It’s that final trading hour, and stocks (^DJI, ^IXIC, ^GSPC) are still abuzz. Julie Hyman and Josh Lipton walk investors through the last sixty minutes in Monday’s session as markets continue to digest the news of an attempted assassination attempt on former President Trump’s life over the weekend.
At the Republican National Convention (RNC) in Milwaukee, WI, today, Trump announced his vice presidential running mate: Senator JD Vance (R-Oh.) Fletcher School of Law and Diplomacy lecturer and “Picking Presidents” author Gautam Mukunda speaks on what Trump’s choice in Vance may signify about past messaging of unity.
Portales Partners founder and Wall Street Beats partner Charlie Peabody joins the program to discuss what the latest slew of Big Bank earnings may signify about the industry.
Other trending tickers on the Yahoo Finance platform include bitcoin (BTC-USD), Apple (AAPL), and Macy’s (M).
This post was written by Luke Carberry Mogan.
Video Transcript
Hello and welcome to market domination.
I’m Julie Hyman.
That’s Josh Lip in live from our New York City headquarters.
We are giving you the ultimate investing playbook to help tune out the noise and make the right moves for your money.
And here’s headline blitz getting up to speed one hour before the closing bell rings on Wall Street.
The assassination attempt certainly has a short term positive impact for former president Trump’s prospects.
I don’t think it has a long term prospect.
I mean, I raised the biden matter in part because, you know, this was a seismic event in political terms, but yet it didn’t have much impact on, on, on how people think about the election, which is saying something, I think the, the idea that Trump is positioning himself as a crypto president.
Um, you know, stems from before this latest rally, if you, if you want to call it such, um, you know, Bitcoins rallied around 10% in the last nine days.
Um I was on here talking, you know, nine days ago and we were saying, you know, how low can Bitcoin go and now it’s actually looking a little bit more optimistic when Apple sort of tends to introduce products.
Uh they are really ready for the consumer, right?
Like so we, we don’t see them jump the gun, not generally first to market, but at the same time, and we have a slew of already phones from, from Chinese competitors from Samsung and others that have some of these A I features.
So Apple’s not first to the game, generally not.
But when they do come, you, you have a high degree of confidence that whatever product they’re coming up with is going to act extremely well.
We’ve got one hour to go until the market closed.
So let’s take a look at the major averages here.
We are on track now for records, not from necessarily the S and P and the NASDAQ, the new one, the new entrant, newer entrant is the Dow.
It looks like it’s gonna close at a record today and the number to beat is 40,003.
Um And it looks like we’re well above those levels.
With this 7/10 percent increase today.
The S and P 500 could well close at a record as well.
50 56 33 the number to be there.
It’s above that right now.
We’ll see the closes there.
The NASDAQ doesn’t look like it is going to match its record.
But nonetheless, seeing this rally here today already, stocks were rallying and then we heard from Fed Chair Jay Powell around midday and that served to, you know, it didn’t necessarily supercharge the rally, but it gave it another underpinning.
It was interesting to hear Jay Powell speak because he talked Julie about, you know, the inflation date and obviously to start the year it had come in hotter than expected.
But now, you know, the inflation picture seems to be kind of improving.
He talked about that.
He talked about the economy performing well, right?
Labor market coming back in a better balance.
Kind of not surprising when you hear Jay Powell talking like that, that you hear the July cut talk kind of bubbling up.
Yes and notably bubbling up from Jan Hay as chief economist at Goldman Sachs who was out with a note today saying if the groundwork is there to cut in September, why not just do it in July?
If the rationale is in place, why not just do it sooner?
So we’ll see what ends up happening.
Powell was asked about timing today.
He said, I’m not gonna give any indication on timing.
Um So, you know, we’ll see what ends up happening.
But that does seem that was because he said, I mean, they said base case September.
But I think, you know, kind of said, listen, if you were looking for a rationale for July, they get it.
Yes, exactly.
So that’s one thing affecting the market.
The other main underpinning of the market as it were is the assassin attempt on former president Trump at the rally over the weekend.
This seems to have raised the betting odds that Trump will be the Victor in November.
It’s still early, but we’re seeing it play out somewhat in the broader markets, but definitely in some other assets, right.
We are seeing a particularly Bitcoin getting a bid off this.
He is viewed as a more crypto friendly candidate, which is a, he’s actually, I mean, listen, he’s positioned himself that actively, that we’ve had Bitcoin fans.
Come on and talk a lot about that with our show.
So it is interesting though because you’re right.
So investors sort of, you know, betting on increasing odds.
He takes the White House then trying to figure out what that means for the market, which is, there’s just so many, there are interesting puts and takes because you think Republican and you think, ok, lower taxes, less regulation at the same time with Trump tariffs, right?
He pounds the table on that spend, spend, spend, you know, he and Biden, there’s no, they’re not gonna address entitle.
So there’s just a lot of puts and takes to think about for investors.
Well, and you have heard some investors say, forget about trying to figure out what it means for the entire market.
You can focus on some individual groups, right?
So for example, you watch the rates market, utilities are lower in today’s session.
Energy is higher.
Although solar stocks are taking a hit because Trump is viewed as less friendly to that sector.
Financial is higher today with earnings from Blackrock and Goldman Z.
