No progress on peace talks over the weekend… why Buffett doesn’t like today’s market… why ¶¶Òõ×îаæ loves today’s market… but Luke Lango is telling readers to expect a pullback… how big it might be
Yesterday, Iran delivered its formal response to the latest U.S. peace proposal.
President Donald Trump’s reaction left zero room for misunderstanding:
I have just read the response from Iran’s so-called “Representatives.”
I don’t like it — TOTALLY UNACCEPTABLE!
Iran’s nuclear program remains the point of contention.
Tehran rejected dismantling its facilities and instead proposed separate negotiations on the issue, offering to dilute some of its highly enriched uranium and transfer the rest to a third country, with a provision that it be returned if Washington exits any eventual deal.
The U.S. has been demanding a 20-year moratorium on enrichment and a full end to the nuclear program as part of any peace framework. Tehran called the American position a demand for “surrender.”
Meanwhile, also yesterday, Israeli Prime Minister Benjamin Netanyahu said that the conflict with Iran was “not over,” adding:
There is still enrichment sites that have to be dismantled, there’s still proxies that Iran supports, there are ballistic missiles that they still want to produce … there’s work to be done.
The lack of geopolitical progress is weighing on the oil patch. As I write on Monday morning, West Texas Intermediate Crude has rebounded to $97 while Brent trades above $103.
However, stocks are brushing off the saber-rattling, continuing to focus on AI and a strong earnings season.
At least for now, Wall Street’s message is clear: as long as corporate profits continue to wow and the AI trade keeps delivering, geopolitical risk is a secondary concern – even with higher oil prices and unresolved risk in the Middle East.
Just over a week ago, legendary investor Warren Buffett sat down with CNBC at the Berkshire Hathaway annual meeting
He wasn’t exactly bullish…
Here are select quotes from the “Oracle of Omaha”:
- I’ve compared the markets to a church with a casino attached. And people can move between the church and casino. And I would say…the casino has gotten very attractive to people.
- We’ve never had people in a more gambling mood than now. But that doesn’t mean that investing is terrible. It does mean that prices for an awful lot of things will look very silly.
- It isn’t our ideal environment, I should say, in terms of deploying cash for Berkshire.
Meanwhile, another legendary investor has been deploying plenty of cash – and helping his readers generate returns that are multiples higher than the market here in 2026.
That would be ¶¶Òõ×îаæ, editor of . While Buffett heads into retirement having amassed a massive cash pile for Berkshire Hathaway over the last handful of quarters, Louis has been making moves that have resulted in this portfolio climbing an average of 28% year-to-date, almost 4Xing the S&P 600.
So, which legendary investor is reading the market correctly?
Both of them.
Where Louis and Buffett align and diverge
In an interview with Bloomberg Business Week in 1999, Buffett said the following:
If I was running $1 million today, or $10 million for that matter, I’d be fully invested. Anyone who says that ‘size does not hurt investment performance’ is selling.
It’s a huge structural advantage not to have a lot of money. I think I could make you 50% a year on $1 million.
No, I know I could. I guarantee that.
The reason Buffett can’t act on that guarantee today?
Before his recent retirement, he was managing hundreds of billions of dollars. With a war chest that large, he can’t effectively invest in smaller, fast-moving companies anymore. He has to focus almost exclusively on massive “elephant-sized” opportunities.
And right now, he thinks the elephants are overpriced – “very silly” prices, as he put it.
But in – Louis’ small-cap focused service – he doesn’t have that problem.
Instead, Louis is focused on smaller, high-growth companies where he believes the opportunity set remains unusually attractive.
The numbers back that up…
His Buy List soared 15.5% in April alone, backed by companies with 123% average forecasted earnings growth and 69.8% average forecasted sales growth.
As of last week, eight of his holdings had reported earnings so far this season. All eight beat expectations, with an average earnings surprise of 68%.
Much of this outperformance comes from Louis’ quantitative algorithms, which are designed to identify fast-growing small-cap companies before Wall Street fully catches on. But Louis will be the first one to tell you that the market leadership has been shifting over the last year, with small-cap stocks responsible for a growing share of the market’s gains.
And Louis sees good reasons to believe this will continue.
Small-cap companies are predominantly domestic. They benefit directly from U.S. economic growth.
They’re more sensitive to interest rates – which means when rates come down, their borrowing costs fall and their earnings power expands fast. And they’re still cheap.
After years of trading at a steep discount to large caps, small caps are only now beginning to close that valuation gap.
Louis believes that when rates eventually come down under the new Federal Reserve Chairman, Kevin Warsh, small-cap borrowing costs will fall and their earnings power will expand fast.
It’s a tailwind he’s been tracking closely after seeing it play out for decades, and he’ll lay out the full case – including which specific stocks he thinks are best positioned to benefit – . He’s also handing out a to everyone who attends.
Bottom line: Buffett’s caution may be justified for mega-cap-focused professional money managers. But individual investors still have access to the small-cap corners of the market where
Are small-caps about to go on sale?
Louis isn’t the only one watching small caps closely right now. And the setup that Luke Lango, editor of , is tracking, suggests that small caps – and perhaps even some mega-cap AI names – are about to get cheaper.
Luke believes that the “Summer of AI” – his term for the powerful rally he’s been forecasting in AI infrastructure stocks – has arrived. And it’s running hot.
Maybe a little too hot.
As evidence, last week, Luke highlighted a technical indicator called the Relative Strength Index, or RSI. Without getting too deep into the weeds, RSI measures how overbought or oversold a stock or index has become.
A reading above 70 generally signals overbought conditions – meaning a market has run up so far, so fast that a pause or pullback has become increasingly likely because prices have gotten ahead of themselves.
Right now, Luke sees warnings from a variety of RSI readings:
The S&P 500 RSI has hit 75. The Nasdaq RSI has hit 78. The semiconductor ETF SMH has an RSI of 82.
RSI 82 in SMH is the most overbought the semiconductor sector has been in years.
When three major market indicators are simultaneously in extreme overbought territory, mean reversion isn’t a risk to worry about. It’s a scheduled event.
Luke zeroes in on SMH, highlighting historical market data suggesting that the ETF is likely in for a 5%-8% pullback.
It wouldn’t be surprising to see a similar step backward in the broader market.
To be clear, this isn’t a crash or a bearish shift in Luke’s thesis. It’s just the normal, necessary breather after a red-hot market run:
[It will be a] clean, healthy, technical reset that works off the excess and creates a healthier base for the next sustained advance.
Duration: typically two to four weeks of sideways-to-lower price action before the fundamental momentum reasserts.
Circling back to Louis, for investors looking to capitalize on small-cap opportunities, . If we’re in for a healthy pullback, this would likely be the last good entry point before Luke’s Summer of AI kicks back into gear.
Here’s Luke bottom line:
Any short-term volatility we see over the next few weeks should pale in comparison to the gains that will follow over the subsequent few months.
Wrapping up
Today’s market looks to be demanding two things from investors at once: patience for near-term volatility and bullishness for the medium-term AI boom.
And that means Buffett’s caution, Louis’ small-cap optimism, and Luke’s expectation for a healthy pullback can all be true at the same time. The difference comes down to timing – and knowing where to look for opportunity once the market’s reset runs its course.
We’ll keep you updated on all these stories here in the Digest.
Have a good evening,
Jeff Remsburg
(Disclaimer: I own SMH)
