May 15, 2026

In the Loop – May 15, 2026

“In The Loop” is designed to give you a short update reflecting major developments, earnings, and investment trends across some core Equity Income and Growth holdings. All clients should be aware that individual buy/sell recommendations will be conveyed directly to you on an individual basis. Have a great weekend.

U.S. – China Summit Highlights

The past week in the markets highlighted a renewed focus on geopolitics, monetary policy, and the accelerating AI infrastructure buildout that continues to reshape the economy. Investor attention centered on the high-profile U.S.-China summit between President Trump and President Xi Jinping in Beijing, where both sides signaled a willingness to stabilize trade relations and reduce tensions. While few formal agreements were finalized, discussions reportedly included expanded Chinese purchases of U.S. energy, agriculture, and Boeing aircraft, alongside the possibility of extending prior tariff truces and creating additional economic communication channels between the two nations. Markets generally interpreted the summit as constructive, particularly given concerns surrounding global supply chains, Taiwan tensions, and energy disruptions tied to the Middle East conflict. Investors appear hopeful that even incremental progress could reduce inflationary pressure, improve corporate visibility, and support multinational earnings heading into the second half of the year. At the same time, expectations remain measured, as markets have learned over the past decade that U.S.-China negotiations often evolve slowly and remain politically sensitive.

New Chair, New Questions for Markets

This week also marked the end of an era at the Federal Reserve as Jerome Powell concluded his final term as Chair, handing leadership to former Governor Kevin Warsh. Markets are now attempting to assess what a “Warsh Fed” could look like. Early reactions suggest investors expect a more market-sensitive but potentially less accommodative central bank, particularly given persistent inflation pressures tied to energy prices and ongoing geopolitical instability. Bond yields moved higher this week as investors recalibrated expectations for interest rates under the new leadership, with markets increasingly recognizing that inflation may remain structurally stickier than many anticipated. Historically, transitions between Fed Chairs can create short-term volatility as investors reassess monetary policy priorities, sector leadership, and liquidity expectations. However, markets may ultimately welcome a period of policy clarity if inflation moderates while economic growth remains resilient. Investors are also increasingly debating whether the next phase of the cycle favors companies with durable free cash flow, pricing power, and direct exposure to long-term infrastructure investment themes rather than purely speculative growth.

From Code to Concrete: AI Investment Cycle

Meanwhile, the dominant force underneath the market remains artificial intelligence and the massive infrastructure spending wave now accompanying it. This earnings season continued to reinforce that AI is no longer simply a software story—it has become a physical infrastructure cycle involving data centers, electricity generation, networking equipment, cooling systems, transformers, and industrial construction. Hyperscalers including Microsoft, Alphabet, Amazon, and Meta continue guiding toward extraordinary capital expenditures that could collectively exceed $700 billion annually, with much of that spending directed toward AI compute capacity and data center expansion. This week brought additional announcements surrounding expanded AI cloud partnerships, pre-leased compute agreements, and continued acceleration in power demand tied to next-generation AI clusters. The market continues rewarding companies leveraged to this buildout—including semiconductor infrastructure, electrical equipment, power management, engineering and construction, and utility operators—as investors increasingly recognize that AI’s growth now depends as much on physical infrastructure and energy availability as it does on software innovation itself. In many ways, the market continues to signal that we are still in the early innings of one of the largest infrastructure investment cycles of the modern era.

Have a great weekend.

Individual Company Updates

Synopsys (SNPS)

Synopsys continues to benefit from strong demand for its chip design and verification tools as semiconductor and AI infrastructure spending remains elevated, with recent earnings commentary highlighting healthy growth in its core EDA and IP businesses and a robust pipeline tied to advanced process nodes and AI-centric designs. Management has emphasized that Synopsys is well positioned as a critical enabler of next generation semiconductor innovation, which supports durable revenue visibility and a solid balance sheet heading into the back half of the year.

Netflix (NFLX)

Netflix has also executed well, growing its global subscriber base and expanding profitability while reshaping its business with new revenue streams. The company’s ad supported tier is gaining traction, with Netflix indicating that advertising revenue is on track to roughly double in 2026 to about 3 billion dollars, supported by a growing base of more than 4,000 advertising clients and mid teens growth in ad buys year over year. At the same time, Netflix has authorized a new 25 billion dollar share repurchase program on top of its existing buyback authorization, reflecting confidence in its cash generation and long term outlook, even as the market digests more measured near term guidance.

We remain focused on navigating market trends and positioning portfolios for long-term growth and resilience.
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Formidable Asset Management (“Massey Romans Capital”) is an investment adviser registered under the Investment Advisers Act of 1940. The information presented in the material is general in nature and is not designed to address your investment objectives, financial situation or particular needs. Prior to making any investment decision, you should assess, or seek advice from a professional regarding whether any particular transaction is relevant or appropriate to your individual circumstances. Although taken from reliable sources, the Firm cannot guarantee the accuracy of the information received from third parties.

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