Video: We have been in Seoul this week meeting with investors. To us, it seems like many have expressed concerns about a possible market top given the weakness in AI stocks this week. But low conviction is rarely a sign of a top and we believe equities have more room to gain before a local top.
Please click here to view our Macro Minute (duration: 4:05).
The S&P 500 is down each of the last 3 trading days, down -2% from its recent peak, with greater weakness seen in AI and technology stocks. To us, this is just normal and healthy consolidation, particularly after the strong gains since April. Month to date, the S&P 500 is still up a very healthy +2.2%.
- I am in South Korea this week, speaking with investors (mostly high net worth, but some institutional) and many asked us whether we have reached “peak AI” — mainly, because many of the largest MAG7/AI names have seen profit taking this week. To me, this is healthy to see. We are hardly at peaks when investors start to question their conviction at every pullback. And as we have written about in the past, with NVDA 5.99% forward P/E of 26.6X, we hardly consider this extended when WMT -0.17% and COST -0.84% have forward P/E of ~40X-50X.
- Currently, the S&P 500 is 10% above its 200-day moving average. Since the Oct 2022 lows, we have seen the S&P 500 make a “local top” when this figure is above 13%:
– July 18, 2023 –> 13%, local top
– March 22, 2024 –> 14%, local top
– July 16, 2024 –> 15%, local top - So at 10%, the S&P 500 is just not that extended. If we were to look at the implied “local top” and use the 15% level, this implies a “local top” level of 6,950. This is consistent with our year-end target of 6,800-7,000 at the moment.
- As for upcoming potential catalyst, the market will focus on August Core PCE on Friday (8:30am ET). Street consensus is looking for +0.23% MoM (or 2.76% annualized) and this is down from +0.27% last month. So while tariff-effects are working their way through inflation, the level of inflation is still modest.
- There are some important Macro Events this week, most important is the PCE on Friday:
– 9/22 Mon 8:30 AM ET: Aug Chicago Fed Nat Activity Index -0.12 vs -0.15e
– 9 /23 Tue 9:45 AM ET: Sep P S&P Global Manufacturing PMI 52.0 vs 52.0e
– 9/23 Tue 9:45 AM ET: Sep P S&P Global Services PMI 53.9 vs 4.0e
– 9/23 Tue 10:00 AM ET: Sep Richmond Fed Manufacturing Survey -17 vs -5e
– 9/23 Tue 12:35 PM ET: Powell Speaks on Economic Outlook
– 9/24 Wed 10:00 AM ET: Aug New Home Sales 800k vs 650ke
– 9/25 Thu 8:30 AM ET: 2Q T GDP QoQ 3.8% vs 3.3%e
– 9/25 Thu 8:30 AM ET: Aug P Durable Goods Orders MoM 2.9% vs -0.3%e
– 9/25 Thu 10:00 AM ET: Aug Existing Home Sales 4m vs 4me
– 9/25 Thu 11:00 AM ET: Sep Kansas City Fed Manufacturing Survey 4 vs 2e
– 9/26 Fri 8:30 AM ET: Aug Core PCE MoM 0.23%e
– 9/26 Fri 10:00 AM ET: Sep F U. Mich. 1yr Inf Exp 4.8%e - By the way, next week is a heavy week of data. Look at the key things on the slate. It is a lot. We have important Jobs data releases including JOLTS on Tuesday and the BLS Report on Friday:
– 9/29 Mon 10:30 AM ET: Sep Dallas Fed Manuf. Activity Survey
– 9/30 Tue 9:00 AM ET: Jul S&P CS home price 20-City MoM -0.10%e
– 9/30 Tue 10:00 AM ET: Sep Conference Board Consumer Confidence 96e
– 9/30 Tue 10:00 AM ET: Aug JOLTS Job Openings 7100ke
– 10/1 Wed 9:45 AM ET: Sep F S&P Global Manufacturing PMI
– 10/1 Wed 10:00 AM ET: Sep ISM Manufacturing PMI 49.2e
– 10/2 Thu 10:00 AM ET: Aug F Durable Goods Orders MoM
– 10/3 Fri 8:30 AM ET: Sep Non-farm Payrolls 50ke
– 10/3 Fri 9:45 AM ET: Sep F S&P Global Services PMI
– 10/3 Fri 10:00 AM ET: Sep ISM Services PMI 52.0e
BOTTOM LINE: Still “most hated rally”
This still remains the “most hated” V-shaped stock rally. As for what we would buy
- MAG7 & Bitcoin & Ethereum
- Industrials
- Financials: Large-cap and regional banks
- Small-caps
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50 SMID Granny Shot Ideas: We performed our quarterly rebalance on 8/17. Full stock list here -> Click here
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Key Incoming Data September:
9/2 9:45 AM ET: Aug F S&P Global Manufacturing PMITame9/2 10:00 AM ET: Aug ISM Manufacturing PMITame9/3 10:00 AM ET: Jul F Durable Goods OrdersTame9/3 10:00 AM ET: Jul JOLTS Job OpeningsTame9/3 2:00 PM ET: Sep Fed Releases Beige BookTame9/4 8:30 AM ET: Jul Trade BalanceTame9/4 8:30 AM ET: 2Q F Unit Labor CostsTame9/4 8:30 AM ET: 2Q F Non-Farm ProductivityTame9/4 9:45 AM ET: Aug F S&P Global Services PMITame9/4 10:00 AM ET: Aug ISM Services PMITame9/5 8:30 AM ET: Aug Non-Farm PayrollsTame9/8 9:00 AM ET: Aug F Manheim Used Vehicle IndexTame9/8 11:00 AM ET: Aug NY Fed 1yr Inf ExpTame9/9 6:00 AM ET: Aug Small Business Optimism SurveyTame9/10 8:30 AM ET: Aug Core PPITame9/11 8:30 AM ET: Aug Core CPIMixed9/12 10:00 AM ET: Sep P U. Mich. Sentiment and Inflation ExpectationTame9/15 8:30 AM ET: Sep Empire Manufacturing SurveyTame9/16 8:30 AM ET: Aug Retail Sales DataTame9/16 10:00 AM ET: Sep NAHB Housing Market IndexTame9/17 9:00 AM ET: Sep M Manheim Used Vehicle IndexTame9/17 2:00 PM ET: Sep FOMC DecisionDovish9/18 8:30 AM ET: Sep Philly Fed Business OutlookTame9/18 4:00 PM ET: Jul Net TIC FlowsTame9/22 8:30 AM ET: Aug Chicago Fed Nat Activity IndexTame9/23 9:45 AM ET: Sep P S&P Global Services PMITame9/23 9:45 AM ET: Sep P S&P Global Manufacturing PMITame9/23 10:00 AM ET: Sep Richmond Fed Manufacturing SurveyTame9/24 10:00 AM ET: Aug New Home SalesTame9/25 8:30 AM ET: Aug P Durable Goods OrdersTame9/25 8:30 AM ET: 2Q T GDPMixed9/25 10:00 AM ET: Aug Existing Home SalesTame9/25 11:00 AM ET: Sep Kansas City Fed Manufacturing SurveyTame- 9/26 8:30 AM ET: Aug Core PCE Deflator
- 9/26 10:00 AM ET: Sep F U. Mich. Sentiment and Inflation Expectation
- 9/29 10:30 AM ET: Sep Dallas Fed Manuf. Activity Survey
- 9/30 10:00 AM ET: Sep Conference Board Consumer Confidence
- 9/30 10:00 AM ET: Aug JOLTS Job Openings
Economic Data Performance Tracker 2025:
Economic Data Performance Tracker 2024:
Economic Data Performance Tracker 2023:
