Remy Blaire: All the major U.S. stock averages are lower in midday trade, and oil and yields continue to pressure equities, with Fed funds futures pointing to a rate hike next month.
And along those lines, the 30-year yield hit its highest level in 24 years.
Inflation, as well as jobs, are the key focus on the macro front this week, with these readings due out tomorrow morning as well as Friday, and both have the potential to sway monetary policy expectations.
But the central bank, the Fed, seems most concerned with inflation.
Well, joining us this afternoon to weigh in is Dale Smothers, Founder and CEO of RDS Wealth.
Good afternoon, Dale. Thank you so much for joining us.
So we continue to monitor the yields this afternoon as we continue to see the 10-year as well as the 30-year hit multi-decade highs.
So why do you say that the bond market is the biggest risk to stocks?
Dale Smothers: Yeah. I mean, clearly the bond market itself, being a 10-year at five and a quarter, becomes an enticing alternative to risk-based assets such as the stock market.
You know, the bond market continuing to climb higher will likely pull some money out of the stock market, looking for those guaranteed 5%, 6% type of returns. And so it's certainly a headwind for the market.
The stock market, as its own, you know, entity, if you will, is primarily led higher by earnings and AI demand. And I think we'll see that continue throughout the rest of this year for sure.
But if the Fed continues to raise interest rates due to a rising inflation risk, we are going to likely see some money go looking in the bond market that was, for the last two to three years at least, primarily positioned in the equity markets.
The goal for us is to make sure that we, on our side, for clients that we work with, are managing that risk and making sure that we're in a position that, you know, if money does flood out of the market, we have opportunities perhaps to buy names that are then on sale.
Long term, Remy, I think the S&P 500 hits 8,000 by the end of the year. I think it continues to climb higher on the backs of earnings and, again, AI demand.
But the bond market is certainly something that we've got to be watching if we continue to have this bullish thesis. It's one of the things that could derail that for sure.
Remy Blaire: Yeah. And another area of the market that we're paying attention to is oil.
So given the geopolitical tensions in the Middle East and the uncertainty in terms of what will happen as we head into the final quarter of 2026, tell us why the Iran situation is still an overhang in this market.
And, of course, the key question mark for the Federal Reserve is inflation. So give us your take on why oil is so important here.
Dale Smothers: Yeah. Everything passes through the pumps, the gas pumps, the diesel pumps. Everything that we consume passes through this point, this bottleneck, if you will.
And currently, people are paying more at that gas pump than they have in quite some time.
Now, if you look at numbers, you know, back in 2022, there's a potential for you to say, yeah, gas was higher back then.
But the reality of what we face today is that there is a war in the Middle East with no real end in sight. Consumers are starting to get a little bit stressed in their pocket due to rising inflation.
Oil continues to make that even harder to combat. The rising interest rates that the Fed are trying to do, it's this rigid tool to accomplish something that is not really, in our opinion at least, demand-driven. It's supply-driven.
And the supply that we are short on is oil.
Iran has to be settled, and we need that to be settled by the end of the year, or else we could again face headwinds in the stock market and even at the, you know, the shopping market, for that matter, with inflation continuing to go higher.
Diesel is out of control. Oil is off the rails. We've got to be able to square away Iran for this to go to bed.
Now, I do think when Iran is put to bed, we are going to see inflation quickly become an afterthought. It's not likely going to be the story that we're focused on.
And the Fed may have to pivot for that very reason.
But for now, the Fed is focused on fighting inflation, and inflation's hinge pin is oil.
Remy Blaire: Yeah. And Dale, finally, before I let you go, we have about 60 seconds here.
And because you are in the S&P 500 8,000 camp by year-end, you've explained your thesis.
So tell us about what you're bullish on when it comes to ticker symbols.
Dale Smothers: Yeah. So if we want to look at specific tickers, I think right now is a perfect time to lean into leadership that continues to take AI higher.
You've got an earnings season that's going to come up here in the next couple of weeks, going into October, October-November.
I think you're going to see names like Nvidia, Microsoft. You're going to see Google continue to climb higher on the backs of earnings, strong AI demand, continued AI buildout.
We also like leaning into a very, very volatile area of quantum for clients that are looking for a little bit of, you know, gamble, if you will, with their money.
We like IonQ as a raw play there.
And we think that names, again, like we just mentioned, are going to benefit from that.
One in particular, IBM. It's an old dinosaur, probably has a lot of fossils. It's time to dig that one up, perhaps, for the quantum play.
The writing's still on the wall there, but I think names like this that you can buy on steep discounts, it's worth being bullish on going into the end of the year.
Remy Blaire: Well, Dale, appreciate your time.
Thank you so much for joining us this afternoon. And as always, thank you so much for all of your insights as well as your perspective.
Dale Smothers: Good to see you, Remy.