So it’s not as though that’s the only thing going on in the market is politics to be sure we’re also going into earnings season.
So that is also going to be front and center for investors.
All right, let’s get another take on all this from one of the latest market moves.
Let’s bring in now, Jeff Bookbinder LP L Financial Chief Equity strategist, Jeff, it is good to see you and a great day to have you on Jeff.
You know, and maybe we’ll start in the politics.
Jeff because listen, you heard Julie and I chat in there.
There’s just a lot going on Republican national convention that starts tonight, Jeff.
Of course, there’s terrible events over the weekend, the attempted assassination of former president Trump reports.
Um, that Trump is gonna pick his running mate today, Jeff try to help us walk through as a strategist.
Jeff.
How you’re trying to make sense of all that, what it means for the markets.
What are you telling clients?
Yeah.
Well, first, thanks for having me on.
Um, you know, I, I think that the key message for clients right now is, is be patient, right?
We’ve had just such a huge run.
Uh, and, uh, to us, don’t your research, it looks like stocks may be a little bit ahead of themselves.
So that’s kind of high level, you know, wait for a pullback potentially by a dip.
Maybe we get a dip around election uncertainty.
Maybe it’s a geopolitical threat.
Uh, we’ll have to see but that, that’s our, our first message in terms of the, uh, you know, the Trump trade, which is certainly getting a lot of, uh, attention today.
Uh, certainly it makes sense for the, uh, for the energy sector to do.
Well, it makes sense for defense, uh, to do.
Well, that’s another one makes sense for the dollar to rally, right?
It makes sense for yields to go up and the yield curve to steepen.
We’re talking about tariffs and we’re talking about deregulation, the banks certainly uh getting a little bit of a lift from that Trump trade.
So you guys are talking, I think about all the right things.
Uh those are certainly areas investors can look at.
Um if they want to try to position around a potential Trump victory.
When you talk about patience though, Jeff, I think it’s important to point out and this is something you pointed out in a recent note that people should stay invested.
In other words, just because you don’t necessarily like one candidate or the other is not a reason to pull out of the market because you think there’s going to be a pullback.
And you had a chart that showed if you hadn’t, if you had stayed unvested during say democratic administrations or Republican administrations, you would have missed out on an awful lot of market upside.
Yeah, that’s right.
That’s, uh, from our mid year outlook that we recently published, uh, certainly staying invested over the long term makes sense.
You know, even though we have thought for a while that stocks were a little bit expensive, uh, we have remained fully invested.
That’s been our recommendation.
Uh, we’re neutral on equities and, uh, it really takes a lot to move us much off of that.
Uh The uh the numbers here are very compelling in terms of staying invested.
So certainly there were some Democrats that missed out on gains during the Trump presidency before there’s certainly uh the opposite as well.
So, um yeah, staying invested, the stock market goes up something like 78% of the time staying invested over the long haul makes a lot of sense.
You’re very, uh it’s very unlikely that you’re gonna get declines over any meaningful period of time.
Jeff, did I hear you just say you were, you were neutral on equities?
That’s right.
Yeah.
Why is that?
Why is that, Jeff?
Sure.
Well, first, um, you know, the earnings environment is pretty good.
Um We’re probably gonna get a double digit earnings growth number in the second quarter in the first quarter when, uh I’m sorry, the second quarter when the numbers are all in uh over the next uh five or six weeks.
Uh So that’s one second.
Um We use technical analysis as an important part of our process and the momentum is certainly very, very strong.
And that suggests, uh, staying with this market and then, you know, we are about ready to get to a fed rate cut.
And, um, you know, if the economy holds up, it’s slowing, but if it holds up, uh, there’s a good chance that, you know, we see some more gains here, uh, over the next several months.
Despite the fact that markets tend to pull back in the second half, whether it’s an election year or not, whether it’s a good year or not, you do tend to see somewhere around, let’s call it 7 to 10% drawdowns in most years.
Um Jeff, of course, you mentioned Jay Powell.
We heard from him today in conversation with David Rubenstein in Washington DC and um Rubenstein tried to press him on timing of the rate cut.
He wouldn’t give information on that.
But here is what he said about the recent economic reports.
Let’s listen to that on inflation.
We, in the first quarter, we didn’t, we didn’t make any more progress the second quarter.
Uh Actually, we did make some more progress.
We’ve had now three better readings and if you average them, it’s, that’s a pretty good pace.
So turning to policy, uh your question, what we’ve said is that we didn’t think it would be appropriate to begin to loosen policy until we were more uh we had greater confidence that inflation was moving sustainably down to 2%.
We’ve been waiting on that and, uh, I would say we didn’t gain any, any additional confidence in the first quarter, but the three readings in the second quarter, including the one from last week do add somewhat to confidence.
So Jeff, I would ask, do you think there’s a chance we could get a cut as soon as July?
And what do you think would be the equity market reaction to that?
Given that the fed hasn’t really telegraphed that timing?
Yeah, we think the chances are pretty low, but certainly it’s possible.
Uh, the House View at Alia research is that we’ll get two cuts, uh, one in September and then one after the election more interesting though is how many cuts are we gonna get?
Right.
And that’s really where the 10 year yield is gonna take its cues from.
So, you know, will that be four or five, will it be six or seven?
It really depends on the economy.
