THE DEAN’S LIST: Two Tests, Then A Third Nobody Scheduled.

Last week I told you the market had two exams left before Labor Day: NVIDIA earnings and Kevin Warsh’s first Jackson Hole speech. Both got graded, and they came back with different marks. Then Sunday night a third test showed up that nobody put on the calendar. The US struck Iranian rocket launchers near the Strait of Hormuz, Iran fired on US sites in Jordan, and oil jumped more than 3% as trading opened Monday. My Single-Digit Millionaire portfolio holds stocks, cash, gold, and a little crypto for exactly this kind of week.

Dean’s note:
Start with Nvidia, because it is the cleanest story of the three. Revenue came in at $96.2 billion, up 106% from a year ago, and adjusted earnings hit $2.22 a share, or $2.46 on a GAAP basis, more than double what the company posted a year earlier either way. Guidance for the current quarter came in at $108 billion, comfortably above the $104.2 billion Wall Street had written down. Yes, gross margin is guided to slip to 74%. Yes, the outlook assumes zero data center sales in China. Both of those are real costs, not footnotes, and the stock still jumped 8.7% and added roughly $440 billion in market value in one session, finally breaking a four-quarter streak of selling off after beats.

Warsh’s speech is the harder story. He did not say the Fed is hiking in September. He said he is impressed by the economy’s overall strength and concerned that inflation’s underlying trends have not meaningfully improved, and he noted that 54% of the goods and services the government tracks have posted price increases of 3% or higher over the past year, up from roughly 32% in the two decades before the pandemic. Traders moved fast. Trump stayed shockingly mum. Odds of a quarter-point hike at the September 16 meeting jumped from 35% to 57% in a matter of hours, and by Sunday night they had climbed further, over 60%. The politics of this Fed pivot are fascinating. Warsh is no Powell. Get used to that.

The bond market did not wait around to see how precise the odds were. The 2-year Treasury yield jumped from about 4.19% to 4.34% on the news, the short end doing what it always does when the Fed’s next move gets less certain. The 30-year barely moved, which tells you the long end believes this settles down eventually or it knew where things were headed before everyone else. And yet the VIX closed Friday at its lowest level of the year. A market that just got handed real uncertainty about its own central bank was not panicking about it, at least not yet.

Then came the test nobody scheduled. Late Sunday, US forces struck two Iranian rocket launchers on Larak Island after spotting the Revolutionary Guard preparing to fire rockets carrying sea mines into the Strait of Hormuz, the first direct US strike on Iran in more than a month. Iran hit back within hours, firing missiles at two American bases in Jordan, which Jordanian and US forces said were intercepted. Iran's Guard separately claimed a supertanker struck two mines in the strait and caught fire, but US Central Command flatly denied it, saying no ship had hit a mine and calling the claim disinformation. Monday morning, a third country got pulled in when the UAE said it intercepted an Iranian drone over its own waters. Oil jumped more than 3% at the open, with Brent back above $90.

All of this landed four days after Iran and Oman had unveiled a framework for a temporary shipping corridor through the same strait, the first real step toward the brokered solution we have expected since summer. Iranian officials say those talks are still moving forward even after the weekend’s exchange of fire, which tells you the diplomacy and the shooting are running on separate tracks right now, not the same one. Watch the ships, not the statements, and treat what either side claims about them with real skepticism until it is confirmed. Layer in a US-Canada trade war that escalated to tariffs running as high as 50% in both directions, and you have three separate sources of upward price pressure landing in the same ten days. Warsh just told you he is watching closely.

Add it up and stocks still finished last week higher, with the S&P and Nasdaq both up and the Dow posting its first winning week in three. Small caps took the real hit, down 1.5% as rate-sensitive names priced in the higher odds of a hike. Monday’s session opened with oil spiking, gold and bitcoin both pulling back on the same rate bets that are pressuring stocks, and Friday’s jobs report carrying more weight than any single number has in months. Stay invested. Stay selective.

A week where the calendar’s two big exams finally got graded, and then a third one showed up Sunday night that nobody scheduled. Here is how it played out.

Monday (August 24): Stocks opened the week lower as chip stocks sold off, with Micron down 5.8% and AMD and Broadcom both down more than 2%, even as Treasury yields eased. Stalled US-Canada trade talks and fresh Iran sanctions added to the unease. The S&P fell 0.28% to 7,652.86 and the Nasdaq lost 0.76%, while the Dow bucked the trend to close up 0.26%.

