that we are looking at mixed trading ahead of the open for Wall Street, but this week the Dow climbing further into record territory while the Nasdaq did take a breather yesterday, but is moving higher by at least 180 points ahead of the open this morning.
And of course SpaceX stealing the spotlight.
The rocket maker narrowly overtook Amazon as the world's 5th most valuable company.
It also announced a massive $60 billion deal to buy AI startup cursor.
Meanwhile, oil has fallen below the $80 a barrel level for both WTI as well as Brent, and this does come as investors await Friday's formal signing of the US as well as Iran interim deal.
But all eyes are on.
Kevin's debut today.
He will conclude his first monetary policy meeting and presser this afternoon.
Well joining me to weigh in is David Busch, chief investment officer at Trasion Wealth.
David, good morning.
Thank you so much for joining me.
Thank you, Rey.
I'm glad to be here.
Well, today is Fed day and it is also a holiday shortened week, so there's a lot going on on the macro front as well as geopolitics and of course the IPO front.
So what do you make of what we're seeing with the Major stock averages.
Yes, it's, it's interesting because really what what the market is waiting for is the Fed meeting today, the decision, which should be a non-event.
I mean, the expectations are rates aren't going to change, but what we're all listening for is the post-FOMC press conference, and I think that that's going to really help define Kevin Warshch's term as Fed chair and depending on how hawkish or dovish the statements are plus the dot plot.
That's going to add either a tailwind or a headwind to the equity market.
So I would expect some volatility around his presser.
Yes, I think all of us are paying attention to that 2:30 p.m.
Eastern presser with Kevin Warsh later this afternoon.
And when we take a look at the macro backdrop right now, we're in very interesting times because near record highs, if not record highs for the major US stock averages, and we got that retail sales number for the latest month, but we have to think about all the stimulus.
As well as tax benefits that came along with the latest tax season.
So what do you make of the retail sales figure as well as the macro backdrop here?
Yes, it's interesting because retail sales beat expectations across the board, and what's interesting to me is that it shows that the consumer is still resilient.
However, when we peel back and we look underneath the hood of the numbers, really it's being funded by debt and so we see credit card debt, auto loan debt, and so on increasing.
So that's in my mind unsustainable over the long term.
And right now with the macroeconomic environment with the Fed and their dual mandate of stability of prices and maximum employment, the unemployment side of that equation is is doing relatively well.
We're still at a 4.3% unemployment rate, but it's inflation that is well above the Fed's target rate of 2% that we've got to be concerned with.
So in this case, the Fed will likely try to squash inflation first and then worry about the impact on the labor markets.
Yes, and you mentioned inflation, and of course that is something all of us are paying attention to, and I'm sure you and I feel it each time we go out and spend in the economy here.
But given the fact that gas prices have been elevated, but at the same time oil prices are pulling back, hopefully we'll see more progress in terms of the reopening of the Strait of Hormuz.
But what are the implications for the American consumer heading into the second half?
Yes, so we've seen those higher energy prices permeate the economy through the inflation.
Numbers.
In fact, the last inflation print, roughly 60% of the increase was due to higher oil prices.
So with oil coming down and if the strait gets opened up, the price of oil should start to trend lower, which will help the economy.
But it's not going to go back to those pre-war levels because of the infrastructure damage that's been done in that area.
And I do want to get your take on artificial intelligence, the technology, the investment theme, and also the Implications on the US economy, and especially since you mentioned the labor market here.
We did get that SpaceX IPO.
It's hard to believe that today will only mark day 4 of SpaceX as a publicly traded company, just given the market cap as well as all the exuberance out there.
So what do you make of what's happening when it comes to artificial intelligence?
So AI is a phenomenal technology, and what we're going to see is there's going to be winners and losers.
So there's going to be companies that That win the race and I and I go back to the dot com era, you know, with the search engines, so there will be a handful that really come out on top, but that's a technology that's going to add that's adding efficiency to to companies but we have to be concerned with the loss of jobs that can come with it as well.
And so in that case we could start to see the unemployment.
Increase and tick higher, but will also gain some efficiencies and so there may not be as negative an impact on GDP.
And President Trump is over in Europe right now as the G7 gathering continues and today we'll be hearing from some of the tech leaders that are ahead in the AI trade.
Of course, as we keep our eyes on this, what do you make of the SpaceX IPO and of course the mega IPOs that are coming down the pike here in the US, including Anthropic as well as OpenAI?
What are the impacts you expect for the market?
Yes, it was interesting to see SpaceX with their IPO because there was so much demand.
It was 4 times oversubscribed.
And obviously we're seeing the results of that in the price action, but again, when we look at the financials of SpaceX, they're not profitable yet.
I mean their operating earnings were negative.
And so really what what investors are looking towards is higher earnings growth in the future.
And with with Musk, you know, it's, it's, it's really SpaceX is really a combination of three companies.
I mean it's Starlink, it's AI.
And it's the rocket ship itself.
And so what will be fascinating is after their first earnings announcement, we'll get a sense of what their plans are for Capex, but also that revenue side, how are they going to monetize all this technology.
And finally, before I let you go, given the fact that we are looking at some of the major stock averages at or near record highs, have you adjusted any of your price targets heading into the second half?
Yeah, my personal opinion is that you know what we really have to see is earnings growth continue because with the valuations where they're at, really what we're we're expecting is higher earnings growth in the future, but this earnings season is going to be telling because we're going to see who's able to monetize that technology.
And then what are all the industries that are going to be in companies that are going to support that AI infrastructure buildout and so that's where I've shifted my thinking is looking at that second order who benefits from this technology.
Well, David, we will have to leave it there for today, but always great having you on the show.
Thank you so much for your perspective and all of your insights.
Thank you, Remy.
Thank you.
