Jessica Inskip, the one and only director of investor research at Stockbrokers.com, thank you for being here today.
Happy to be here, JD.
I brought all these cheering people for you, rightfully so.
I love the clappy things.
OK, so here's why I love talking because usually I get, I love all my guests equally.
We got to talk macro stuff, but with you, we get to dig right into the nerdy stuff like the 30-year Treasury yield.
What did you see?
What levels are we at and what does that communicate to you given historic norms?
Well, so I think it's interesting if we were to look at historic norms right now, we would look at what we call a bare steepening curve, but we've got things that are happening in the front end and the back end.
So if we think of the back end of the 30 year, that's going to give us fiscal uncertainty.
We don't have a lot of certainty from Kevin Warshch, and we've got fiscal uncertainty coming in with a lot of this debt issuance.
Now.
Kevin is more on the front end of the curve, which is the two-year note, but what is very interesting is the 2-year note, and we've been talking about this very consistently, JD, has moved a lot more than the 30-year, has moved a lot more than the 10-year, which tells me that short-term inflation expectations are really what's on the lens and what's driving markets to me.
Did a lot of analysis today where I looked at correlations of the S&P 500 versus the. the 10 year, and the 30 year just to see what was actually driving it.
In the short term, it is the 30 year as of recently because of fiscal and what we've heard from Besson and moving around and we can talk about that, but it's still the 2 year, which tells me that the inflection point that the market is waiting on actually will be PCE that we're getting on Wednesday and Friday when we finally have Kevin Warsh talking at Jackson Hole.
So I think we really need some clarity.
We have uncertainty term premium which is creating a ceiling on the S&P 500.
How lucky are we?
That we get Nvidia earnings in Jackson Hole in the same week.
Like we love this stuff.
I do.
What a great day.
What a great day to be in the market.
We got a lot coming up in the days ahead.
Let me get your take on not just what Treasury Secretary Scott Besson said earlier today, but it's the first time you and I are talking since the so-called Bescent bond buyback, at least announcement last week.
What is he going for ultimately?
Well, so I think it's interesting because we've got Treasury now, not trying to peg yields, but they're giving us a signal.
Let's try to control them.
Which can be good and bad if we look at when Yellen did this in the past.
So this isn't the same.
When Yellen was Treasury Secretary, she moved moved around issuance, so it wasn't actually buybacks, but instead of issuing so much on the back end of the curve, we issued more on the front end of the curve.
Now that we're buying back and we're going to issue more on the front end of the curve, the reason why I pointed to Yellen is that it actually didn't move things as much, and I see that happening again.
The 30 year yield.
Initially retracts, but we're at the same place again.
So it's very interesting.
I don't think the market wanted that.
It's so, it's something to pay attention to.
It wants more of a clear path, not a band-aid.
That was a bridge.
We need someone to pave a road, and that was Mike Santoli's, uh, analogy.
I don't want to take that away from anyone, but It is very interesting with the long end here that I think we need to pay attention to.
So go into Nvidia, that's happening this week.
We've got Nvidia earnings talking about Capex.
9% of all CapE spend was funded by debt a year ago.
Now we're up to 32% of CapEx spend is funded by debt.
Free cash flow going negative, which means we have a competition.
We're looking for money flowing.
There's a competition with AI debt and.
Fiscal right now that is such an interesting dynamic that we actually haven't seen.
I tried to pull data to find percentage of GDP, anything to get a correlation just to understand history, and I could not find that even in the dot com boom.
So what I think is important to pay attention to is where the demand is, and that leads me to the other catalyst this week, which is Nvidia earnings.
If Nvidia is giving us any insight to that demand equation staying there, that's going to be extremely important.
But because of this push and pull with rates, it means we're, if there's any type of shock, that is so bad for the for the market right now.
So it's very important to pay attention to rates right now.
I cannot stress that enough.
No, it's really crucial.
We're about out of time, if you don't mind me asking.
We have a bit of a personal question.
How do you celebrate Nvidia earnings Wednesday after the close?
Who?
I mean, it depends if I put a trade or not.
I love.
Personally some short iron condors to look at the implied move that that's fun, but otherwise, you know, we take a deep breath, uh, simply because we're taking a lot of data and then we go on to the next one because then we've got a lot of the, uh, every day is a lot.
Yeah, there's, there's more earnings next week where we're going to look at cybersecurity and so we're going to move on to that, but it's the demand equation, but it's also very.
Important with Nvidia, and I do want to leave you with a stat.
They have beat consistently by $3 billion so the market is expecting that.
So we need a beat of at least $3 billion on revenue.
If we get that, that gives us the pattern of the bar exceedingly higher.
So if we get that, then I think we can go higher with Nvidia.
That supports the market, and then we need rates to follow through as get those earnings on Wednesday after the bell.
Thank you for being here.
