7 posts from 6 reports.
Most investors watch the crude oil price. The bigger move is in refined products like diesel and gasoline. Bernstein, using satellite imaging and web-scraping of Russian and Ukrainian sources, estimates Ukrainian drones have struck about 90% of Russia's refining capacity, and 80% of it just this year. In the last week alone that knocked out more than 2 million barrels a day, about 2% of global refining.
The result is a fuel shortage rather than a crude shortage. Russia has banned diesel and gasoline exports until the end of January 2027, which tightens supply further. That is why the gap between product prices and crude, the refining margin, sits near record levels, with the crack-implied oil price above $90. Refiners and integrated oil companies capture that gap directly. Bernstein prefers ExxonMobil, rated Outperform, and expects the benefit to run into 2027. The break in the thesis is a Russia-Ukraine truce, which would let refining return and close the margin quickly.
Own refiners and integrated majors like ExxonMobil. Wide refining margins should hold into 2027 while the attacks continue.
Moderna and Merck reported the first positive Phase 3 result for an individualized mRNA cancer therapy. In a 1,137-patient melanoma trial, their vaccine combined with Merck's Keytruda produced a clear improvement in the time patients stayed cancer-free, against Keytruda alone. An earlier trial had cut the risk of recurrence or death by 49%.
The treatment works by sequencing each patient's tumour, finding its unique mutations, then building a custom mRNA therapy that trains the immune system to attack the leftover cancer. The importance runs wider than one disease. It validates the mix of genetic sequencing, mRNA manufacturing and immunotherapy, which could open personalized treatments across many cancer types. For investors, this is the moment the genomics theme moved from promise to proof, and the obvious names are Moderna and Merck. The risk is that survival data is still early, and personalized manufacturing is costly and hard to scale.
The genomics story turned real. Own Moderna and Merck for the individualized cancer therapy push and the wider genomics theme.
The AI boom is showing up in concrete and steel. Spending on data center construction rose nearly 60% over the past year to more than a $75bn annual pace. This is the part of AI spending that leaves the chip behind, because every data center is really a large power project. Hyperscaler spending is set to rise about 75% this year and perhaps another 30% next year, so the building work should stay heavy.
The bottleneck is the physical stuff. Average lead times for data center equipment run about 42 weeks, 83% longer than in 2019, held up by equipment shortages, too few skilled workers and slow grid connections. Those delays push costs higher and lock in multi-year order books for contractors and suppliers. The read is to own the picks and shovels of AI: construction firms, electrical equipment makers and power infrastructure suppliers. The risk is that a pause in hyperscaler spending would hit these suppliers hard, since they have added capacity to serve it.
Own the AI construction cycle: builders, power and electrical equipment suppliers sitting on multi-year backlogs.
A common bear case on Shopify is that AI personal shoppers will bypass it and deal straight with merchants or big marketplaces. The new partnership with Meta's Muse assistant argues the reverse. Inside Muse, shoppers can now find products from Shopify merchants and pay through Shop Pay. The agent plugs into Shopify's rails rather than replacing them.
This matters because it shows what Shopify actually owns: structured product data, merchant connections and a trusted checkout. Those are exactly the pieces an AI agent needs to finish a sale. Deutsche Bank argues agents could grow the market, since they cut the friction of searching, comparing and paying, which lifts online shopping overall. Smaller merchants also gain visibility they would not get on a big marketplace. Deutsche Bank rates Shopify Buy with a $185 target, about 44% above the recent $128. The open risk is money, since it is unclear whether these assistants will take a cut that squeezes Shopify's fees.
Buy Shopify. It is becoming the infrastructure behind agentic commerce, with a $185 target against a recent $128.
After a huge run, investors have started to doubt AI, worried about heavy spending, unclear profits and safety concerns. BofA's quant team checked its momentum rankings, which combine earnings revisions, price and news flow across global themes. They found no deterioration. AI Compute, Photonics and Data Centers remain the top-ranked themes, so the leadership is intact.
The top names on this measure are TSMC in AI compute, Zhongji Innolight in photonics and Seagate in data centers. Two related themes are strengthening: cybersecurity, because AI adoption creates new security needs, and software, where better-than-feared results suggest disruption worries were overdone. The losers tell their own story. Consulting, led by Accenture, ranks lowest as AI starts to threaten its business model, alongside luxury and alcohol. The read is to stay invested in AI infrastructure rather than trim on nerves. The risk is that momentum can turn quickly if AI spending slows.
Stay in the AI infrastructure theme. Compute, photonics and data centers still lead on earnings, price and news.
Deutsche Bank argues investors are lowballing the scale of the tightening ahead. History is one-sided. In 2022 markets priced about 200 basis points of hikes in the first year, and both the Fed and the ECB delivered over 400. The same pattern held in 1994 and 2004. Central banks also tend to overcorrect for the last mistake. Having been too slow in 2021, they are now hiking with inflation less than half its 2022 peak.
Two forces make this cycle likely to run further. Commodity prices are climbing, with Brent near $102 and a broad commodity index close to record highs, and that is not yet in the inflation data. Financial conditions are also loose, with stocks near record highs and credit spreads tight. In 2022 stocks had already fallen more than 10% before the hikes began. Loose conditions mean central banks must do more of the tightening themselves. The read is to expect higher rates for longer, which threatens long-dated bonds and expensive growth stocks.
Prepare for more hikes than priced. Favour assets that cope with higher rates, and be wary of long-dated bonds.
The index looks calm, but Morgan Stanley's Mike Wilson says the damage is hiding in plain sight. More than 40% of Russell 3000 stocks have fallen 20% or more since June, and the S&P's forward earnings multiple has dropped to 19 times, back at its spring lows. At the same time earnings are strong, with the typical stock growing profits in the mid-teens. Falling multiples with rising earnings is a classic mid-cycle correction.
Wilson treats the Fed hike as helpful. Acting early on inflation can lower uncertainty, so a higher policy rate need not lift long-term borrowing costs. This is not a repeat of 2022. His advice is to stay in large-cap quality, the efficient, asset-light companies that lead in this phase, and positioning data shows investors already moving that way. He flags one level to watch: when the 10-year yield breaks 4.50%, stocks tend to de-rate. The main risk is another leg up in oil.
Stay in large-cap quality. This is a classic mid-cycle setup, and the Fed hike is a healthy signal.
