AP’s Christopher Rugaber reports. The administration requested a decision by Monday. If this appeal fails, Trump could turn to the Supreme Court for a last-ditch emergency ruling.

Still, Wall Street isn’t put off — at least not yet, POLITICO’s Victoria Guida writes in her latest Capital Letter column. “But the central bank’s insulation from the president could eventually hinge on whether investors start to panic.”

What comes next: If Trump is granted “broad authority to decide the grounds on which Fed board members can be ousted, it could create a pathway to removing other central bank officials — even, theoretically, Chair Jerome Powell, an event that would send shockwaves through the global economy. But for now, the range of possible outcomes is so broad that it’s hard for investors to bet on any result with precision.” What could shake things up? “The answer I heard from several people on Wall Street: The freakout might not come until the Fed actually starts behaving less independently.”

Mark these words: Commerce Secretary Howard Lutnick, when asked what was behind the sagging August jobs numbers, told Newsmax in an interview that aired yesterday that “the Donald Trump economy is coming in the beginning of next year.”

The above suggests we could be facing an even more dynamic Fed policy meeting next week, and the market is already concerned about political loyalties influencing monetary policy.

Given the comments by some of the Fed officials who are clearly jockeying to replace Powell, like Fed Governor Christopher Waller, we would say that has already begun.

In terms of the comment from Lutnick… our take on it is this… it is akin to an investor selectively looking at companies with valuations that support what they want to be bullish on. The proper valuation is captured by looking at the full picture, and from multiple metrics, not just what supports what we want it to show. 

From Reuters:

Black Rock Coffee Bar Inc: The company has raised $294.1 million in its US initial public offering (IPO), the cafe chain said on Thursday, setting the stage for a closely-watched consumer listing in the aftermath of the tariff turmoil. The Scottsdale, Arizona-based company sold about 14.7 million shares at $20, compared with its marketed range of $16 to $18 apiece. The IPO valued it at $956.3 million. Black Rock Coffee's top shareholders include affiliates of its co-founders and the Cynosure Group, a Utah-based private investment firm. Black Rock Coffee will start trading on the Nasdaq under the symbol "BRCB."

Gemini Space Station Inc: Cryptocurrency firm Gemini Space Station raised $425 million in an initial public offering on Thursday, pricing its stock above a marketed range. The company led by the billionaire twins Tyler and Cameron Winklevoss sold around 15.2 million shares for $28 apiece, after marketing them for $24 to $26, it said in a statement, confirming an earlier report by Reuters. The IPO values Gemini at $3.33 billion on a non-diluted basis, according to a Reuters calculation. Gemini will begin trading on Nasdaq under the ticker "GEMI".

Legence Corp: Engineering and maintenance services provider Legence raised $728 million in its U.S. initial public offering on Thursday, adding its name to the string of companies looking to go public amid heightened investor enthusiasm. The San Jose, California-based company sold 26 million shares priced at $28, within its marketed range of $25 to $29 apiece. This gives Legence a valuation of $2.85 billion. Blackstone acquired Legence, then known as Therma Holdings, from private equity firm Gemspring Capital in 2020. Under Blackstone's ownership, Legence has bought smaller rivals, including A.O. Reed, OCI Associates and P2S. Legence will list on the Nasdaq under the symbol "LGN."

Via Transportation Inc: Transit tech firm Via Transportation and select existing investors raised $492.9 million in a U.S. initial public offering on Thursday, becoming the latest addition to the September rebound in IPO activity. The New York-based company sold about 10.7 million shares at $46 each, priced above its marketed range of $40 to $44 apiece, giving Via a valuation of $3.65 billion. The company plans to list its shares on the New York Stock Exchange under the "VIA" ticker symbol.

Next week brings IPOs from cybersecurity company Netskope (NTSK) and StubHub (STUB), but based on the above deals plus the IPO pricings earlier in the week from Klarna (KLAR) and Figure Technology (FIGR), we’re going to see some price target revisions for the likes of JPMorgan JPM, Goldman Sachs GS, and others, including the Pro Portfolio’s own Morgan Stanley MS and Bank of America BAC.

Microsoft MSFT and OpenAI signed a non-binding deal for new relationship terms that would allow OpenAI to proceed to restructure itself into a for-profit company, marking a new phase in one of the most high-profile partnerships to fund the ChatGPT frenzy.

This helps clear the path for an eventual monetization event, which will likely be an IPO. Good for investment banks, but also good for the Pro Portfolio’s position in SuRo Capital SSSS, whose second-largest investment portfolio holding was in OpenAI exiting Q2 2025. 

Hey folks, we have a very quiet earnings and economic calendar on tap for today but we’re going to make the most of it here at the Daily Diary. There’s no shortage of things to talk about as the market continues to melt up, and we get ready for what the Fed may say and do next week.

Grab that first or, in my case, second cup of morning go juice (coffee here for me), and I’ll be back shortly with a list of fresh upgrades and downgrades and a few other items catching my eye.