Now let's get to the big story breakdown.
Well, Treasury yields are surging as the trading week gets underway.
We're looking at the 10-year breaking above 4.8% today and markets also reacting to Fetcher Kevin Morsh's hawkish debut at Jackson Hole with Morsh doubling down on a firm 2% inflation target.
Meanwhile, we're looking at oil prices also higher on new tensions with Iran as rate hike expectations at the September 16th meeting climb.
Well, joining us live to break down what this Fed shift could mean for the broader markets as well as portfolio strategy is Will McGough, CIO at Prime Capital Financial.
Will, good morning.
Thank you so much for joining us.
Well there's a lot to digest as a new trading month gets underway and we finally heard from Kevin Warsh last week at Jackson Hole.
So what do you make of Warsh's comments and what does this actually mean for the broader markets as we head into the rest of 2026?
Remy, thanks for having me on and you've hit the nail on the head here.
There is a lot to digest right now.
We're moving into a seasonally kind of weak month.
If you look at studies, September typically tends to be down and we're also moving from earnings, getting all the headlines with earnings season wrapping up this week and moving into a more of a macro environment where all eyes are on the Fed and Warsh and As we know, we had his speech last Friday at Jackson Hole.
The title of the symposium was Financial Innovation Implications for Payments and Policies, and he only touched on it just by title.
Otherwise, the market got a little bit of clarity on the 2% target and some potential tools that he's got with a lot of inflation rhetoric, and the market has obviously interpreted that as very hawkish.
But we work with hundreds of advisors and really try to guide our clients that a hike here or there It doesn't really matter in the grand scheme of things when we're building portfolios for all types of investors, which may or may not have fixed income exposure.
And it's a key point to remember here is that, you know, a hike here or there probably doesn't really matter in the grand scheme of things other than just being noise and volatility, which investors should be prepared to take advantage of.
And Will, speaking of portfolios out there, let's take a look at what's happening with tech.
So the Mag 7 had essentially been the Lag 7 all year, while the rest of the market saw highs.
But tell us about the role that NVIDIA's latest report actually plays in all of this, because we saw quite an impressive print.
So what does this mean for mega cap tech?
So if we take a step back here and look at how the market has played out, the S&P is up double digits, where the MAG-7, if you're looking at MAG's ETF, is only up like 4%.
That's actually collapsed a little bit here recently as the MAG-7 has started to catch up trade.
And we leaned into it a little bit later in the spring. thinking that this overblown hyperscalers CapEx argument.
And so we really like the Mag7 here.
If you think about the markets, almost everything had made new highs.
We've pulled back a little bit from there, but you have small caps and made new highs, value, international small caps.
And so if the Mag7 can get on board and really help tech go higher here, it's overall healthy for the markets.
And really, if you look at Nvidia, it's one of the most attractive stocks right now, in our opinion, Its P.E. ratio is like half of Walmart, which is kind of crazy to me if you think about it.
And so a lot of people get skittishness over owning the number one stock by market cap in the world because it carries such a huge weight in the indices in the portfolios.
But as NVIDIA goes, the market will go here the rest of the year if we can get through a little bit of volatility over rates and inflation.
Yeah, and I do want to expand on what you just talked about when it comes to tech.
Now, we know that Wall Street is keeping their eyes on data center infrastructure, but you think cybersecurity deserves far more attention here.
And we all know that enterprises are deploying AI models out there, and that does in turn mean autonomous agents and their role in terms of what it means for the overall attack surface.
So are we looking at a second multi-billion dollar spending cycle stacked on top of the first because of this?
I'm really glad this one's getting attention because it's very important.
We get to do a lot of client events and actually get questions over the security of their data and the usage of AI and language models.
And it's a really important fact to look at open models versus frontier models to really understand where your data is going.
And Fortune 500 companies are behemoths, right?
And so they're going to be spending money to ensure that their client's data is protected. with all of the information going to language models.
So cybersecurity getting attention, in my opinion, is a really good thing because we always need to be cognizant of protecting client and investor data.
Yeah, and Will, so this leads me to my next question.
How should investors out there rebalance now that the market has forced a rotation when it comes to global asset classes?
Right.
So there's an old saying, if you don't rebalance, the market will for you.
We are really working with our advisors on talking with clients about shedding the labels.
What's growth and value these days can mean a lot of different things to a lot of different people.
There's value indices that have nag seven names in them.
And most people would think of them as growth.
So having a portfolio exposure where you're not overly concentrated with the growth or value definition by somebody else is extremely important to us.
If you even look at emerging markets, 35% of EM is now three hardware stocks.
Most people think of emerging markets as kind of a commodity trade.
So you're really getting a two for one in emerging markets.
And emerging markets has gone from historically 20% of XUS, 80% developed, 20% emerging, to about one third of XUS, which is a big move.
So if you're running static allocations, it matters.
But also more importantly, in diversifying away from commodities and AI, you have to think about overall portfolio exposure and IPOs like SpaceX highlight a very important component to building core portfolios, not just with public markets, but with private market exposure so that you can get those returns as stocks grow up from small caps to large cap.
They're IPO in a mega cap territory these days.
So public market investors are missing out on that growth, which is why it's important to also include private markets in a portfolio allocation these days.
And Will, finally, before I let you go, you mentioned IPO, and we know that there are several coming down the pike heading into the end of this year and into next.
And at the top of the program, you mentioned seasonality.
We all know that September is historically a weak month for stocks, and we also have the midterm elections on top of that.
So how much back and forth volatility do you actually expect?
And should investors be expecting a Santa Claus rally at the end of this year?
So I would say so I mean we're in a period where midterm elections usually get all the focus.
Historically, markets trade kind of sideways until the midterm gets gives clarity this year has been a little bit different.
And so as you think about why it may be different it's earnings.
Earnings have driven the train higher.
So I really love the simplistic fact about thinking of the S&P.
It's earnings per share times price to earnings ratio.
And earnings per share is doing all the hard work this year.
So we actually have decent PEs from a sentiment basis.
But you also have important factors with AI debt financing.
That supply is hitting the market, which is causing rates to go higher.
People are concerned about the US deficit in debt, which is causing rates to go higher, potentially the dollar to go lower.
And so we're in a period where there's these macro headlines are going to add a little bit of volatility to the markets in my opinion.
And it's not going to derail the longer term thesis and the longer term train that we work on with our clients and Remy the important thing to think of here is. to take advantage of the volatility.
So you can use pullbacks to lean into positions and lighten up when you get extended runs.
But for that, I think we're just kind of saying that this year is just a continuation of the trend where we've had double digit returns to the S&P for many years in a row.
We're on pace for that today, barring some type of crazy headline or shock to the system.
But right now, with earnings growing incredibly at 50% year over year, it's just going to be hard for the markets not to grow with it.
Well, we will have to leave it there for today, but a lot of moving parts.
So thank you so much for weighing in and for breaking it down.
Have a great day.
