• NVIDIA is the market’s AI barometer. Its earnings and global deals could make or break tech momentum this summer.

• The US 10-Year Yield is flashing a signal on Washington’s credibility. Policymakers need to project stability to keep rates from causing economic and market damage.

• We’re staying disciplined and diversified. In a world of policy whiplash and AI hype, we remain focused on quality global businesses and alternative assets that smooth volatility and stabilize returns.

The year so far has been eventful, to say the least. There have been new issues to deal with seemingly every week (day?). But if we were to narrow our focus, we would say that the two primary drivers of recent market activity have been artificial intelligence (AI) and policy direction (including tariffs, the Federal budget, and the like). We therefore thought it would be helpful to highlight two indicators – NVIDIA’s stock price and the US 10-Year (10-Y) Treasury Yield – investors can watch over the summer to get a sense of how these things are going.

Let’s begin with NVIDIA.

NVIDIA: The AI Bellwether

There are times in market history when a single stock comes to symbolize an entire theme. NVIDIA has become that stock for AI. With its massive leadership in hardware, the company has effectively become the bellwether for tech and innovation. Given how important these areas have been for market sentiment, investors should watch the stock closely as a gauge of risk appetite over the summer.

We will get an early hint on how this will play out on the day this post is published, May 28th, as the company reports earnings after the market close. The results of that release – and more importantly, how the market reacts to it – could set the market tone for the months ahead. If NVIDIA beats expectations, investors will likely interpret this as confirmation that the AI infrastructure wave is real, sustained, and still in its early innings. Such a result would likely lift not only chipmakers but also enterprise software firms, hyperscalers, and other key players in the related tech ecosystem. This could push the S&P 500 towards new all-time highs by the Fall.

If, on the other hand, the company misses or guides conservatively, that could mark a short-term peak in the euphoric positioning we’ve seen across AI-linked equities. With many investors already heavily allocated to the theme, disappointment could quickly give way to re-evaluation and, in turn, volatility.

But earnings are just one piece of the story. NVIDIA’s business sits at the intersection of geopolitics and technology in a way few other companies do. This comes with benefits and drawbacks. The Trump administration’s May visit to the Middle East illustrated the positive side of this position, with NVIDIA featured as a central part of the US’s diplomatic and economic push in the region. The trip ended with key allies committing tens of billions to build out sovereign AI infrastructure. Through deals with the likes of Saudi Arabia’s HUMAIN and the UAE’s Stargate, NVIDIA is providing the high-performance chips and server hardware for high-priority projects funded by extremely deep pockets. These are not theoretical. They are real, government-backed orders that will directly support NVIDIA’s topline growth. At the same time, the company is facing evolving sales restrictions, especially when it comes to China. Granted, this issue is still evolving under the current administration. But policies like these inject a degree of uncertainty into NVIDIA’s forward visibility—especially given how meaningful China once was to its revenue base. We are watching closely to see how this dynamic unfolds.

In any case, NVIDIA currently represents a temperature check on investor enthusiasm. Its stock price is worth tracking over the coming months.

US 10-Year Treasury: The Policy Scorecard

While NVIDIA’s stock provides a gauge on AI and risk appetite, we see the US 10-year (10-Y) Treasury yield acting as a “scorecard” on the Trump economic agenda. Investors who track this rate and its components will get a sense of the market’s thoughts on policy direction in the months ahead.

Context is important here. All Treasury rates reflect what US government bonds pay at various maturities (the most common vary from 1 month to 30 years). When analyzing markets, different maturities are used for different purposes. But all rates reflect expectations of (1) economic growth (or “real” interest rates) + (2) inflation and + (3) a premium for uncertainty over the given timeframe. The 10-Y is a widely used benchmark for long term economic prospects.

The Trump administration has been explicit about wanting to see this rate (and indeed all rates) go down as part of their pro-growth agenda. Lower rates make loans (like mortgages) less costly and create more economic activity, which would be helpful to offset the drag created by tariffs. Apart from “lobbying” (to put it politely) the Federal Reserve, the administration has been trying to use other means – like encouraging greater oil supply to lower energy prices and thus lower inflation – to get rates to go down.

The problem is that rates have remained stubbornly high and are trending upwards. The White House has argued that this is happening for good reasons – i.e. higher expected economic growth – while critics point to higher expected tariff-related inflation as the cause. In our view, neither side fully captures what’s really going on. The Federal Reserve’s real interest rate calculations (which act as a proxy for economic growth) have been trending downwards while market measures of expected price increases (called breakeven rates) have remained fairly steady. In other words, recent policy moves have lowered growth projections while barely budging those of inflation. This means the third component – uncertainty – is what’s been driving higher yields of late.

Recent events support this view. Moody’s downgrade of US federal debt – though not terribly important in itself – reflects the fact that the country’s fiscal trajectory continues to deteriorate, with deficits widening and debt ratios climbing. As global investors grow more concerned about Washington’s fiscal discipline, they are demanding higher yields to compensate for that added risk. Meanwhile, the U.S. dollar’s declining role in global foreign exchange reserves suggests that the country’s “safe haven premium” may be eroding – a subtle but important shift in global capital allocation. The current administration’s policies gyrations haven’t helped in this regard.

For investors, this all boils down to one key takeaway: the administration needs yields to stop going up. As the 10-y approaches 5% (it is about 4.5% today) – especially while economic growth is modest – it complicates the investment landscape and restricts credit-sensitive sectors of the economy, from housing to small business lending. Sustained movement above this level warrants caution. If, on the other hand, policymakers can successfully project a renewed sense of stability and get rates to go down, we could see the boost in economic activity come to fruition.  

Our Positioning

The indicators above capture much of the opportunities and risks in today’s markets. Our current positioning reflects this, with a relatively balanced or “neutral” view on risk-taking. The core of our approach remains in high-quality, globally diversified equities. We continue to favor reduced exposure to Canadian stocks in favor of international and US positions. We hold a cautious posture on duration risk within fixed income, and are pleased with our growing positions in alternative investments (including private equity and private credit) as these have done well to reduce volatility and boost returns in our portfolios. While short-term volatility is likely, we remain focused on owning great businesses, managing risk prudently, and investing with discipline.

With the news cycle as volatile as it is today, the importance of having a plan and sticking with it becomes all the more important. Our clients know we are managing this on their behalf.