Um, and then if you look at the, um, historical performance of the S and P 500 after an initial rate cut, it’s actually very mixed.
So again, it goes back to the economy if the economy grows and we’re not worried about recession, stocks could add to gains, uh, after, uh, an initial cut.
But certainly, you know, we’ve seen, um, 2001 being one example of 2007 being out of there.
We’ve seen cases where, um, the uh initial rate cut was actually the start of an economic decline.
And that’s when you saw losses uh initially in response to those cuts.
You know, we talked a lot about the equity market today uh for fixed income investors who are listening, Jeff though.
What would be your guidance there?
Sure.
Yeah, certainly a lot of folks are talking about, um, a big drop in rates.
We don’t think that’s the right way to think about it.
You know, again, if we just get a gradual rate cutting cycle, uh which is our anticipation, we will get uh maybe a little bit lower uh interest rates.
But uh you know, over the long term rates tend to follow nominal GDP.
So a gradual economic slowdown aligns with maybe a gradual move lower in rates.
So, um we still think this kind of 4% range, maybe four and a quarter is where we’ll be for a while.
And we also want to get our diversification from bonds.
So we’re telling our clients to in general stay diversified, use your bonds as defensive cushion against potential uh equity market declines.
Uh and then enjoy that income that we’re getting now that we haven’t gotten for uh for many, many years.
So we actually like fixed income a little better even than um than equities right now.
Interesting stuff.
Jeff, thanks a lot.
Appreciate it.
We have some breaking news now, former President Donald Trump has indeed named Ohio Senator JD Vance as his running mate for the 2024 presidential election.
He made that announcement on truth social, which is the social networking platform that he uses.
And he said he thought he was best suited to assume that position a little bit about Vance.
He an Ohio Senator currently, he did serve in the Marine Corps and then was a venture capitalist as well as a corporate attorney in the past.
Well, I guess a little bit more distant past now, he had been critical of then candidate and President Trump, but the two have since made amends as, as Vance has sort of reversed some of his earlier comments.
Of course, he’s also the author of Hillbilly Elegy, which was something of a memoir slash social commentary.
Our Rick Newman is here now with more on this choice.
Hi, Rick.
Hi guys.
So does this indicate some level of comfort on the part of Trump with his chances?
Now, in the broader election?
In other words, what does Vance do for the ticket?
I think of JD Vance as maybe he’s like the next generation Trumper.
Um He, so when Donald Trump is no longer a political force, uh who will be the driving force of the political party.
So maybe now it’s JD Vance.
Um I mean, just to put this in context, I mean, a lot of times there’s not a lot of going on in the campaign that we know who the candidate is going to.
So there tends to be a lot of drama.
Uh, this is the next thing that’s gonna happen, he’s gonna pick his VP nominee.
Who’s that gonna be one wonders that the parlor guessing game and all this kind of stuff?
Then it happens, then it doesn’t matter very much.
Um, so I think JD Vance matters at least in this one regard.
I mean, if Trump wins, I mean, he’s almost as old as Joe Biden and if, uh, whichever one of these guys wins, assuming they’re the two candidates in November, uh, we’re gonna have the oldest president ever.
So you, you could say the odds are higher, uh, than usual that the vice president actually might end up taking the job.
Um, so, uh, voters do need to decide, do they think, uh, JD Vance is qualified to be president if something, if Donald Trump wins and then Trump ends up being disposed or he dies in office or something like that.
Uh, in terms of the election, he’s from Ohio.
Ohio was already a red state.
Uh, nobody thinks Ohio is a swing state anymore.
So I’m not sure he does anything for Trump electorally.
Go back to when Trump chose Mike Pence in 2016, Pence did something important for Trump, which is, he gave him cover with evangelicals.
Um, and Trump did get the evangelists vote and that actually by some measurements, put Trump over the top in 2016.
I don’t see that JD Vance is going to do that well, but he has a meaningful regard but he didn’t really have any.
He wasn’t in danger of losing that vote necessarily this time around.
I’m not so sure about that.
I mean, Joe Biden is a practicing Catholic.
Um, and Donald Trump, we don’t even know what he is, uh, except the guy who hold the Bible up in the air every now and then.
I’m so, I’m not so sure about that.
Although evangelicals, we would be, uh you know, they’re probably not as important in the swing states that matter.
Um Also not a woman.
Um So Trump could have cho, there were some women on the list.
Trump could have chosen, which might have helped him a little bit with the problem that the Republican Party has with abortion.
Um And not, not going in that direction either.
So, white guys on the Republican ticket, I guess my question is Rick, do you think JD Vance brings people to the ticket?
Trump wouldn’t have been able to, you know, I don’t see how he does and vice presidents for the most part don’t do that anyway.
But he said that was sort of like a narrative.
You heard that out there?
Well, Trump needs somebody who can at least give him a chance to reach more independence and moderate suburbanites.
I don’t, I’m not seeing it because JD Vance.
Uh so as you pointed out in the beginning, Julie, um, he was an anti Trumper at the beginning and I think it’s about a 99% likelihood the Biden campaign is gonna be running ads of JD Vance for the old JD Vance trashing Trump.
I think everyone’s gonna get pretty familiar very quickly with, um, things JD Vance has said against Trump in the past.
Um, but I, he’s, to me he’s kind of like a mini Trump.
I mean, he had a Trump conversion.