Tuesday (August 25): Chip stocks rebounded and Treasury yields fell for a second straight day, lifting the Nasdaq 0.66% and the S&P 0.32%. The Dow notched its third straight winning session. Consumer confidence slipped 0.8 points to 89.4, a seven-month low, as households grew more anxious about jobs and prices even as their read on the present situation improved.

Wednesday (August 26): July’s core PCE, a closely watched measure of underlying inflation, came in exactly as expected at 3.3% annually, while the broader headline PCE index ran hotter at 3.7%. Iran and Oman unveiled a framework for a temporary Hormuz shipping corridor, and oil eased on the news. Stocks drifted slightly lower into the close ahead of Nvidia, which then reported revenue of $96.2 billion and guidance well above estimates after the bell.

Thursday (August 27): Nvidia shares jumped 8.7%, adding roughly $440 billion in market value and finally breaking a four-quarter streak of selling off after beats. The Nasdaq surged 1.57% to 26,541.35, its best day in weeks, and the S&P rose 0.72% to a fresh high of 7,730.99.

Friday (August 28): Fed Chair Kevin Warsh delivered his first Jackson Hole keynote on his 100th day in the job, warning that inflation’s underlying trends have not improved, and traders pushed September hike odds from 35% to 57% within hours. The same morning the Chicago PMI cratered to 47.1 from 57.6, the weakest reading of the year, and the University of Michigan final August sentiment read fell to 51.7. Stocks slipped, with the S&P down 0.25% and the Russell 2000 down 1.37%, even as the VIX closed at its lowest level of the year.

Monday (August 31): Late Sunday, US forces struck two Iranian rocket launchers near the Strait of Hormuz, the first direct American strike on Iran in more than a month. Iran retaliated with missiles at two US bases in Jordan, which were intercepted, and its Guard separately claimed a supertanker hit sea mines in the strait, a claim US Central Command flatly denied. The UAE said it intercepted an Iranian drone over its own waters Monday morning. Oil jumped more than 3% at the open, Brent back above $90, stocks opened lower and stayed under pressure through the morning, and Fed hike odds climbed further, toward 60%. ISM Manufacturing and JOLTS land Tuesday, ADP’s private payrolls report comes Wednesday, and August's jobs report closes the week Friday, a report that just got a lot more important.

Nvidia reported fiscal second quarter revenue of $96.2 billion, up 106% from a year ago, and adjusted earnings of $2.22 a share, or $2.46 on a GAAP basis, more than double what it posted a year earlier either way. It guided to $108 billion in the current quarter, well above the $104.2 billion Wall Street expected, while warning gross margin will slip to 74% and confirming its outlook assumes zero data center sales in China.

The stock jumped 8.7% Thursday, adding roughly $440 billion in market value in a single session. That broke a streak stretching back four straight quarters in which Nvidia's stock fell the day after earnings even when the numbers beat expectations. This time investors decided the beat was real, and they bought it instead of selling it.

Dean’s note:
I have watched this exact stock sell off after good news often enough that I stopped being surprised by it. A company can report a great quarter and still watch the price fall, because the price already assumed the great quarter and then some. This week the price finally caught up with reality instead of running ahead of it. A great company and a great stock are not always the same thing, but every so often, for one earnings night, they line back up. The China exclusion and the thinner margin are real costs, not footnotes to wave away. The market decided $108 billion in guidance was worth paying for them anyway.

Kevin Warsh delivered his first Jackson Hole keynote Friday, on his 100th day as Fed chair, at a symposium themed on financial innovation and payments. He said he is impressed by the economy’s overall strength, but flagged that inflation's underlying trends have not meaningfully improved, noting that 54% of the goods and services the government tracks have posted price increases of 3% or higher over the past year, up from roughly 32% in the two decades before the pandemic.

Warsh stopped short of committing to a specific move, but said the Fed may still have work to do to bring inflation down. Traders did not wait for more clarity. Odds of a quarter-point hike at the September 16 meeting jumped from 35.4% to 57.5% within hours, according to CME's FedWatch tool, and drifted higher again over the weekend, above 60%, once the Iran news hit.

