By Shah Gilani, Shah Gilani – Total Wealth Research, 2024-08-26
Anyone with money in the markets should be feeling good…
Stocks were off and running after the Fed's remarks last week.
Rate cuts are coming.
That alone should make it a calm week ahead of the Labor Day weekend.
But there's something else big happening this week… Nvidia earnings. There are a few key pieces of information all investors should look out for when the company releases on Wednesday.
Get all the details in your Monday Takeaways… plus the one tech stock I think is a bargain right now.
Click on the thumbnail below to watch.
Transcript
Hey, everybody. Shah Gilani here with your Monday Takeaways.
First takeaway is the market is off and running. If you have money in the market, you should be a happy camper. It's from the long side only now. There's no reason to be playing the short side… unless it's a particular firm-specific situation where a company's earnings are likely to implode, where they do implode, and where the stock is falling off a cliff and likely to continue to fall off a cliff.
There are always exceptions to that rule.
Case in point, Intel (INTC). I like it. You might want to take a look at it. That's a little freebie for you because I think Intel looks cheap down here. I said last week on Stewart Varney's show, Varney & Company, it's the only chipmaker on sale to take to the bank.
Last week was another great week for markets. It ended up being great because on Friday, Chairman Jerome Powell said in his keynote speech at the hotly anticipated Jackson Hole Symposium hosted by the Kansas City Fed – what I've been saying for two weeks he was going to say – we're going to start cutting in September.
Why did I think that? The title of the symposium was called “Reassessing the Effectiveness and Transmission of Monetary Policy.”
I've been pounding the table for a couple of weeks saying the “transmission part” means “forward guidance.”
The Fed talking about what it's going to do to tee up markets, tee up the economy, tee up economic players to understand where rates were going so they could go about taking care of business. And that transmission happened on Friday, live, from Jackson Hole – we're going to cut.
The markets loved it. Now, the takeaway from that is we know now the Fed's going to cut in September. Likely 25 basis points. There are increasing odds of a 50 basis point cut if what happens in between shows that the labor market is softening more.
Unemployment is now at 4.3%. It was at 3.4% in July of 2023. So, yes, it's markedly higher than it was. And the Fed is concerned about its dual mandate, what it's going to do for the labor market just as much as what it has to do for price stability.
So if things slip by the September meeting, which is September 17-18, maybe there will be a 50 basis point cut. The knock from economists and from a lot of analysts is that the Fed has waited too long to cut.
The last cut was March of 2020. Fed has waited too long to cut, and the economy is slowing, and we might be heading towards a recession. So if we see some more signs of that, maybe the Fed will cut 50. Mark is already pricing in 25.
I don't think they're going to get 50, and 25 is good enough for now. Guess what? The takeaway from that is it's not about rate cuts anymore until they cut more and more and more.
But for now, it's going to be about things like earnings.
So this week, we have Nvidia on Wednesday after the close. Now, Nvidia could move the market one way or the other. I think what we're going to look for there, what I'm going to look for, what you should be looking for, the takeaway from Nvidia's earnings report Wednesday after the bell is going to be should be, what do they say about AI spending? What do they say about the future spend from companies spending money on Nvidia chips?
That's really the takeaway I think that everyone's going to be geared up on. We get PCE on Friday, people. Gosh. Yeah.
They right now, looking for about a tenth below June, both on core and on headline. So I think we're looking at I think, headline is supposed to be estimated about 2.6%, a tenth below June's core of 2.7%. That would be a tenth below June, so going in the right direction. So we got PCE Friday, Nvidia on Wednesday.
It's going to be an interesting week to see how markets play out, what's going on, which is going to be the couple data points they're getting and individual earnings. Again, the biggest one this week, Nvidia.
That's it for today. That's it for the week. It's going to be a rather, I think, calm week for a change.
Market should be fairly steady.
Give a little, take a little. Why? Because barring Wednesday and Friday, there's not a lot moving the markets right now. This is the end of summer, and big traders and investors who want to take a break, this is probably their last chance, the last couple of weeks before Labor Day, before things turn around, before we start to gear in on the election, and what markets are going to do in October and, of course, post election. That's it for today. I'll catch you guys next week. Cheers.
The post Monday Takeaways: Interest Rate Cuts Mean It's Time to Go Long appeared first on Total Wealth Research.