Um, he Trump backed him, uh, and probably helped him win the senate seat in Ohio in 2022 against Tim Ryan, who was a pretty good senate candidate then.
Um, so, uh, he’s, he’s a convert to Trump and I, I, he’s just in the Trump lane.
He’s been in the Trump Lane since he got elected as a senator in 2022.
So I don’t think he goes out very far outside and grabs many independents.
Well, let’s take a step back for Mullen because obviously we are coming off of a very momentous weekend and tragic weekend with the, um, attempted violence against President Trump and the killing that did occur at the rally over the weekend.
We have been following several weeks of intense speculation about President Biden’s age whether he would remain the candidate.
Now we swing back to whatever would have happened, whatever happened this weekend, we were swinging back to a more Trump centric news cycle with the beginning of the RNC.
How should people who are watching the election watching the polls?
Sort of read the importance of the numbers that we’re gonna see the headlines, we’re gonna see, et cetera.
I think people should go to the beach, go on vacation, go to the pool, go cool off somewhere.
I think people should just forget about it.
I think, I mean, frankly, I mean, these, uh, I mean, if you’re a politics geek the conventions, you, you know, you wanna know what’s going on at the conventions.
I think they’re so totally boring.
Um, I mean, who, who wants to watch this?
People will tune in for Trump’s speech on Thursday.
If you’re gonna watch anything, you think he shifts his tone there at all?
He has telegraphed that he is going to shift his tone.
I don’t believe for one second that the posting has not been much.
No, I mean, Trump, I mean, is Trump gonna have, you know, a near deathbed conversion?
I, I’d be astonished if he did.
I think we’re gonna be back to the same old Donald Trump.
Biden.
Uh, Biden has to shift his tone.
He already has, um, he has shifted his tone for the time being.
But, um, I, I mean, by the, by the beginning of September, which is the gonna be the home stretch of this election that is when the real, um, you know, fighting in the trenches is going to be going on.
I think we’re, I think we’re gonna be right back to, we were assuming Biden is the candidate which he might not be.
Um, I think we’re gonna be right where we were.
You know, the minute before that kid fired the round from the roof.
In Butler, Pennsylvania.
Well, that’ll be just in time for us to have come back from our beach vacations and everybody should go put it out of your mind until then.
Well, thank you very much.
We’re just getting started here on market domination coming up.
We’ll get more analysis of that selection of JD Vance, former president Trump’s running mate.
When market domination returns don’t go to the beach or if you are, keep us tuned in.
Former president Donald Trump has named Ohio Senator JD Vance as his running mate for the 2024 presidential election.
And this comes after a pivotal weekend for Trump the assassination attempt on the former president providing a reason for new voices to come forward in support here with more on the presidential race.
Let’s get to Fletcher School of Law and Diplomacy lecturer, Gotha Munda.
Uh Gotham.
Thank you for being here.
So we just got this news about JD Vance.
You write and talk and think a lot about leadership here.
So I’m curious, first of all, what you make of this choice from that perspective.
Uh It’s my pleasure, the leadership in general, the presidency in particular.
My last book, was on the presidency actually.
So, I mean, one can only imagine JD Vance’s feelings right now, right for Mike Pence, Donald Trump’s last vice presidential nominee, it was a being picked as Donald Trump’s vice president was a life altering and very nearly a life ending experience.
So Vance must be feeling quite excited um in terms of electoral strategy, essentially, this pick signals that Trump has abandoned whatever attempts he might have been making uh after the assassination attempt to try and try and be a unifying figure like those lasted for about a day and they’re over now.
It is impossible to imagine a less unifying figure than JD Vance.
Um When, when it happened, I was texting with, with uh some Republican friends of mine and one said, well, I guess the vice presidential debate will be JD Vance versus JD Vance.
Um Just to put this in context, um There’s been a lot of criticism of the rhetoric that’s around.
There were opponents of Donald Trump have attacked him, you know, they, they called him cultural heroine or a con man or America’s Hitler.
And those are all things that JD Vance said about Donald Trump.
So it’s going to, they’re going to be some fascinating discussions about that go with, it tells, you know, I, I wonder if it tells you that Trump is Jo saying that with this pick, he’s basically suggesting he’s just so confident um that he’s got this thing locked up really because, you know, you heard those, those chatter, a lot of folks were sort of suggesting, well, you know, if Trump wants to reach more independence, moderates, suburbanites, um, he’s got to go with, you know, um, who know Rubio, a Scott.
Um, yum.
That is so someone a different candidate.
To me, this just says I can go with the candidate who maybe, I don’t know if you believe we were talking to our colleague who was saying it’s, it’s hard to see how Senator Vance brings new folks to the table who weren’t otherwise already gonna vote for Trump anyway.
I, I think that’s right.
I mean, like, so there are two theories here.
One is Trump is just saying that I am so certain I’m gonna win that it doesn’t matter what I do.
And the other is that Trump is making a judgment basically based on who has been the most sycophantic towards him.
And I, I stand in awe of JD Vance’s skills in that department.
I, I like I, I honor him.
It, it’s been impressive to watch.
Um And so what I would like, like thing about this is if you think so, so just views that Vance has expressed right in the relatively recent past, um, the is the voting issue that is most likely to have an impact on this election.
Everybody on both sides agrees is abortion.
