We are looking at a macro data and expectations for monetary policy now may surprise jobs report showed an addition of 172,000 jobs ahead of the 88,000 that had been expected.
Well ahead of next week's Fed meeting, all eyes to remain on rate expectations at the same time inflation.
As well as energy volatility from the Middle East as well as currency swings and mega ideas of forcing a sharp rotation, especially within the tech joining us on this Monday morning to weigh in on the undercurrent is David Fetherstonhaugh, EVP, Investment Strategist at VistaShares.
David, good morning.
Thank you so much for joining us.
So we have a lot to so let's start.
With the economic data this week we are paying attention to inflation figures, but these data came in twice as strong as expected at least for the headline on payroll figure.
So all eyes remain on geopolitics as we return from the weekend.
But how investors out there the positioning their portfolios as they head into the second half of 2026.
Hey Remy, great to be on.
That's exactly right.
And I, I think it's quite a juxtaposition, even when you're looking at, you know, the start of the year and how we entered 2026, and some of the sentiment that we had around Fed and the rates, um, a little bit more thinking about rate easing rather than rate hikes, and then suddenly we have a little bit more tensions geopolitically in the Middle East.
As well as a little bit hot of a jobs report, um, and suddenly, you know, everyone's kind of looking at midweek to see how the CPI numbers come out to really digest that.
And we started to see a little bit of that, you know, from the AI trade as well, and we've, we've been in a market that's been a little bit more growth equity, growth equity heavy.
Um, and as Broadcom came out with some of their earnings, that was, you know, great earnings, really good quarter, um, but more of an in line with expectations, and then suddenly you have a fast follow, um, where suddenly you're, you're looking at rates as a potential hike instead of a pause or cut, and, you know, how many hikes would you potentially have in 2026, that starts adding a little bit more uncertainty and multiple compression when you're thinking about the growth side of things.
Um, so that's kind of what we're, we're watching this week ahead of, ahead of going into the, the Fed meeting.
Yes, and David, as you mentioned, we are seeing a market that still likes growth but is far less forgiving, where even decent semi earnings are triggering sell-offs due to over elevated expectations there.
So how are you actually adjusting your tax exposure here as the general AI trade does make this transition into a much more selective phase.
Yeah, I think that's exactly right.
And we, we're, we've entered a phase for at least the first two quarters of 2026, where it seems like any way you would slice and dice parts of the AI trade, they seem to do well.
And what we do remain very like bullish overall on, on kind of the what we call the AI super cycle, and the impacts that that can have within the stock market and, and the GDP as a whole, um, different segments will be treated differently, and it's no longer uh essentially a, a, a rising tide for all boats situation.
Um, there's still very strong earnings across the board, which is really great to see.
I think the piece that people are trying to grapple with right now is there's been such a run up for the start of 2026.
We've seen that, you know, whether it's the US indices, Japanese indexes as well, you looked at the Korean market start to adjust.
Everyone's just a little bit taking a breather, um, which is a good thing if you're looking at repositioning your entry into a trade like this for, for ours. at least, this is something that is, you know, a multi-decade run rather than just a short-term, um, a short-term, you know, technology shift, and we remain very bullish on that aspect of things.
So if you're looking at, you know, potentially allocating to some of the names that you thought were running a little bit too hot, you would have, you know, wanted to have access to, um, this is kind of a good opportunity to do so and reposition the portfolio in areas that have really strong earnings that you've kind of been watching chase away from you in the AI trade.
Yeah, and speaking of which, I do want to get your take on FX volatility, especially as we're seeing a stronger US currency so far this year.
So how will a stronger greenback, as well as these global currency swings out there, actually disrupt earnings translations as well as capital flows when we're looking at the global semis?
I think that's one of the least appreciated aspects of today of, of what we think about when the, with the AI super cycle, and part of it is that so much of the supply chain resides in South Korea, Taiwan, Pan.
And, you know, mostly of that being known, but the second kind of order effect of a lot of the conflict in the Middle East of being a lot of those countries are very energy dependent, and a lot of those countries also suffer from pretty strong foreign capital flows that can have downward pressure on currency.
We saw over the weekend, the Korean government kind of put some pressures out there to avoid, you know, derivative pressure on the yuan, which is kind of It seemed like it helped a little bit.
The, the one kind of strengthened a little bit.
The yen's kind of, you know, it's been hit pretty hard as well.
Um, so when, when we're thinking about how those markets, which are all in long-term supply contracts with some of the US companies, how that's going to impact their economy, how that's going to impact their margin pressure, um, for some of these AI trades, um, you know, energy for, for the first and foremost is top.
Mind and the kind of the, the downstream impact on that on currencies.
That's something that we're watching.
We're watching pretty closely.
And, and part of why over the weekend, you know, some people would say, you can look at the Korean market since it's still digesting some of the news on Friday.
I mean, the Korean market also had a little bit of a, of a front run to the US market on Friday.
So, you know, the jury's a little bit out as to whether it's a fast follow.
Um, or a leading indicator.
Uh, but for the most part, you, you are kind of seeing some of that volatility play out, um, specifically in some of the, you know, more emerging markets or, or in markets like Japan, um, that would have, you know, a pretty large portions of the AI supply chain.
And finally, David, before I let you go, with all of this volatility across markets and asset classes, where are you currently finding the biggest misprices as well as hidden opportunities right now?
Yeah, the, the piece that we're kind of broadly looking at is, is how the market really digests some of the, the, the CPI numbers this week.
I think that's going to be part of it.
The, the, the second as to whether we, you know, stay relatively growth tilted or look maybe a little bit more towards quality.
The, the second piece of that um is really around how some of the market also digests if the hyper scalers have mentioned coming out with some convertible, um, some convertible notes or either, you know, some share issuances to raise capital to actually put more dollars to work into the AI trade and all those downstream impacts of that.
And we saw Google come out last week with, with kind of support from Berkshire to do something.
Comparable, um, market, market digestion was pretty mixed on that, especially with some of the news coming out from Meta towards the end of the week that they might be considering something similar.
Um, so, yeah, and then you can tie in kind of like a third, a third multiple of that, which is, we have one of the largest IPOs ever, um, kind of slated on, on the docket for, for later this week.
How the market kind of digests all of that with respect to staying growth tilted is something that we're kind of monitoring quite closely over the next week.
Um, we've seen the market dabble a little bit more towards some of the quality stocks, but we haven't really seen anything, um, that would kind of Indicates a sector shift at, at this point.
So we're, we're still kind of at some of those names that have traded off in the AI space.
Um, you're, you're starting to see some that have been included in the S&P 500 to kind of go pretty high pre-market, um, and a shift within the AI trade, kind of a little bit more from some of the semi-trades.
You can see a little bit more movement into optics, a little bit more movement into networking.
And those are some of the areas that we're looking to, to entry, um, after a little bit of the pull-off and, you know, quite a good rally to start 2026.
Well David, we will have to leave it there for today, but a lot to keep our eyes on as we head into a new trading week.
So thank you so much for joining us and thank you so much for your perspective and your insights.
Awesome.
Thank you so much, Remy.
