Where Investors Should Be Looking for Opportunities in Today’s Market

In New York morning trade, we are looking at mixed trading for the major US stock averages while oil futures creep higher yet once again while Wall Street is at a critical crossroads as the buyers attempt to stabilize a tech sector battered by a historic momentum line while some names have recently suffered a position and reversal.

The broader market showing resilience with the equal weight S&P 500 touching new all-time highs earlier this week and Fed officials may be in a blackout period ahead of next week's FOMC meeting.

But the macro data has been fairly light so far this week and earnings you take center stage to determine if solid fundamentals can overcome market positioning noise.

Well joining us live here at the New York Stock Exchange this morning is that or chief market strategist and portfolio manager at Raymond James Investment Management that great to have you here.

Thank you so much for joining me.

It's great to be here.

Well, as usual, there are plenty of headlines coming through.

So first tell us how the macro backdrop is affecting equity markets.

So I think the macro backdrop really.

Until today has been fairly constructive.

I think the market has been able to look through the war I think on hopes that there might be de-escalation again.

I think today we're getting a few jitters that perhaps diplomacy might take a little longer than expected, but still, the fundamentals underpinning this market remain very strong, and we heard from financials over the past two weeks, I think, corroborating that narrative.

The consumer is in a good place, loan growth is in a healthy place.

In fact, banks are writing down reserves, which is always a good.

Place to be from an economic backdrop.

So I'm encouraged by where we are, and I think that's going to keep playing out as we get deeper into earnings season.

Yes, and speaking of earnings, as you and I mentioned before we went on air, all eyes are on alphabet.

So Google's parent company will be reporting after the closing bell today, and the big question mark is regarding, regarding artificial intelligence.

So what in particular will be key as we head into today's session and of course the report?

Yes, I think like you said.

It's CapEx.

I think that's what investors care most about is do we get a Goldilocks CPE number?

I think CPE, that's too high, might spook the markets again that there is overinvestment or lead to questioning with respect to too much investment in data centers and architecture.

But if you see a decline or a hold in CapEx, that's also not going to be constructive with the semiconductor trade.

So I think we're going to continue to see an increase in numbers, but I don't think it's going to be too extreme.

And when you put it into Perspective, companies like Alphabet are monetizing on all of this CapE.

You're seeing that across the hyperscale are complex and hopefully that narrative is going to be front and center, especially when the management team takes over and the conference call later on in the afternoon.

Yes, I know that all of us will be paying attention to what the management team says later this afternoon, but expanding on what we're seeing in artificial intelligence, I understand that you say don't try to pick the winners here in the AI complex.

But address scarcity.

So where are the bottlenecks right now, right?

So I think you don't want to pick the winners in the application layer right now, whether it's open AI, whether it's anthropic, whether it's any of these new Chinese open source models that are gaining ground.

We don't know how that's all going to end up, but what we do know is we need a lot more investment in the infrastructure layer of artificial intelligence to get to the expanding use case that we're seeing globally, especially as more and more governments are taking this seriously.

National security concerns.

So the bottlenecks squarely exists and there's not enough memory.

There's still not enough chip constraints.

We don't have enough power with respect to data centers.

We don't have enough data center capacity either, and there's a more difficult regulatory backdrop for that as well.

So these bottlenecks, Remy, are going to continue over the next couple of years.

And if there's one thing investors should pay attention to, it's what the management teams from ASML and TSM have already shared with us during earnings season is that these.

Logs are not only in 2027, we're pushing them out to 2028 and beyond.

So there's durability to the earnings of the companies that sit squarely in the bottleneck space.

Yes, and that, you mentioned durability, so I do you want to take a look at what we're seeing for the broader markets here, especially within the S&P 500.

So when we take a look at the leaders within the sector, we know that energies as well as IT industrials do lead the way higher, but we're also looking at market cap here.

Whether we're talking about large, mid, or small caps, so when it comes to some of these small caps, where do you think the opportunities are?

So I think small caps, we've talked before about our optimism in the small cap space, that's played out, and I think we will continue to see the earnings growth story provide tailwinds to the small cap trade.

But when you look down market cap, I think right now there's a little bit of indigestion just because you've reconstituted out some of the biggest AI winners that were in the Russell 2000.

Now you have more emphasis on regional banks.

You have more emphasis on the healthcare space, biotechnology in particular.

These are all exciting places.

Earnings results for regional banks have been strong.

We continue to get good results, and biotech, I think, is finally starting to break out.

And when you look at what we've heard from the large cap pharmaceutical companies that have reported earnings, it's that they are continuing to face patent cliffs and they're making investments by acquiring small cap biotech companies.

So there's tailwinds again to that trade.

And finally, before I let you go, I do want to get your perspective when it comes to investing in other economies, in particular the G7 nations here, because we do have to keep in mind that whether we're looking at the UK or even Japan, there are opportunities.

But at a time when we're looking at the rate outlook for the major central banks, we know that the rate differential factor does come into here.

So what is your Outlook.

So my outlook is somewhat constructive.

I think when I talk to clients, people want to like international markets more, but everyone is focused on the AI trade.

I think investors really need to look at international as kind of a value play.

Where can they get that value type exposure without needing to own that in the US?

So the UK is old economy stocks, energy, healthcare, consumer staples.

Those hold up very.

Well, as the market pulls back, you look at Japan, highest earnings revision ratios in the world outside of the US, so it's not just AI, but there are banks and financials benefiting from the interest rate environment over there.

So if investors want to be overseas, you have to be selective about what you own because not everything is attractive.

And so I would really encourage folks to be very specific about what they want to own overseas.

And Matt, finally, before I let You go, we're counting down to the July Federal Reserve meeting and of course there are a lot of expectations as well as anticipation, so we have to consider the geopolitical situation in the Middle East.

But in particular, what are you looking forward to and what will you be paying attention to next Wednesday?

So I think I'm going to be paying attention to what does W say or not say because I think we're adjusting to less forward guidance going forward.

So I think what's going to be really important is what if anything changes in the statement and can we glean or discern anything with respect to what W was talking about that left of center, how focused are they really going to be on getting inflation back to 2% really, really quickly, or is it the journey that matters?

Is it the fact that we might be seeing disinflationary forces and perhaps more of a tolerance to live with that as long as we're moving in the right direction.

I think that's probably the case.

We underestimate the power of the balance sheet as well, and I continue to think we're not going to see any rate hikes this year, which again should be constructive for some of those diversifiers in our portfolios like financials, regional banks, and biotechnology.

Well Matt, a lot to continue to monitor as we head into the rest of the summer.

So I appreciate you joining us today and thank you so much for your insights.

Thanks so much.

Thank you.