Um, JD Vance has supported a total ban on national ban on abortion with no exceptions for any reason, right?
You cannot imagine a sharper contrast with the Democratic.
Um he has expressed and, you know, in a statement he said that, that he regretted that one of the results of the sexual revolution was that women were free to leave abusive marriages.
And that, that’s his phrasing, not mine.
Um Like, like you were setting up an as you by picking him, you’re setting up an astonishing contrast.
Um You were also bringing into play.
I’ll just note, uh Peter Thiel who has been JD Vance’s patron for basically his entire career since he left, uh since, since he left Yale law school there, it’s hard to think about a modern, a modern sort of member of a ticket who has been so uniquely patron had as a patron, a single individual.
And I imagine democrats are going to be looking quite closely at Peter Thiel and wondering what they’re going, what, what sort of attack ads they can craft from that as well.
Well, and, and since you bring up Thiel, I think it makes sense also to bring up the other endorsements that Trump collected over the weekend from Bill Ackman and from Elon Musk.
Not that either of them was particularly surprising, but again, it highlights sort of the um business leaders who are willing to put their money and their support behind Trump.
What do you make of that dynamic in the race?
So it is striking.
Right?
So I, I always tell my students that when you’re trying to understand an event, the most important thing you need to understand is base rates, right?
So what is the, what is, what you would normally expect the rate to be?
So the base rate is almost all corporate leaders are Republican.
That shouldn’t surprise us.
Right.
Most fortune mo, most major company CEO S are Republican.
Most major senior leaders on Wall Street Republican.
They are like, like that’s just historically, always been true.
The Republican party is the party of financial and corporate elite and it has been since the day it was founded.
Um And so what’s really striking here is not that there are business leaders who are endorsing Trump.
It’s how few have, um, as my, my friend and colleague, Jeff Sonal pointed out, um up until Elon Musk, uh endorsed Donald Trump, the number of fortune 100 CEO s who would endorse Donald Trump was zero, right?
For Mitt Romney, the number was I believe in the forties.
Um So that’s a pretty striking difference, right?
Like that, we’ve gone from 0 to 1.
You can sort of dive into the particular questions as to why individual people have done it, right?
What might have driven us, what might have driven Ackman and you know, there’s, you can hear lots of gossip surrounding either of them about what that and you know, gossip is worth what you pay for it.
So that may not mean anything but the most striking thing about corporate support for Trump is not how much there is, but how little, which is really surprising for any Republican Gotham.
It’s great to get your perspective as always.
Thanks for joining us.
Thank you, Bitcoin.
Getting a lift fa shooting attack on former President Donald Trump over the weekend and with more on the crypto action, let’s get over to Yahoo Finance’s, Jared Blick Jared.
Thank you, Josh.
You’d have to go back to March to see a better day in Bitcoin.
You can see it’s up 6.38%.
And then we’ve got some of the other tokens like salon and Ether up even more.
This is a three day look and I just want to point out that Saturday, this was the time of the shooting on Saturday.
That unfortunate event.
This shot up the price of Bitcoin to almost 120,000 is an important level.
This is a three day chart.
I’m going to zoom out here to a year to date and then I’m going to highlight the 60,000 price level.
You can see it’s been a virtual floor for most of the last several months.
Going back all the way to February actually.
And we did get a breakdown.
This was a false breakdown at the beginning of May here.
And then we had a more substantial break last week actually, two weeks ago, this started and this coincided with the German authorities releasing about 50,000.
Well, they’re going to eventually release about 50,000 Bitcoin as part of an unwinding event.
And so all of those Bitcoin flooding the market, those offset some of the gains that we’ve been seeing some of those flows that we’ve seen into the spot.
Bitcoins.
And in fact, we saw a billion dollars in flows last week alone.
We didn’t see it impact the price.
In fact, we saw price fall off.
But arguably that was because the German authorities were distributing those bitcoins.
So all in all it looks like kind of a wash and we still have this bullish set up, technically speaking for crypto.
So here’s Bitcoin, we are back above 60,000.
That is bullish next in sight.
Well, you still got to clear about 73,000 to get to ultimate highs.
But then you take a look at Ether.
Um This is a similar looking chart except it did not break down as much as Bitcoin.
You can see just a little bit of a breach right there.
And then finally, Solana very diff uh excuse me, very similar chart and uh bullish looking crypto chart there too as well, guys.
All right.
Thank you, Jared.
Coming up, Apple shares jump to you on the back of a few bullish calls from Wall Street analysts.
We’re gonna discuss that when market domination returns so far 2024 has been the year of A I but is corporate it spending reflecting that A I boom joining us now is John Def Fucci Guggenheim, senior research analyst.
John is good to have you on the show.
So you talk about John um what you see is a new normal for software companies walk us through that John.
What, what do you mean by that?
Yeah, Josh, it, I think if we look back toward in recent history anyway, even go back 20 years.
It spending’s been maybe two times or better than that of GDP growth and software spending is probably better than it spending.
But over the last two years we’ve seen software spending or it spending be about what GDP growth has been and why has that happened?
People wonder why is that?
Why is that happening?
Is it, is it, is it over?
Is, is tech spending just gonna, is that not gonna be a high growth area anymore?
I don’t think that’s the case.
II, I think what happened is we had COVID, right.
