The S&P 500 has surged to new all-time highs, even as the economic landscape sends mixed signals. In the latest episode of DH Unplugged, titled "Fear and Greed," hosts Andrew Horowitz and JC Dvorak examine the forces driving the market's optimism despite headwinds such as war, inflation, softening GDP, and tariff reversals. With roughly 80% of S&P 500 companies having reported earnings, and nearly 90% beating EPS estimates, investors are pricing in a rosy outlook ahead of Wednesday's Consumer Price Index (CPI) and Thursday's Producer Price Index (PPI) releases. The CNN Fear and Greed Index, hovering near 61, suggests a market leaning toward greed, raising questions about whether this signals froth or a contrarian opportunity.
Horowitz and Dvorak delve into the components of the Fear and Greed Index, including Tom McClellan's Volume Summation Index and Horowitz's proprietary Key Reversal Indicator (KRI). They also dissect Friday's jobs report, which revealed a 4.1% unemployment rate but only 20,000 payrolls added, alongside a shrinking labor participation rate. This mixed data paints a picture of an economy that is slowing but not collapsing, leaving investors to bet on a soft landing.
The episode also covers the rebound in oil prices after Treasury Secretary Scott Bessent's failed deal timeline, and Horowitz shares a profitable client trade he doubled up on. Additionally, the hosts discuss new 10% to 12% tariffs on 60 trading partners, lawsuits from 25 states, and Nike's reported tariff refund, illustrating the ongoing trade policy turbulence.
A significant portion of the conversation focuses on mega-cap free cash flow trends that worried Horowitz heading into the quarter. Apple's free cash flow rose roughly $7.5 billion, or 31%, while Microsoft fell about $6 billion. Meta's free cash flow collapsed 91% due to Mark Zuckerberg's renewed AI spending, and Amazon swung from positive $18 billion to negative $7.6 billion. Alphabet flipped negative, Tesla turned to a $1.09 billion outflow, and Intel worsened by $7.37 billion after a $20 billion secondary offering. Nvidia bucked the trend, adding $22.5 billion. The hosts also cover SoftBank's $2.2 billion quarterly profit driven by Masayoshi Son's Intel stake, and ByteDance's OpenAI funding.
The discussion turns to behavioral finance, with Horowitz citing Daniel Crosby's work on loss aversion. "When people are freaking out, it's usually the time to get in. When people are like, oh my God, it's never gonna get worse, the market rally is gonna continue forever, it's like time to get out," Horowitz tells listeners. Dvorak pushes back, questioning why proprietary signals used by shops like Jane Street remain private while retail-facing indicators become content. Horowitz's response: "It's content. That's what it seems like to me at least."
The episode also includes a heartfelt recap of the Fort Lauderdale meetup honoring the late John C. Dvorak, attended by roughly 35 listeners from across Florida. DH Unplugged is a weekly investing and markets podcast hosted by Andrew Horowitz and JC Dvorak that blends market commentary, economic news, business trends, and offbeat cultural observations with a skeptical, humorous tone. Episode 813 is available now on the DH Unplugged website, Apple Podcasts, Spotify, and Amazon Music/Podcasts.
