🗞 The Truth About The Labor Market (Top of Mind Trends)

WHILE YOU POUR THE JOE… ☕️

You should always build the habit of knowing how different indicators affect the stock market. 🖊️ 

Historically, job openings have closely tracked the S&P 500 over time.

Makes sense:

• As more businesses look for employees, this signals a healthy outlook for demand and productivity

• That translates into more corporate earnings and higher valuations

• A healthier labor market accelerates disposable income + personal spending

There’s an issue, though…

Since 2023, the S&P 500 has continued to rally, even as the pace of job openings has fallen significantly behind.

Like the industrial and internet revolutions, this divergence is happening because of a major introduction to the global economy.

Democratized AI, like ChatGPT, Claude, Gemini, etc.

This creates a massive crack between United States tech stocks and AI stocks everywhere else.

That’s what we’ll cover today.

Speaking of A.I. opportunities, let’s get on with today’s email 📧…

A NEW GLOBAL ROTATION
House View

Here’s the major difference between U.S. tech and Emerging Market tech:

• Forward EPS Growth

• PEG Ratios

As most global institutional and retail investments focus on U.S. AI names such as NVIDIA, Amazon, Meta, and Microsoft, other worthy names worldwide have fallen significantly behind in demand.

We all know that the attractiveness of an investment lies in the expected future earnings growth. 📈 

Given these two subsets are growing at an average EPS rate of 30%, they should trade at approximately the same valuation.

Yet, that’s not the case right now.

Emerging market AI names carry an average 1.1x PEG, while U.S. AI names are valued at 2.3x PEG ratios.

Double the price tag; same EPS growth.

In a recent interview, two Goldman Sachs managing directors pointed out two major trends for 2026:

• Emerging Market AI Stocks

And

• Brazilian Stocks

When we boil down the divergence between job openings and S&P 500 valuations, driven mostly by AI names, the delta is clear.

Productivity growth in the United States will skyrocket as AI boosts margins and productive hours for the average large-cap.

Meanwhile,

The same productivity gains haven’t been recognized in overseas AI names, so that’s one area we can start digging into.

Specifically, the following companies:

While an entire pitch was made for MercadoLibre (MELI) at $1,925 a share in this Deal Room post, there are still lots of potential plays to be considered in this revaluation theme.

Such as:

• VNET Group (VNET)

• Alibaba (BABA)

• Mobileye Global (MBLY)

The top pick, after due diligence is made, will be broken down and pitched to my Deal Room members first.

A deal you may never get to see, as other pressing issues come to light in this free newsletter.

This is a once-in-a-generation opportunity, as evidenced by the job openings vs. S&P 500 price action divergence, so I suggest you take it seriously.

Grab 7 Days Free right now. ✅ 

Brazil has the highest real rates in the world right now at 9.42% (10Y yield minus inflation).

Markets view Brazil as a very risky economy, likely due to the current president’s socialist economic views.

However,

That could change if Bolsonaro Jr. comes to power in 2027, accelerating the pace of foreign investment and aggressive rate cuts, among other benefits.

In other words,

Brazil has the largest delta in real rates, employment, and productivity outside AI implementation.

If I were you, I would agree with Goldman for one simple reason:

• Emerging market AI names are deeply discounted compared to US peers despite similar EPS growth rates.

• Brazil’s productivity & real rate delta potential mean jet fuel for stocks

Following our stock selection process, let’s dig through a rough overview of Brazilian stocks and see what we can find in terms of themes: ⬇️ 

Overall, the ones with the highest forward P/E premium, justified by above-average EPS growth, seem to be:

• Embraer Empresa Brasileira de Aeronautica (EMBJ)

• AXIA Energia (AXIA)

• Telefonica Brasil (VIV)

I don’t know about you, but this all seems to be like a defensive rotation so far.

Of course, we’d still need to dig through high-delta names like NuBank (NU) and others. For now, we can take this as the market’s signal to enter Brazil’s deep infrastructure.

This is typically what a pro-market president (such as Bolsonaro Jr.) tackles first in terms of investment when they take office.

Again, all the benefits of a major compression in real rates.

Before I leave you, I want to give you a fresh take on last week’s U.S. jobs report, especially as we have highlighted this divergence in job openings relative to the S&P 500.

Leisure and hospitality was the only industry to post significant job growth over the past month.

That’s outside the typical and expected growth in government and healthcare jobs.

This is also an industry not being surrounded by a potential AI revolution, so it should post decent EPS swings into the next quarter. 📈 

That said,

A thorough review will be available to you in my Deal Room, and you can access it during your 7 Day Free Trial. ✅ 

To your success,

G 🫰