Global markets were rattled last week as China dramatically expanded its controls over rare earth metals, a move viewed as strategic leverage ahead of the late-October Trump-Xi meeting. PVG’s Patrick Adams, CFA, described this as a “war-time approach,” noting that China supplies about 70% of global rare earths—critical to semiconductors and defense—and that the U.S. faces a significant gap in sourcing. The S&P 500 dropped -2.7% Friday following Trump’s announcement of a possible 100% tariff on China. Adams cautioned that while some companies are shifting focus to meet demand, valuations across the sector, such as MP Materials trading at 70× revenues, appear stretched. He also highlighted a small ripple effect from First Brands’ $11 billion bankruptcy and commented on the broader rotation in equity markets, where cyclicals, value stocks, and small-caps are beginning to show signs of life amid strong healthcare and biotech rebounds.

Looking ahead, Adams outlined contrasting market paths. A bullish scenario—assuming Fed rate cuts, continued AI investment, and stable global conditions—could push the S&P 500 to 8,000 by 2027 (about +20% upside). Conversely, a bearish outcome tied to economic shocks could send the index down -32% to 4,500, or -17% if it merely reverts to its long-term earnings trend. With sentiment-based valuations implying roughly 4% upside from current levels, PVG expects modest gains as long as key bullish drivers remain intact. Sectors showing resilience include healthcare, utilities, and dividend-oriented equities, while housing may have a decade of growth ahead. However, persistent inflation, cautious consumers, and policy uncertainty continue to temper investor confidence despite ongoing economic expansion