THE BOTTOM LINE: The market avoids going nuclear and a deep dive on Snap

This week:

• Stock indices slipped last week as nuclear tensions between the US and North Korea were ratcheted higher. That anxiety was quickly forgotten, and markets recovered. Business Insider CEO Henry Blodget discusses how attention has now shifted to the decision of CEOs nationwide to leave President Donald Trump’s manufacturing council in response to his comments on recent events Charlottesville, Virginia. The sudden development has some saying it reflects a broader loss of faith in Trump on behalf of the entire US business community.
• Neil Dutta, the head of US economics at Renaissance Macro Research, spoke to Business Insider executive editor Sara Silverstein about what he sees as very low odds for a recession. He says financial conditions are easy, stocks are up, the yield curve is relatively steep, and economic indicators are looking solid — all factors he sees resisting a recession. And from a macro perspective, Dutta thinks that the US has “several years to go” before it’s at real risk of one. He then goes on to say that the actual odds of a recession are below 10% right now. While acknowledging that while asset prices are high, Dutta says there’s considerable support for them at current levels, and notes that the market overestimated the influence of Trump, but underestimated the effect of earnings. He also says that while improving labor force participation is one of the most bullish things going on in the US economy, it’s not getting a lot of respect right now.
• Snap has had a rough go of it since going public in March, with its market value being cut in half from post-IPO highs. Despite recent weakness, the jury is still out on whether the company will stumble and fail (like Twitter), or if it will pick itself up (like Facebook). What we do know is that Snap will trade around 15 to 20 times earnings, and it’s good news for bulls that the company is cheaper now, because it means the profit threshold for maintaining that valuation will be lower going forward. Key drivers for Snap include user growth and revenue expansion. If either of those stall, the downside scenario is around 4 times current year revenue, where Twitter now resides.
• While the US stock market has shown remarkable resilience lately, if you look closer, there are some cracks forming under the surface. Business Insider senior markets reporter Joe Ciolli discusses a measure called dispersion, which shows the degree to which the market’s best performers are diverging from the worst. It’s high right now, which some market experts think shows rising investor worry and risk aversion. This doesn’t necessarily represent an immediate threat to the eight-year bull market, but it’s something traders should keep an eye on if the situation worsens.
• Bill Kennedy, a portfolio manager at Fidelity investments, spoke to Henry Blodget about how international markets may be the place to be after years of underperforming the US. This is due to better earnings clarity overseas, which improves the environment for stock pickers. He points out the low valuations for international stocks, relative to their US counterparts, and says it’s time for a shift. Kennedy highlights one of his top holdings, an Indian mortgage company. He holds it up as an example of a stock that can give you broad exposure. Kennedy then discusses Alibaba, which he sees leap-frogging traditional brick-and-mortar retailers and completely dominating the online market. Finally, he shares his thoughts on Sony, as well as emerging markets.

Get the latest Snap stock price here.