Joseph Shaposhnik Bets on Recurring Revenue and Fanatical CEOs Joseph Shaposhnik, veteran investor and founder of Rainwater Equity, says the world of actively managed funds is “broken”—but he’s convinced it can be fixed. His answer: back predictable businesses led by exceptional managers. This summer he launched the Rainwater Equity ETF (RW), with early support from legendary value investor Bill Miller. Before that, Shaposhnik spent 13 years at TCW, where he ran the TCW Compounders ETF (GRW), the top-ranked U.S. large-cap core equity fund in its class. The key lesson from those years? Companies with recurring revenue deliver the strongest long-term results. “Recurring revenue gives management the confidence to invest in growth,” he said. “That translates into stronger earnings, higher free cash flow, and better performance for shareholders.” The ETF reflects that philosophy with holdings like: Shaposhnik looks for what Warren Buffett once called “fanatical managers”—leaders who are fully committed to their companies and skilled at reinvesting free cash flow. He dislikes dividends, seeing them as capital better used to compound growth inside the business. Why invest in his fund? He points to diversification, a record of outperformance, and resilience in downturns thanks to durable, recurring-revenue businesses. “Benchmarks today are more concentrated than ever,” he said. “We’re building something designed to endure in both bull and bear markets.”

Mike Wilson Warns: Equities at Risk Amid Potential Liquidity Stress The S&P 500, Dow, and Nasdaq all closed last week at fresh record highs. The S&P 500 has jumped 33.75% since its April low, and it’s up 13.3% year-to-date, as the market becomes increasingly immune to White House policy uncertainty and continues to ride the wave of optimism around the AI boom. On top of that, the Federal Reserve has introduced another round of monetary easing, which is helping to support market sentiment. However, Mike Wilson and his team at Morgan Stanley are raising a red flag about the potential risks ahead for equities. The concern: if the Fed doesn’t meet market expectations, it could lead to a market shake-up. Currently, traders are pricing in a strong likelihood of a 50 basis point rate cut from the Fed this year, which would lower the current range of 4.00% to 4.25%. By this time next year, the fed funds futures market anticipates the rate dropping to around 3%. Wilson, however, believes the economy may not actually need such drastic cuts. “We still maintain our view that the rolling recession ended with ‘Liberation Day,’ and that we’re now entering an early-cycle recovery phase, where earnings growth is likely to outperform expectations,” he explains. This outlook is backed by a rise in analysts’ earnings revisions, as well as improving economic indicators like the ISM Purchasing Managers’ Index, which Wilson expects to strengthen further. He points out that pent-up demand is increasingly evident in sectors that have lagged for the past few years, including housing, consumer goods, industrials, transportation, and commodities. Against this backdrop, Wilson argues that the Fed isn’t as accommodative as it would usually be at this point in the cycle. That’s because, while the labor market is holding up, inflation remains persistently above the Fed’s 2% target. “The tension between the Fed’s cautious stance and the market’s expectation of quick rate cuts is a key risk for equities, especially with the historically weak seasonal period ahead,” Wilson says. He notes that the market’s growing correlation between poor economic data and rising stock prices suggests that investors are betting on more rate cuts. The real risk, however, is that the Fed may recognize the ongoing recovery and decide that the economy doesn’t require such aggressive easing. While this may be the right decision from an economic standpoint, it could disappoint markets that have already priced in more cuts. This could also prevent a full early-cycle rotation, leaving lower-quality stocks and small caps to outperform. Wilson also warns about the potential for liquidity stress as the Fed continues with its quantitative tightening, alongside increased Treasury bond issuance and high levels of corporate debt. Liquidity pressure may show up first in the spread between the Secured Overnight Financing Rate (SOFR) and the Fed Funds rate, Wilson says. Traders should also keep an eye on the BofA Merrill Lynch MOVE index, which tracks Treasury volatility. A meaningful rise in the MOVE, currently near a four-year low at 72.5, could signal growing strain in the Treasury market. “Although it’s not a concern yet, we think liquidity stress could surface here first,” Wilson says. “If the Fed doesn’t address these risks, it could trigger a sharp correction in the equity market.”

Tesla’s Next Act: From Cars to “Physical AI” The rally is spreading. The Russell 2000 (+2.51%) just hit its first record since 2021, joining the S&P 500, Dow, and Nasdaq at fresh highs. But while the market broadens, Tesla remains in the spotlight. Shares are up 22.6% in the past month, and Baird’s Ben Kallo just upgraded the stock to outperform, hiking his target from $320 to $548. His bullish view isn’t about cars. With EV sales slowing, Kallo says Tesla’s future lies in robots and robotaxis — the foundation of what Elon Musk calls a “physical AI” company. Baird’s 10-year framework (2026–2035) envisions: If Tesla clears those milestones, Baird sees a path to a $5.5T market cap and a $1,412 share price. In a “bull case,” doubling those volumes could lift Tesla to $12T in value, with shares soaring to $3,043. Kallo stresses these are stretch scenarios — not his base case. Still, he argues Tesla is evolving from a carmaker into the leader of a new era: physical AI.

SocGen: Fed Cuts Set Stage for Equal-Weight S&P 500 Rally It’s Fed Day, and despite market bumps, 2025 has been a standout year for investors. Societe Generale strategists believe the strength can continue as the Federal Reserve cuts rates in a non-recessionary backdrop. So far, none of the 28 asset classes in SocGen’s recommended portfolio — from European bonds to gold — are negative this year. Looking ahead, they see room for more gains and are shifting allocations: raising equities to 50% from 44%, trimming cash to 5% from 10%, and slightly reducing bonds to 35%. History shows that dovish Fed policy supports global equities. While U.S. growth exceptionalism is fading, earnings remain resilient — boosted by AI, stronger profits beyond tech, rising fiscal spending, and global supply-chain shifts. Together, these factors point to ongoing EPS growth and the potential for the S&P 500 to climb higher, with any pullbacks staying shallow. To capture a broadening market rally, SocGen highlights the S&P 500 Equal-Weight Index and a custom basket of profitable small caps with solid balance sheets. They also project the S&P 500 hitting 7,300 by the first half of 2026. Their bullish stance extends overseas: doubling exposure to Japan, maintaining strong European positions, and adding slightly to emerging markets. They point to Germany’s fiscal push, Japan’s new pricing power, China’s next bull leg, and renewed strength across Europe — especially in Italy and Spain.