A couple of years ago we poured money into the economy.
Our governments did our government, other governments in the world we spent on it to get everybody to be able to work remotely.
Interest rates were negative.
So people had a lot of money and they ended up spending on a lot of things.
They pulled, they pulled it forward, right.
They pulled it, pulled it back to, to spend it back in 2021 on things that they would have spent 23 years later.
So now we have this little bit of a gap.
We don’t need some of the things we already spent on doesn’t mean, um, it is not gonna be high, high growth.
It doesn’t mean software is not still a great area to be in, but we have to work through this and we’re not done yet and it doesn’t, there was this hope we’re gonna get this uptick in spending in the second half.
We’ll get an uptick because we always get a seasonal uptick.
But it’s not gonna be the kind of year over year uptick that people had hoped for.
Maybe it happens next year.
Actually, it’s unclear but that’s too far out.
It’s probably not going to happen in the second half.
Well, and John, what was so fascinating to me about your recent report on all of this is that, of course, a lot of the expectations for that boost in software spending has been tied to A I.
And you’re among the voices that recently including the folks over Goldman Sachs has been sort of questioning the A I narrative, both the timing, the magnitude, even maybe the existence of the huge lift that this sector is gonna get.
Can you walk us through that part of your thinking?
Yeah, there’s been Julie, there’s been some conjecture out there that A I is the reason why it spending isn’t as robust as people would hope it would be.
Um I don’t think that’s the case at all.
Uh There is spending on A I and by the way, I believe A I is gonna change the world.
It’s already changing the world and it will change the world.
That doesn’t mean that all tech companies are going to be able to monetize that.
It doesn’t mean they’re gonna be able to charge for it.
They’re gonna improve their, their, their products with A I technologies and we’re gonna benefit, we are all of us the users but are they gonna be able to charge more for it beyond the, this the uplift they get every year on renewal.
I don’t, a lot of them probably won’t.
Some areas will cloud vendors will, security vendors probably will because even even the bad guys will have a lot of A I.
So they’ll be, there probably will be more attacks.
Um Maybe some of the data um preparers, data cleansers will, but that doesn’t mean that every company is gonna benefit from A I.
And I don’t think that what’s happening out there today is because people are spending on A I.
So they’re not spending on other areas of tech for the most part that’s not happening.
The people spending on A I are A I companies, some companies are spending on A I but they’re A I companies and they’re companies that want, want to provide A I for, for uh corporate consumers.
So John, I’m curious to know just giving your kind of broad views there.
If you’re an investor, you’re listening right now.
You wanna, you wanna commit capital to the Softwares, those software names?
Uh John, what would you suggest?
What are, what are some names you prefer here?
Yeah, Josh, I think, I just, I think if you think about where um what na what names are set up well, for the second half, they are usually some names that, that probably had some problems.
So the numbers have come down already for the most part names.
They’re, they’re a little too high.
Numbers are too high and they’re probably gonna come down for more than half of software names.
Um, some names you can invest in.
Now, uh, a company like Octave Octaves had a breach or an incident, they call it, um, a little more than a year ago or actually, it’s not a year ago.
It was back in October and now they, their numbers have come down quite a bit but they’re doing really well and we think it could be one of the best software stocks over the next few years.
Another company you can buy.
Think of what I just said.
There are, there is spending on A I who’s benefiting from that today.
Well, NVIDIA obviously is, but the cloud vendors are and well, what cloud vendor may have an advantage in that if they can provide, you think about it.
You need a lot of data and you need a lot of compute.
So all the cloud vendors are gonna benefit.
What if one of them provided performance at a lower cost, better performance at a lower cost, they might benefit even more.
Well, that’s oracle think oracles, oracles, our best idea right now.
God John, thank you so much for joining the show today.
I really appreciate it.
Thanks Josh.
Let’s get to our call of the day.
Good day for Apple.
The tech giant getting an upgrade from loop capital to buy and Loop is also raising its price target along with another price target raise from Morgan Stanley.
Those Apple shares are trading at a record today.
Loop capital’s price target of $300 is the highest one on the street and the analyst there is making this judgment.
The analyst, by the way is Ananda Bara is making this judgment based on supply chain checks that show strong demand for the next generation iphones um that are sort of evidence through the supply chain checks.
And he like Eric Woodring over at Morgan.
Stanley says it does have to do with A I here and the demand that they expect because of that.
Yeah.
Loop was really interesting though, basically talking about how um really A I they say is gonna help Apple solidify itself as consumers gen A I what they call a base camp of choice just as it did for social media 15 years ago with iphone and digital content consumption 20 years ago with ipad.
Also another interesting story, Julie was uh Bloomberg signing sources.
Apple’s annual sales in India hit a record of almost 8 billion revenue jumped about 33% in the 12 months through March.
Of course, Apple we know has been very focused on India kind of looking to diversify beyond China.
That was an interesting headline as well.
Yeah, all of it interesting for sure.
Um One of the numbers that stood out to me, by the way from Wood R’s Note is that Apple, he’s predicting will ship almost 500 million iphones over the next two years, which would be higher than the cycle it saw in 2122.
And again, he like, um Barre thinks it’s gonna be A I spurred on by demand for A I get your hands on those new A I enabled iphones, I guess.
