Good morning. On Fortune’s radar today:
- Wall Street insiders have stopped buying their own stock.
- Trump eyes a new round of major combat operations in Iran.
- The grumpy American consumer.
- Markets: Bond contagion risk.
- Is Wall Street too optimistic for Q3 earnings?
- SpaceX is a decade ahead of its rivals.
- Billionaires fleeing Britain have taken more with them than the combined wealth of those who remained.
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ONE BIG THING
Wall Street insiders are buying their own stock at the slowest pace in nearly 23 years
As Wall Street’s biggest banks prepare for Q3 earnings starting next week, things have never looked better. Trading desks have been setting records. Blockbuster public offerings like SpaceX in June have also given bankers plenty of reasons to celebrate.
But are the people who know the business best starting to have doubts about how long the run can last? A new report from VerityData showed that the number of financial executives buying shares of their own companies fell to a nearly 23-year low during the July-to-September quarter, Fortune’s Morgan Chittum reports.
According to Ben Silverman, head of research at VerityData, there were just 298 “unique financial-sector buyers,” or employees who made at least one purchase of their company’s stock, in Q3. That was the lowest in the financial research firm’s records, which go all the way back to 2004, and also just under the prior record low of 302 buyers in the third quarter of 2024.
- ‘Where you come from shouldn’t dictate where you finish’: How Standard Chartered is taking on the banking industry’s class problem - Sam Birchall
MORE FROM FORTUNE
The Rise of AI Agents: Meta vs. OpenAI | Fortune Daily
Trump keeps changing who gets his $5,000 dividend, and only 21% of voters believe he’ll actually pay it - Joshua Hong
Gen Z is spending more on art than ever before. It’s a key piece of the Great Wealth Transfer, UBS says - Morgan Chittum
Wealthy Gen Zers’ quiet love of art collecting, revealed: They’re outspending boomers and millennials—but keeping their collections off Instagram - Nick Lichtenberg
Nvidia’s secret to retaining staff? No org charts, a flat structure, and two extra days off every quarter - Tamlin Magee
Meta VP: AI in advertising and the rise of the single-person billion-dollar company - Derya Matras
Hilton is betting on people in an industry that can’t afford to lose them - Sam Forsdick
How Marriott’s leadership pipeline is helping it navigate Europe’s hospitality talent shortfall - Ted Kitterman
Move over DINKs: SPLITs are the new financial power couple—they have two incomes, no kids yet and no joint bank account - Orianna Rosa Royle
The ultrawealthy are buying nearby homes to keep staff close—and Larry Ellison and Mark Zuckerberg are two examples - Sydney Lake
NO DEAL
Pentagon prepares for new round of major combat operations in Iran
The price of gas is up and his poll ratings are down, but President Trump said he is prepared to double down on his war with Iran. The Pentagon is readying a new round of major combat operations targeting Iranian energy, infrastructure, and nuclear targets, Axios reported.
“I think the deal isn’t really something that I want to do, but they’re willing to offer us anything to stop,” Trump said late Wednesday, per CNBC.
An Israeli official suggested to Axios that the conflict might be delayed until after the midterms: "The discussion about possible resumption of major combat operations in Iran has increased. The chances of it happening before the elections is not high but we don't rule it out. After the midterms the chances of it happening increase significantly."
THE MOOD OF THE NATION
Why grumpy American consumers are ignoring the wealth effect
When asset prices rise—stocks, property—consumers feel richer (even though the gains are only on paper) and spend more. Normally, they report being happier, too.
Not today.
As these charts from James Pomeroy and his team at HSBC show, consumer sentiment has plummeted despite the rising stock market and rising consumer spending. Why are Americans still sad when the stats show they have so much money? Because the stock gains, and the spending that follows, are being done by a narrow layer of rich people. The top 1% of Americans own more stock than the bottom 90% combined, and 59% of spending comes from the top 20% of consumers.
“Consumers aren’t feeling it,” Pomeroy said in a note to clients.
