💣 The war's shaping the market

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Good morning investors! Cloud stocks jumped yesterday as the global situation continues to create havoc.

Today we cover:

📊 Economy and News

The U.S. House of Representatives voted down a war powers resolution that sought to restrict President Donald Trump's authority to conduct military operations against Iran without congressional approval.

The measure failed by a narrow margin of 212-219. Four Democrats crossed party lines to vote against it, joining most Republicans, while two Republicans supported the resolution alongside Democrats.

This vote followed the Senate's rejection of a similar measure the previous day (March 4 or 5), which fell largely along party lines.

Constitutional Debate and Symbolic Nature
Democrats and some Republicans argue that the Constitution grants Congress the sole power to declare war, and Trump bypassed this by initiating hostilities unilaterally. Critics point to shifting administration goals for the operation.

However, the resolutions were largely symbolic. Even if passed, Trump would almost certainly veto any bill limiting his commander-in-chief powers.

Energy prices continue to rise

Tanker traffic through the Strait of Hormuz remains at a standstill as Iran attacks vessels.

Oil prices have surged about 20% this week, hitting $80 a barrel. Retail gasoline prices have jumped nearly 27 cents since last week to $3.25 per gallon.

Also, the US has granted waiver to allow India to buy Russian oil amid Iran war.

Reminder: Mortgage rates hit 6% as Iran war spooks bond market traders. Also, the average 401(k) balance rose by 11% to $146,100, in 2025. Lastly, Anthropic says the Pentagon’s supply chain risk label will have less business impact than feared.

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📈 Stocks

S&P 500 6,830.71 (-0.56%)
DJIA 47,954.74 (-1.61%)
NASDAQ 22,748.99 (-0.26%)
BRENT CRUDE 84.40 (-1.37%)
* Prices as of Mar 6th, 12:20 AM UTC

Broadcom shares jumped nearly 5% after CEO Hock Tan delivered a bullish outlook on AI during the company’s earnings call.

Tan forecasted AI chip revenue in 2027 “significantly in excess of $100 billion,” driven by surging demand for custom silicon designs. The projection exceeded most Wall Street estimates and highlighted Broadcom’s growing capacity—nearing 10 gigawatts across six major customers.

He assured investors that high-bandwidth memory and leading-edge wafer supply are secured through 2028, easing concerns about shortages that have plagued the industry.

Tan emphasized Broadcom’s sustainable profitability in AI, with yields and costs now aligned with the rest of its semiconductor business. He downplayed risks from hyperscalers building their own chips, arguing that competing against Nvidia requires the absolute best performance, which favors Broadcom’s leadership in AI networking and custom accelerators.

The upbeat results and guidance lifted related stocks: copper connectivity players Credo and Amphenol rose 10% and 4%, respectively, while optical tech firms Lumentum and Coherent dropped over 4% each as the market favored copper solutions for AI server connections.

Gap reports: Gap’s fiscal fourth quarter results missed on the bottom line after historic winter storms led to around 800 temporary store closures.

💵 Personal Finance

Stocks do not rise every day, week, or even year. Markets crash, recessions hit, and corrections happen. Yet over any 20-year period in modern history, the major stock indexes have delivered positive returns. This upward trajectory is not luck—it is the result of powerful, structural economic forces that reward ownership of productive businesses.

Economic Growth Powers Corporate Earnings
The single biggest driver is real economic expansion. Companies exist to solve problems, create products, and generate profits. As global GDP grows—through population increases, technological innovation, and rising productivity—corporate revenues and earnings rise with it. A growing economy means more consumers, more infrastructure, more innovation. Since the end of World War II, U.S. GDP has grown at roughly 3% annually on average. Public companies capture a share of that growth, turning higher sales into higher stock prices. When you buy a stock, you own a slice of that expanding pie.

Compounding and Reinvested Profits Create Exponential Gains
Public companies do not hoard all their earnings. They pay dividends or reinvest in new projects, research, and expansion. Shareholders who reinvest dividends benefit from compounding—one of the most powerful forces in finance. A $10,000 investment in the S&P 500 in 1950, with dividends reinvested, would be worth millions today. Each year’s gains build on the previous year’s larger base. This self-reinforcing cycle turns modest annual returns (historically 7–10% after inflation) into massive long-term wealth.

Inflation Lifts Nominal Prices
Stocks also rise because money loses purchasing power over time. Inflation pushes up the price of everything, including corporate revenues and stock valuations. What cost $1 in 1970 costs far more today. Companies adjust prices, wages, and contracts upward, so their nominal earnings and stock prices climb even if real growth is modest. This built-in inflation hedge explains why cash and bonds often lag stocks over decades.

Constant Capital Inflows Support Demand
Every month, millions of people add fresh money to the market through 401(k)s, pensions, IRAs, and index funds. Governments, corporations, and sovereign wealth funds also buy stocks. This steady demand creates a structural bid under prices. Unlike a closed system, the stock market receives continuous new capital from a growing global population and rising wealth.

Historical Evidence and Important Caveats
Data confirms the pattern: since 1926, the S&P 500 has returned about 10% annualized including dividends. Even after the Great Depression, 2008 crisis, and 2022 bear market, new highs eventually followed. Yet short-term losses can be severe—stocks fell 50%+ multiple times. The “always go up” truth applies only to long horizons and diversified portfolios. Timing the market, chasing hot stocks, or using excessive leverage can destroy wealth.

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