Dean’s note:
Be precise about what a number over 60% means. This is essentially the Fed hiking. It’s a real shift from three weeks of assuming a hold, but it is still a coin nobody has caught yet. A hike getting more likely is not the same as a hike being decided. Warsh did not promise anything, but Trump’s silence is educational. The 2-year yield jumped from about 4.19% to 4.34% in a single session. The President said nothing. He would have torn Powell a new ***hole. That kind of two-sided uncertainty is exactly why the portfolio still carries a real cash position. Optionality is worth paying for in a week like this.

Iran and Oman unveiled a framework Wednesday for restoring safe navigation through the Strait of Hormuz, built around a temporary joint shipping corridor roughly seven miles wide, a joint mine-clearing effort, and continued talks toward a permanent arrangement. Part of the new corridor would run through Iranian waters for the first time, a departure from the old system that kept commercial traffic inside Omani waters.

Four days later the diplomacy and the shooting split onto separate tracks. Late Sunday, US forces struck two Iranian rocket launchers on Larak Island after spotting the Revolutionary Guard preparing to fire mine-carrying rockets into the strait, the first direct US strike on Iran in more than a month. Iran retaliated with missiles at two American bases in Jordan, which were intercepted. Its Guard separately claimed a supertanker hit two sea mines in the strait and caught fire, but US Central Command called that report false, said no ship had struck a mine, and blamed the Guard for spreading disinformation to intimidate shipping.

Dean’s note:
We have said since summer that a brokered solution gets delivered before the November midterms, because the political cost of expensive gasoline heading into an election forces the issue. This week gave us both halves of that bet in four days. First the framework, real progress on paper. Then a live exchange of fire, a missile attack on Jordan and a drone intercepted by the UAE, proof the shooting has not stopped just because the talking started. Iranian officials say the Oman talks are still moving forward even after the strikes, which tells you the two tracks are running side by side right now, not one replacing the other. Watch the ships, not the statements, and watch the disputed claims most of all. This week both sides had a version of events, and only one of them checked out.

Trade talks between the United States and Canada collapsed just before a deadline, and Washington's 50% tariff on about C$27.6 billion, roughly $20 billion, of Canadian goods took effect. Prime Minister Mark Carney called last-minute changes to the US terms unfair, suspended talks, and vowed to retaliate dollar for dollar, rate for rate.

Canada answered with countertariffs ranging from 15% to 50% across roughly 700 product categories, covering the same C$27.6 billion of American goods, set to take effect September 8. The list runs from steel and aluminum to dairy, appliances, agricultural machinery, paper, and electronics. Neither side has signaled a path back to the table yet.

Dean’s note:
A trade war between two neighbors is not an abstract headline, even when the rate on any one item runs closer to 15% than 50%. It shows up in the price of a car, a bag of flour, and a dishwasher on both sides of the border, and it lands at the exact moment the Fed chair just told you he is worried underlying inflation has not cooled. Tariffs are a tax, and a tax on inputs eventually becomes a tax on the receipt. I am not saying this alone changes the Fed’s math in September.

I am saying it is one more thread pulling in the same direction as everything else Warsh flagged Friday, oil included, and threads pulling in the same direction are worth watching even when no single one of them is decisive on its own. Amazingly, Warsh seemingly convinced the President hat he has to be accountable for these self inflicted wounds and mum’s the word on a relatively minor hike coming to a meeting near you.

July’s core PCE, a closely watched measure of underlying inflation, held at 3.3% annually and rose 0.2% on the month, exactly matching what forecasters expected. The broader headline PCE index, the measure tied to the Fed’s actual 2% longer-run target, ran hotter at 3.7%. The government's second look at second-quarter GDP showed real consumer spending revised up to 3.4% from 3.2%, a solid number on paper. But July itself told a different story. Real personal spending was flat for the month, its worst reading since January, and the Conference Board’s consumer confidence index fell 0.8 points to 89.4, a seven-month low.

Two more numbers landed the same week and pointed the same direction. The Chicago PMI, an early read on manufacturing, cratered to 47.1 from 57.6, its weakest print of the year and well short of the roughly 58 economists expected. The University of Michigan’s final August sentiment read fell to 51.7, down more than 6% from July, with both the present-conditions and expectations gauges sliding.

Dean’s note:
Read all four numbers together instead of picking one. A backward-looking quarterly average said spending grew at a solid pace. Three forward-looking monthly reads- spending, confidence, and manufacturing- all said the household and the factory floor stalled out right at the end of it. That is not a contradiction. It is the real economy wanting more certainty about jobs and prices before it commits to the next dollar, and Friday's jobs report is going to tell us whether that caution is catching on or fading out. Warsh read the same inflation data and reached a similar conclusion in his own way. When the consumer, the factory floor, and the Fed chair all start worrying about the same thing in the same week, pay attention to it.

