The one and only Jessica Inskip, director of investor research at Stockbrokers.com.
Come on in, my friend.
Thank you for being here.
Happy to be here.
So, OK, we've had earnings now for a couple of weeks.
Earnings Palooza.
We got the big banks, we got some mega caps.
Is the market reacting more to earnings or more to what's going on in the macro environment?
Wonderful question.
The market is actually reacting more to liquidity than it is earnings.
It's the liquidity constraints because the earnings are wonderful.
We're looking at double digit growth for the 3rd consecutive quarter.
We have had wonderful beats.
The banks have been doing fantastic, even the hyperscalers, but we don't like the cap back spend.
And it's really the environment because it would be different if we had higher capE spend and a less restrictive Fed or less worry about what's happening with oil in the Strait of Hormuz, less worry of raising interest rates.
That's what's bleeding over.
So it's really difficult for stocks to go higher if we don't have a better macro environment.
That's driving right now.
I would love your take on the response the markets.
Alphabet after that first ever report of negative free cash flow, it gapped down in yesterday's session 7%.
Someone found its footing a little bit better on today.
Was that an overreaction, do you think, given all the other information we learned from Alphabet, but there is one clearly one bad sticking point investors not so fond of.
It was a bad sticking point, but I think it was absolutely an overreaction and an opportunity to buy incredible margins, but They also have an incredible backlog.
So if we're increasing the, the cap ex spend towe capacity to meet those demands, it's not, it's not a supply constraint.
It's, there are, there is such sensational demand.
So I think it's very, very good, but again, it's the environment.
The 2-year note was reaching, and once again, a new 52 week high.
Once that 2-year note starts increasing, then the cost of Capex is going Going up and that's bleeding into these fantastic earnings is the cost of capital.
What does it tell you on a leak like this one, Jess and Skip?
Energy, utilities, industrials, those are your leaders.
It was not necessarily something like, let's say consumer staples right when you talk about rotation.
Exactly.
So it's still telling me that it's a healthy market because we're seeing that broadening.
I want to see that broadening and continue, but if I'm seeing industrials, I'm seeing utilities, I'm even seeing.
Information technology is not the lowest sector on there, so it's not a flight to safety, but it's still the artificial intelligence trade.
It's just broadening and it's not so concentrated in the hyperscalar due to the capex spend.
It's the picks and shovels.
The picks and shovels is the trade of today.
But once we remove that risk of the Strait of Hormuz, we go into next week, we look at Kevin Worsh.
Those are our catalysts that that could push us higher and then have those hyperscalers start to participate.
Yeah, let's do a little bit of a preview for what to expect next week.
Obviously two day FOM.
Policy meeting Tuesday.
Decision Wednesday.
Warsh's second press conference Wednesday at 2:30.
You also got a lot of big juicy mag 7 names that are reporting right around that time.
We do.
How do you prepare for such a big week like that and what more would you want our viewers to keep in mind as we head into such a consequential few days?
Yes, first and foremost, you need a good night's sleep because we have to pay attention.
Not kidding, but I think Worsch is actually a very interesting scenario.
He's in a conundrum, if you will.
He Has to either listen to the bond market.
So the 30 year has been increasing, the 10 years increasing, the 2 years increasing.
Every single one of them are increasing the 2 year has higher velocity than the rest.
He could tame the bond market by raising interest rates and listening to the bond market.
I don't think he's going to do that.
Then on the other hand, we have this short-term inflation shock.
His framework is to look through short-term inflation shocks and look at the underlying causes of inflation.
So if he raises interest rates due to that.
That would break his entire framework and credibility is extremely important as we know when we're talking about the Fed.
So I think we're going to be able to hold, but what's more important to me is the language, and he doesn't give us much.
If he tells us that this oil shock is a continuation, then that will tell me it's perhaps not this one-time shock that we can look through.
But if he still makes it one time transitory, we know we don't like that word, but that will give us an insight of how we could utilize or.
How we would utilize interest rate policy going forward before I let you go, we do have a little bit of late breaking news, and I want your response to it in real time if you don't mind sources familiar with the situation tell me today is Jessica Inskips it is my birthday.
I can't confirm.
Happy birthday.
Thank you for taking time on your special day to join us here on the broadcast.
All the best for an amazing birthday.
Enjoy your weekend.
Absolutely my pleasure.
It wouldn't happen any other way and I hope we'll see you next week during earnings.
The Fed, we got a lot to talk to.
Thank you for kicking us off.
Sounds good.
Watch that.
