While markets are navigating oil price volatility as well as a cooling labor market and hawkish rate hike bets under Fed Chair Kevin Morse, but despite election season chop as well as fears of a weakening consumer, our next guest remains firmly bullish.
He is calling for the S&P 500 to touch $8,000 as real AI revenue stacks up across enterprise balance sheets.
Joining us live here at the New York Stock Exchange to break down his macro outlook as well as highest conviction stock picks is Ted Thatcher, president of Bright Lake Wealth Management.
Great to have you here.
Thank you so much for joining me.
I mean, it's great to be with you as always.
Well, we are counting down to the September Fed meeting, 15 days to go, and we're seeing a higher likelihood of a rate hike, according to CME Fed Fund Futures.
But I understand You don't expect to see a cut and you're not alone, so walk us through the why.
Yeah, a lot of people and certainly the odds markets and the betting markets say, hey, we're going to expect a hike here.
I don't see it that way.
Obviously, Warsh has been dealing with taking the helm at the Fed and making sure, I think, really that the markets have real respect for his position and what changes that he wants to make.
But he's pointed to this story of inflation again and again.
But the reason I don't think that we are going to see a hike is because of what is causing the inflation he's pointing to.
I think he's rightly pointing to it.
But when we look at what it's being caused by, of course, we know it's a supply constraint. with the oil markets and, of course, everything going on in Iran.
We're seeing risk being priced into the modern market very heavily this morning.
The 10-year hit, what was it, 4.8.
The 30-year has been at 5.2.
Really, since the Iran war kicked off, we're over 80 basis points increased, especially on that 10-year.
And so If we can get that back down, because of oil prices and things in Iran winding down, I think we're going to start to see a lot of risk get priced out of the market, which would really help.
Certainly, the inflation story would certainly help consumers more broadly as well.
Yeah, and so as you mentioned, there are a lot of moving parts here because we are looking at oil prices climbing higher yet once again.
And we're looking at global yields on the rise yet once again.
And you mentioned that 4.8% level we're watching on the 10-year.
But when it comes to your S&P 500 target for year-end, tell us your expectations of mid-term election chop and how we actually get to that level.
I was going to say, how do we get there?
Right now it looks really bleak, doesn't it?
And I think that story there is, look, I actually would tell you I have expected a pullback here.
We've had a really nice push up, a really nice rally coming out of Q2.
I think the question the markets have been asking, are we going to see these earnings continue to push up higher and higher?
Is there going to be that ROI on the AI trade that we've all been demanding and pounding the table for?
I think we passed that test with flying colors.
We've seen earnings continue to expand.
What has driven the markets up, though, the first half of this year?
It's been a lot of the chip names, the semiconductors, the memory names.
I think there's an opportunity and what I expect to happen here is the baton to get sort of handed back off to some of the Mag 7 performers.
They haven't performed as well the first half of the year, but actually since really we've seen Microsoft come out, release earnings, Google come out, release earnings.
If you look at the Mag 7 compared to the RSP, In the broader mark and the broader index in general, it's outperformed the last month or so.
I think that that trend can continue.
Again, I do expect a pullback here.
I think it's normal.
I think it's healthy going into election season.
I think how deep we get into the pullback, though, Remy, it comes down to, again, what happens with the price of oil.
Yeah, and while we continue to monitor the price of oil, I do want to expand on what you just said with the Mag-7.
So there's a reason they've been referred to as Lag-7.
And I understand when it comes to some of the names, including Meta as well as Alphabet, you actually expect their valuations to increase.
So how do we get there?
Yeah, you know, if you look at the MAG7 names, it's really easy to say, okay, they've had run-ups, are they overvalued?
I think at times that's been the criticism.
Maybe not across the board today, but if we look at those names, I think it's important to pick and choose where we see value.
Meta is one of those ones that stands out to me as having the most, I'll say, value of that tier.
And really, it's because of how much, I think, bad press they've had.
They've been kind of stuck under this rain cloud of all this legal pressure and really, I think, very real humanitarian issues.
But from a shareholder standpoint, to get those things behind them, I think it gives them a little bit of clear sky moving forward the second half of this year.
One thing I really love about Meta, something that Jensen Wang has said, is there's nobody that uses AI to monetize like Meta does.
And I think that we'll continue to see them improve that monetization over time.
Yeah, and Ted, while I have you here, two names that I know you've been paying attention to when it comes to the American consumer is Walmart as well as Target.
So as we continue to look ahead to the rest of 2026, we know that it's back to school season after that Halloween, Thanksgiving, as well as Christmas.
But how are Americans spending and what is the earnings data actually telling you?
Yeah, the Walmart story is a really interesting one because you could look at it from a company standpoint.
You know, there was a couple of misses there, which I'm happy to get into if you'd like.
But to your point on the consumer side, there's a lot of data out there and a lot of people that say consumers are completely tapped out.
They're totally under pressure.
I believe they are under pressure.
We can look at the consumer sentiment data, the confidence data.
They're not great numbers.
But what's really important, in my opinion, to also look at when it comes to the consumer, Remy, is how they're spending and what their behavior actually is.
You know, I think that the consumer right now, if we look at that Walmart data, is being selective.
Maybe they're not going out and financing a big purchase right now, but they're looking for value.
And interestingly, a segment like fashion at Walmart, very much a discretionary category, improved year over year.
And so again, I think it's more of a selective consumer, but maybe more durable than we want to give them credit for broadly at the markets.
And finally, Ted, before I let you go, I do want to look at some under-the-radar plays that you're paying attention to, and that, I understand, include Uber as well as Micron.
So tell us why.
Yeah, I don't know if under the radar of Micron would fly necessarily.
But when it comes to Uber, I think that there is this narrative that, you know, because of the robo taxis and autopilot and all this autonomous driving, that Uber is sort of, you know, going to be out on the green mile or something like that.
And markets are sort of pricing that as an existential risk to the company.
The way I view Uber is actually that the distribution that they have is a very durable moat.
And so what I expect to happen, actually, is for the, whether it's the Robotaxis, the Waymos, the autopilots of the world, to end up actually plugging into their platform.
And the other thing I love about Uber is that you're seeing it's becoming a cash cow.
It's not some tech company that's trying to get distribution.
They have the distribution and their profits are up 33% if you look at their year-over-year quarterly earnings metrics.
Yeah, and before I let you go, we have 60 seconds here.
So I do want to ask you about where you think bonds belong in an investor's portfolio.
You know, it's really important when we think about where investors are to have different ways to manage risk and have risk off assets.
You know, I think that one thing I'm really conscious of is how you manage interest rate risk in an environment like this.
So do they have a place?
Certainly, you know, whether it's for income and for risk mitigation, we just want to be conscious about inflation. and making sure that money is working hard enough to actually pass through and earn on inflation.
And then, of course, not get caught up with all the interest rate volatility that we've seen so commonly, especially since COVID, it's become a really important thing to pay attention to.
Well, Ted, we will have to leave it there for today.
So thank you so much for weighing in.
And thank you so much for sharing all of your insights today.
Thanks so much for having me.
Thank you.