Stay invested. Stay selective. This week the market graded two exams, then Sunday night handed it a third.

This was the week I told you to circle, then the weekend added a chapter nobody assigned. Here is what actually moved money, and what to watch as the real jobs report lands Friday.

•     Nvidia beat cleanly, and the market finally believed it, guiding to $108 billion in revenue against $104.2 billion expected, and the stock added roughly $440 billion in value in a single day. That breaks a four-quarter streak of selling off after strong quarters.

•     Fed Chair Warsh used his first Jackson Hole speech to say inflation’s underlying trends have not improved, and traders repriced September hike odds from 35% to 57% inside a day, then toward 60% over the weekend. That is a coin flip that has tipped toward a hike, not a decision that has been made.

•     Iran and Oman unveiled a real framework for a temporary Hormuz shipping corridor Wednesday. Four days later, the US struck Iranian rocket launchers near the strait, Iran fired on two bases in Jordan, and the UAE intercepted an Iranian drone. Iran's Guard also claimed a tanker hit mines in the water, but US Central Command denied it. Oil jumped more than 3% at Monday's open.

•     The US-Canada trade war escalated for real. Washington's 50% tariff on about C$27.6 billion, roughly $20 billion, of Canadian goods took effect, and Ottawa answered dollar for dollar, rate for rate, with counter-tariffs from 15% to 50% on the same value of American goods starting September 8. Tariffs feed straight into the inflation numbers Warsh just flagged.

•     The data agreed with Warsh from a different angle. July’s core PCE held at 3.3% annually, consumer confidence fell to a seven-month low, the Chicago PMI cratered to 47.1, and the University of Michigan’s sentiment reading fell to 51.7. Four separate readings, one direction.

•     The Russell 2000 fell 1.5% on the week, its worst stretch in a month, as rate-sensitive small caps took the brunt of Friday's hawkish surprise. Big caps held up better, with the S&P and Nasdaq both still positive for the week.

•     Keep contributing to your 401(k). The limit is $24,500, and if you are 60 to 63, the super catch-up takes you to $35,750. A week with a $440 billion up day, a coin-flip Fed, and live fire around the Strait of Hormuz is exactly when that automatic paycheck deduction earns its keep.

None of this week's news was a surprise waiting to happen forever. Nvidia was always going to report, a Fed chair worried about inflation was always going to say so, and a fragile standoff around the strait was always going to get tested again. What changed is the calendar. Friday’s jobs report now carries more weight than it would have two weeks ago, landing right after a Fed chair who says he is watching it closely and a strait that just proved it is not fully calm yet.

- Dean

P.S. The number that sticks with me this week is $440 billion. That is what Nvidia added in market value in one day, more than the entire Canadian countertariff package leveled at the United States, and then some. It is also more money than a missile attack on Jordan or a denied claim about a tanker managed to knock off this market by Monday morning. That does not mean those events do not matter. It means this market is still, after everything, mostly a referendum on a handful of very large companies doing very large things, right up until the day it is not.

And one more thought. Mark Friday, September 4 on your calendar, because August‘s jobs report just became the most important data point standing between here and the Fed's September 16 decision, and now it arrives with an oil market on edge too. Economists expect a modest gain, something in the neighborhood of 90,000 jobs, as slower immigration keeps a lid on labor supply from both directions. ISM Manufacturing and JOLTS land Tuesday, and ADP's private payrolls report comes Wednesday, so by the time Friday's number hits the tape, the market will already have three previews in hand, plus whatever the Strait of Hormuz has done to oil in between. Watch the number itself, not the average everyone quoted going in.

👉 What do you do with a week where one company adds $440 billion in a single session, a Fed chair moves hike odds twenty points, and shooting breaks out again around the world's most important oil chokepoint? You do not try to guess which force wins next month. My Single-Digit Millionaire portfolio blends stocks, cash, gold, and a little crypto so no single earnings call, speech in Wyoming, or headline out of the strait decides your whole year.
This newsletter is for informational purposes only and does not constitute investment advice. Past performance is not indicative of future results. Consult with a qualified financial advisor before making any investment decisions.