Following a blistering earnings season fueled by infrastructure spending, bottom up analysts are expecting the S&P 500 to hit new records this year, but top down macro strategy see a much darker picture and so not so much.
Well after the jobs report beat expectations, traders are recalibrating their bets and instead of waiting for rate cuts, the market is on the possibility for the Federal Reserve to potentially hike by the end of this year.
We join me ahead of the Market open is Eddie Ghabour, co-founder and CEO of Key Advisors Wealth Management.
Eddie, good morning.
Happy Monday to you.
So this morning we are looking at US stock futures in positive territory, although we were looking at a mixed open earlier, but this does come on the heels of a violent sell-off last week, hammering chip stocks.
So what do you make of what we're seeing unfold in the market, especially ahead of a big week for data as well as that SpaceX IPO.
Well, I think we've been saying this for a couple of weeks now to our clients that we put a message out on X two weeks ago that, you know, you're gonna, you should expect a pretty volatile summer, uh, you know, Friday is a 11 off to us.
That's not a big concern because, you know, some of these names that everyone's talking about that got hammered or hit hard on Friday, they're up over.
200% some of the ETFs that took a big hit were up 40 to 60% on a year to day basis.
And when you have that much of a move in a short period of time, seeing corrections along the way in a bull market is very normal and healthy.
But because of all the uncertainty with inflation, with oil, with the new head of the Fed.
With the market as hot as it has been, I think investors should use this time period to maybe start taking some chips off the table to play a little bit of defense if you are fortunate enough to be in the tech trade, because we think that we're going to see a correction this summer and it's going to be a very viable correction at the end of the day when we take a.
Productivity boom that we're going to see over the next few years, so there's gonna be lots of opportunities, but as an investor you're just gonna have to have the stomach to be able to ride these big moves up and down.
Yes, and Eddie, expanding on that, as you mentioned, we are seeing tech giants pour trillions into AI chips as well as new data centers.
So do you think this massive AI boom is going to be able to keep the stock market afloat, especially as you mentioned, we're looking at inflation higher for longer and at a time when we're hearing about these capital raises from some of these mag 7 companies.
I do think it will by year end, you know, like I say, I, I think we're going to have some, some trouble this summer and see some downside pressure on some of these really hot areas because they are overbought on a short-term perspective, but these are companies that are investing real dollars.
With real earnings.
So when we take a look at the year end this year and then 2027, um, I think there is plenty of fuel left in the bank to get this market higher, and I think the market will also broaden out.
It won't just be a tech story.
And for Americans out there who are watching right now, bond yields have shot up recently, and that means it's more expensive or remains expensive to borrow money for everything, whether we're talking about mortgages or loans.
So with interest rates likely to stay higher for longer, where should regular investors be putting their cash to ensure a reliable return, not just in the short term but also in the long term for now?
Obviously it depends on everyone's risk tolerance, but for us what we have recently done is we have taken some money off the table and some of the semiconductor names.
We have increased cash.
We have rotated into the software that has just gone through a bear market.
I think you can look to add healthcare right now as well too from a.
Defensive positioning perspective and then when we have a summer correction if we are right on our summer correction, you're gonna buy back aggressively some of the semiconductor names software as well too that will get ahead if we have a broad based selloff and small caps as well so the areas that have led us higher we think will continue to lead us higher at the end of the year.
It's just gonna take a breather this summer, uh, is, is what our thought process is right now. and Eddie, while I have you here, I do want to ask you about SpaceX.
So Elon Musk is reserving a massive 30% for the upcoming SpaceX IPO scheduled for Friday.
So that is for everyday investors for that reserve, and usually we're talking about allocations of around 5%.
But with hundreds of new ETFs as well as AI stocks already competing for investor dollars, what are your expectations for this historic IPO?
Well, it's certainly going to make history.
It's probably gonna be the most subscribed IPO in history, and I would anticipate uh initially you'll probably see that name go vertical, you know, I think there's a lot of retail money that wants to chase this higher.
For us, we will take a more cautious approach because a lot of times what will happen in these IPOs is they will take off, but then there's going to be a liquidation period of time for the folks that were in early on in the capital raise that may have doubled or tripled or quadrupled their money.
I think you'll see them take some chips off the table this summer.
So these IPOs and SpaceX IPO that's coming out really falls in line with our theme this summer of volatility because that's going to add to the volatility in the tech space for sure.
So, uh, it's going to be a wild ride, but again, I think investors need to focus on where we'll be in December versus maybe these next few months that may be challenging.
Yes, and speaking of which, when we're talking about volatility in 2026, of course we've been keeping our eyes on the conflict in the Middle East, and the past 24 hours have been a reminder of this volatility given what we saw in futures as well as oil prices.
But how are you factoring in geopolitics when we're talking about your outlook for the second half?
So from a geopolitical perspective we're tracking yields and energy.
You know, these kind of go hand in hand as energy prices go higher.
You see inflation is probably accelerating and then the 10 year yield and longer term yields start to go up.
But I would say that the market right now is telling us that the worst is behind us on the geopolitical front because if not, I think we'd see oil well over $100 a barrel.
I know it's still elevated in the 90s, but considering we're 100 days into this conflict and oil still is not above $100 a barrel, I think speaks volumes that the market believes that we are getting closer to an end to what's happening in the Middle East, and we'll have to wait and see if the market is right, but it has a funny way of predicting the future, and that's how we are reading the oil markets right now.
Well, you and I will continue to monitor those headlines coming out from the Middle East as well as social media, and I'm glad you mentioned that oil is managing to hold below that $100 level.
So Eddie, always great talking to you.
Thank you so much for joining us and thank you so much for sharing all of your insights.
Thank you for having me.