Ok. All right, big bank earnings are kicking off another season banks we’ve seen so far reporting mixed results with analysts keeping a close eye on net interest income and how potential rate cuts could affect bank earnings for more on those earnings.
We’ve the earnings we’ve seen so far and what’s on deck we’re bringing in Charlie Peabody is a partner at Wall Street Beats and founder of portalis partners Charlie.
It is great to see you.
It has been a minute.
So it’s a pleasure to talk to you, my pleasure.
So, Charlie, from what we’ve heard thus far, um It has indeed been a mixed picture, but if you can kind of zoom out, how would you characterize what we’ve heard so far from?
So we’ve got the among the biggest JP Morgan City, Wells Fargo, we got Goldman Sachs and Black Rock today as well.
But on the, on the bank side, specifically, what, what’s sort of your biggest takeaway so far.
But the fundamental trends have been strong capital markets and weak net interest income or spread income.
Um And the question is, is that spread income going to inflect positively in the second half of the year, if it does, that starts to bring the regionals back in as a play.
And we start to see that rotation in the second half of last week away from the big money center banks towards the regionals with a continued bid in the capital markets.
Names Charlie.
I wanna get your take on Goldman Sachs.
Of course, reported results this morning.
Investors, Charlie seem to like what they see to bid this one up stock is now up nearly 30% this year.
But you see a void this name Charlie.
It’s, it’s a sell, how come, well, short term, you know, there’s momentum in the capital markets.
And so Goldman is a good momentum play.
Um But we argue that their earning stream remains much more cyclical than the market is uh valuing them at.
And that’s the big debate out there in management as they moved away from their failed consumer banking strategy.
Back to their roots as an investment bank have been trying to convince the street that there is a core underlying earnings power that’s sustainable and stable and I don’t leave them.
And I think once you start to see more volatility in the capital markets and you’ll see the cyclicality in their stream emerge.
Um So I, I think, you know, we’re seeing the best um of that stock price right here right now and, and I would certainly sell it on the flip side.
You like Citigroup.
You know, there’s been a lot more sort of belief seemingly in Jane Frazier’s turnaround efforts at that bank.
What was something sort of from this earnings report that really convinced you that she is making progress?
Well, I think Citi has a couple of things within their power that’s not dependent upon the macro kind of the opposite of Goldman where they’re very dependent upon the macro.
Um There, you know, in the midst of a simplification reorganization process, that’s going to allow them to bring their expense structure down from 54 billion this year to 51 billion by 2026.
They’re in the process of improving their, the strength of their balance sheet, particularly the capital front.
And I think they’re going to be able to buy back, you know, multi billion dollars worth of stock at deep discounts to book.
So that should improve their, um, you know, rot ce.
Um In addition, there are certain businesses um like their credit card business that are under performing and as losses in that um Business crest and come down, you’re gonna see a significant improvement in the returns and earnings of that operation.
So we think that stock um is gonna, you know, gravitate more towards book value as they improve their ROTC from a 7% level today towards a 10 to 12% in 26.
And in the meantime, we think they’ll grow book value, you know, towards over $100 in 26.
So we think that discount to that $100 projected book value will narrow um dramatically over the next 2 to 3 years.
Charlie, let’s go ahead to tomorrow morning, Morgan Stanley on deck.
What, what do you expect to hear when they report Charlie?
I think it’s gonna be more of the same, you know, strong um investment banking um with an eye towards a pickup in M and A and IP Os in the second half of the year.
And then trading will be driven more by equity trading and less so by uh fixed income trading.
Um I’m looking for a dollar um 68 in the quarter on about 14.1 billion of revenues.
Do you think that Morgan Stanley is, is subject to the same kind of cyclicality that you talked about with Goldman Sachs.
No.
And, and that’s where, you know what Gorman has done to transform that franchise has been significantly different than what Solomon has tried to do at Goldman Sachs.
He’s built a wealth management operation and an investment investment management operation that have much more stable revenue streams.
So I think they’ve dampened the cyclicality of their investment banking trading part of the franchise.
Charlie.
Thanks again.
Appreciate your perspective.
Coming up.
We’re breaking down the best ways to be positioned in the tech sector as part of today’s investor playbook.
Don’t go anywhere more market domination still to come.
Investors briefly fled from Big Tech last week after rate cuts spurred a rotation, but there is still ample opportunity for investors within technology stocks at least according to our next guest, we’re looking at how to navigate the big picture with the Yahoo Finance playbook.
Joining us now is Dominic Rizzo portfolio man at T Rowe Prices, Global Technology Fund.
Tom.
Thanks for being here.
So we looked at that rotation.
We sort of were trying to figure out whether that was a blip, whether it was a sign of things to come.
Perhaps as we start to get closer to rate cuts.
What do you think here?
Last week, we saw a pretty vicious tech rotation.
I mean, the question is really gonna be is how strong are earnings coming up in the coming weeks?
And it kind of depends on where you’re looking at, if you’re looking at hardware or software, broadly speaking, I would say the earning set up is a higher bar than it was say last quarter.
We’ve seen tech outperform um in the past three months, up 18% in total and valuations are at the higher end of the historical range that being said within hardware.
We’ve seen some really nice data points this quarter quarter, whether it’s an A I server PC smartphone that makes me more positive on the space software is a little bit of a trickier set up this earnings.
