are always good to have you on the show,
especially on a major Fed day in the stock market
in rally mode. What's your take? Well,
my first take is, it's awfully nice to talk
to you on the day the market's up. It
seems like we've had so many conversations when the market's
been down. I think that the market was actually
a pretty good stead as, as we entered the
day because we had a couple of household name companies
that reported better than feared earnings results and better than
fear. It seems to be the new good and
, and, and certainly, um, that kicked
off the day and the right fashion and then the
Fed delivered three things I think you touched on all
of them 75 basis points consensus. So that was
good news. You have a chairman of the Fed
that's talking about the fact that at some point that
likely decrease the size of the rate hikes that they're
going to do and actually made a comment about where
he'd like to see the Fed funds rate at the
end of the year. And if you do the
quick math on that, that means we likely have
a 50 basis point increase in september and 2 25
after that to wrap the year up at between three
and a quarter, 3.5. So I think investors
really bit into that. But I think the Moneyball
was when he said, you know, a couple
of different answers to questions, you didn't think we're
currently in a recession. And, and that likely
gave the combination of all those things likely gave investors
a good reason to get back into the pool.
And they certainly did during the Presser art. Does
that set us up for a rally into the end
of the year? Of course, a lot does
right on this holiday season. And JPMorgan actually has
still a very bullish call out that the stock market
could set a new record before the end of the
year. But of course, we know as the
Fed funds rate increases, it historically is not good
for the stock market. But if those rates rises
do slow, do you think that could set us
up for a more favorable environment for investors? I
do. I think, you know what the investors
are looking for now is the Fed to slow a
bit, at least slow the pace at which they're
raising the Fed funds rate. And we'll likely see
that in september and the meetings until the end of
the year. And I think the other piece of
that is the assumption with the slowing of the pace
of increases means you're getting close to that endpoint that
terminal rate and that terminal rate may well be 3.5%
Beginning of the year, consensus was the terminal rate
was going to be between four and four and a
quarter and that's actually pulled back and I think that's
pulled back because we've actually seen inflation rolling over on
its own accord. We've seen things like gasoline prices
down for 44 days in a row crude prices down
some 26% from their peaks. Coppers down some uh
at a 19 month low and lumber prices are 65%
off their peaks inflation you know on its own accord
is rolling over. And I think investors look at
that combined with Fed that's been pretty steady at the
wheel here, that perhaps there's more good news in
front of us than bad news, especially heading into
those two important shopping season at the end of the
year back to school, which will be starting any
day now and certainly the holiday shopping season. So
I think you know when we when we think about
the consumer and how important that is the U.
S. Economy, I think they're they're likely going
to feel better um than they did at the beginning
of the summer. Well let's certainly hope art.
And I know the Fed chair pointing out that yes
, american households do still have money to spend trillions
of dollars accumulated in household savings during the first two
years roughly of this pandemic. My next question is
can we get a soft landing? Can the U
. S. Actually avoid a recession? What do
you think? Well, you know, it's it
hasn't been done that often and you know the batting
average is very very bad for monetary policy tightening and
a soft landing. So it is very difficult needle
to thread. Not impossible though. So we're coming
at this tightening cycle at a point in which the
labor force is the labor sector is is very tight
, right? So having a tight labor market clearly
is going to be a benefit, meaning that while
unemployment could go up and hopefully it goes up for
the right reasons like the labor force participation rate increasing
. We're still not back to pre pandemic levels of
labor force participation, But you know, full employment
has historically been anything below 5%. So we've got
some room between the 3.6% unemployment we have now and
seeing unemployment go up, demand destruction happening and and
and not necessarily going full throttle into a recession.
You know, we don't have a great history of
being able to do this, but it's not impossible
, especially with the strength in the labor force right
now. All right, stay with me. I
do wanna break in with an earnings alert now because
it is a busy news day down here on Wall
Street and qualcomm results actually hitting the tape, those
earnings coming in better than expected revenue about in line
with expectations. But actually some disappointing a current quarter
guidance that revenue estimate below what Wall Street had expected
earnings per share guidance, that kind of does hug
that midline but more to the downside than actually exceeding
again, what analysts on Wall Street were anticipating that
stock down 3.5%. We talk about some of these
bigger names are and certainly these technology companies, they
do have an outsized impact on the path forward for
the stock market. I know clearly you haven't had
a chance to dig into these results. But what
might this Qualcomm report? Tell us about the overall
health of the economy and the stock market. You
know, it's interesting. We've had several semiconductor companies
report and a couple of them have given upside surprises
. Qualcomm beating likely doesn't surprise after we hear texas
instruments. Um, give a better report and they
and they operate in some of the same sectors.
Right? Welcomes very much in mobility. Um,
I think that one of the drags and likely why
the guidance has been pulled down is that they're,
they're also um dependent on china for a couple of
things and one is supply and the second is demand
. Right? So while we continue to have china
and there's zero covid lockdown, rolling lockdowns, that
likely is going to affect the next quarter. They're
likely already seeing that on both the supply for the
things they need and, and, and certainly the
china demand. So not shocked that the guidance is
like this and obviously you always want to wait till
after the conference call before you really put a nail
in the coffin for qualcomm. But you know,
very happy to see that they very much like texas
instruments were able to beat. Yeah, the stock
at 250 bucks per share after hours, about 43
bucks below its 52 week high but still holding in
there, it was up 2.3% today art. Let's
turn back to the major indexes meta gonna report after
the close as well. Advertising span. I think
a key focus for some of these large technology names
that's for sure. If we can avoid a recession
that would be a positive. Even though we're already
starting to see based on earlier reports, some trepidation
in the ad spend market collectively. What are you
seeing come from this earning season? And do you
think things will get better or worse for corporate America
from here? Well, I'll tell you this,
we certainly have seen that there are haves and have
nots right. So, you know, in,
in the, in the case of companies that actually
have higher end exposure, they certainly seem to have
done better. So where we see the lower end
exposure, like a walmart and a target having to
warn here, it's really showing that, you know
, these inflationary pressures are, you know, for
obvious reasons, adversely affecting the lower end consumer,
the higher end consumer continues to be um, pretty
confident and pretty busy out there. So that's one
piece of the puzzle. The other piece of the
puzzle I think is especially in the case of alphabet
and Microsoft is we have actually done a very efficient
job of pricing and some bad news, you know
, coming into this earnings reporting season, there was
all the talk, it was a very popular narrative
to say that this was going to be the earnings
apocalypse and it was going to be terrible and estimates
were too high and guidance was going to come down
across the board and we actually haven't necessarily seen that
. And you know, in the case of both
Microsoft and alphabet, um today it showed that yes
, we knew that the number is gonna be tough
. But you know what, that's a lot better
than we thought they could be so better than feared
. Clearly seems to be the mantra for this earnings
reporting season. I think if you're able to hit
your top and bottom line and even if you keep
your guidance unchanged, um, you're you're gonna be
in a place where you're gonna be rewarded. I
think that's gonna be the case next week when earning
season is even busier than it was this week.