THE MARKETS
Rising oil and European bond contagion risk sparking global selloff
Stocks sold off globally this morning—all the major Asia and Europe indexes are down—and U.S. futures turned negative before the open in New York. The trigger: Rising oil prices and sovereign debt yields. The price of Brent crude went back up to $104 per barrel on news that President Trump was considering restarting the war with Iran. And the yield on France’s 10-year bond—which had declined over the last two days—headed back up to 4.92%. “Soaring bond yields in France are signaling a looming debt crisis,” Ed Yardeni and Elias Griepentrog of Yardeni Research told clients.
“In terms of the last 24 hours, it was clear that European contagion risk was back on the agenda, as there was a sharp widening in the spreads of multiple countries,” Jim Reid and his team at Deutsche Bank said in an email today.
“Crude oil prices and diesel prices are up,” UBS’s Paul Donovan noted. “Bonds and equities do not like this. Central banks have pretended that they can do something about oil prices, which worries investors. If central banks want to offset inflation from an oil shock, they need to create a recession (or near recession) in the non-oil economy via aggressively restrictive policy. That does not favor bonds or equities.”
The yield on the French 10-year over the last month:
- S&P 500 futures were down 0.39% this morning. The index fell 0.22% yesterday.
- In Europe, the Stoxx 600 was down 0.85% in early trading, and the U.K.’s FTSE 100 was down 0.46% before lunch.
- Asia: South Korea’s KOSPI was down 2.62%. Japan’s Nikkei 225 was down 1.42%. India’s Nifty 50 was down 1.64%. China’s CSI 300 was down 1.09%.
- Brent crude rose to $104 per barrel.
- Bitcoin was at $82,973.
Passive investors are squeezing out active traders
It’s not news that the stock market is increasingly owned by “passive” exchange-traded and index-tracking funds. But this chart from Bank of America’s Savita Subramanian shows just how dominant own-it-all investors are becoming in stocks. The “brain and asset drain from active equity to passive and private equity” may mean the market trades more on momentum than “fundamentally driven price discovery,” she says.
“Passive funds in the U.S. surpassed active funds in assets under management in 2020,” according to Joachim Klement of Panmure Liberum, who recently published this chart from Hannah Unterberg at UC Irvine. “The outflows from active funds in the U.S. have been relentless and pretty much nonstop since 2008.”
Wall Street is optimistic for Q3 earnings. Maybe too optimistic?
Going into the Q3 earnings season, analysts are so optimistic that S&P 500 companies will beat consensus expectations that they may be too optimistic for their own good, according to Saxo’s Charu Chanana. Simply beating consensus estimates will not be enough if the expectation is that stocks will, again, beat the consensus.
“FactSet expects S&P 500 earnings to rise 29.5% year-on-year, alongside revenue growth of 12.3%. More unusually, analysts raised Q3 earnings estimates by 1.4% during the quarter,” she said in a recent note. “Companies are therefore heading into earnings with much less of the usual expectations cushion. Instead of asking simply whether a company beat consensus, investors may need to ask whether the result was better than an already optimistic market expected.”
CHART OF THE DAY
SpaceX is light years ahead of its rivals
“SpaceX has landed orbital-class boosters more than 660 times since 2015, including three launches in 13 hours last week,” according to ARK Invest’s Karim Mattar. “Its closest competitor, Blue Origin, landed a booster for the first time last year, ~10 years after SpaceX.”
THE FRONT PAGES TODAY
Former prince Andrew could face witness summons in £40mn London fraud trial - FT
Inside Trump's AI science summit - Axios
Oracle, Broadcom and SpaceX Seek Blockbuster Debt Deals to Pay for AI Chips - WSJ
Attacks on Saudi airports claimed by Houthi rebels kill 3 people, officials say - AP
France’s Debt Is Now Riskier Than 38% of Nation’s Company Bonds - Bloomberg
Trump’s Retreat: From the Gulf to Britain, American Forces Pull Back - NYT
ONE MORE THING
Billionaires are fleeing Britain—and they’ve taken more with them than the combined wealth of those who stayed behind
Britain’s ultra-rich are increasingly voting with their feet as a wave of tax changes has left many reconsidering their U.K. residency. It’s estimated that billionaire U.K. residents who have loosened their ties to the country in the past two years—or up and left completely—took around $160 billion with them collectively, reports Fortune’s Emma Hinchliffe. It’s an eye-watering sum that even surpasses the combined wealth of billionaires who have chosen to stick with their U.K. postcodes.
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