Why, why do you say that that software is a bit more tricky?
Well, you know, if you look at a couple of different data points, I think we haven’t seen that meaningful acceleration that some people were looking for into the back half, particularly in the application software.
So you saw dasso systems come out and preannounced negatively as customers have been pushing out some of these bigger contracts.
We saw accenture’s numbers were relatively fine, but it’s still 0 to 1% organic growth, not nothing tremendous.
And in general, I think there’s a lot more momentum in companies getting their data ready for A I, which means less spend on applications.
And so where would you be looking going into the earning season for big tech?
Are there sort of sub sectors or particular names that you think are gonna be better positioned?
Yeah, I think hardware is looking strong heading into heading into the prints.
We’ve seen four data points that have been quite positive for the hardware ECOS system.
First off the printed circuit board space, the PC B companies, many of them have pre positively in Asia.
And I think that’s a great sign for smartphones, P CS, traditional servers and A I servers.
Second, corning had very strong numbers.
You look at their optical business.
That’s what drove the growth and what’s driving that is really adoption of A I third.
We just had Semicon West LA last week, which is the big industry trade show for semi capital equipment.
And in general, I think people are looking for Wafer fab equipment spend to continue its upward trend.
China’s equipment spending to be stable and then finally, probably most importantly is TSM C’s numbers.
We saw TS MC had June quarter numbers of 40% revenue growth year over year and 16% quarter over quarter growth.
It’s just been really, really strong performance at TS MC Don.
You’re still positive on NVIDIA but, but you like a MD as well.
How come?
Well, you know, NVIDIA has been our largest position for a while and that’s, that’s, that’s been a great place to be if we take a step back.
The A I chip market has just been absolutely on fire.
We are going from a $45 billion A I chip market in 2023 to a $400 billion A I chip market by 2027 that’s a 70% plus Kegger.
And if we look at that NVIDIA is the dominant player and we think NVIDIA will continue to have the dominant amount of share.
That being said A and D has a real shot to be a second source provider with their M I 300 GP US.
And I think that all of those major hyper skiers are looking for a second source to NVIDIA, not to mention their core CPU business, whether it’s on the PC side or on the server side is starting to bottom.
And their industrial business, which they got from the Zyliss is also starting to bottom and that comes in at very high margins.
So if you look at a MD, I like the set up because we have a lynchpin technology company, a company that’s mission critical to the success of their customers.
They have improving fundamentals and you have revenue that’s accelerating operating margins that are expanding in free cash flow conversion that’s improving and a fairly reasonable valuation.
Tom, we haven’t talked as much about the mag seven with the exception here of NVIDIA.
Um There are some expectations that the rest of the S and P 500 X uh S and P 500 that earnings they are gonna start to reeler uh re accelerate and mag seven earnings are gonna start to decelerate to some extent.
Would you be lightning?
Some of them here would you just be kind of standing pat kind of how are you thinking about positioning uh for them going into earnings?
You have to respect the price momentum we’ve seen last week, this big reversal and the small cap stocks and the queues, right?
One of the biggest reversals that we’ve ever seen that being said, the fundamentals at all, the mag seven companies are still very, very strong.
So when I look at the earnings growth of those companies, we’re looking at 20% earnings growth for the mag seven collectively, we’re looking at high single digit earnings growth for the S and P 493.
And if we look at the, the multiples, the mag seven trades at roughly 30 times earnings, the S and P 493 trades at 17 times earnings.
And so you’re actually getting a cheap, a cheaper peg ratio for the mag seven compared to the S and P 493.
Now, that being said, we’ve kind of seen the most extreme uh balance that we’ve had between mega caps and small caps that we’ve had in a long time.
And it wouldn’t surprise me to see that the small caps have some short term rallies.
But over the medium term, those mag seven stocks still like a good place to be Tom.
Thanks a lot.
Appreciate it.
Thanks for having me guys.
Now take a look at Macy’s who stock is sliding here after ending, buy out discussions with Arc House and Brigade.
Macy’s Co Tony Spring pledges a turnaround for the department store chain planning to close under performing stores while revamping ones with better sales to carry more on trend products.
So yes, to take it a hard tumble today, Julie, they end these buy out talks.
Uh says the offer was not an actionable proposal, lacks certainty of financing.
Of course, this has been going on for some time Back in December, the offer was nearly 6 billion raised the bid in March and they get in June.
But Macy’s saying, you know what?
No, thanks.
We’re going to do this turnaround on our own.
Yeah, and Tony Springs only been the CEO since February.
So now the pressure is on him to do this turnaround effort.
And in addition to what you were talking about, they’re also going to expand Blue Mercury, Mercury, which is the Cosmetics brand that they own.
The shares before today were still down here to date at about 5%.
So that didn’t necessarily big in a lot of optimism that this deal was gonna get done.
Um But now that it’s that that’s removed, the stock is falling even further.
You know, we’ve seen this movie before that it takes a long time even for storied department for retailers such as Macy’s to kind of have a decline, we’ll see if indeed he can turn it around.
Spring was the head of the Bloomingdale’s franchise which has performed better than the rest.
So we’ll see if he can apply that playbook.
Keep our eyes on it while we’re wrapping up today’s market domination.
Do not go anywhere.
We’ve got you covered with all the action following the closing bell.
