Key Points
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Despite flat economic indicators, the market has fully recovered from a 20% early-year selloff, with gains driven by broad-based optimism across sectors including tech, industrials, and utilities.
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AI infrastructure demand is fueling unexpected strength in utility stocks as power providers engage in joint ventures to support data center energy needs.
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Investor sentiment is buoyed by expectations of rate cuts later this year, likely in September, which could further support equities unless derailed by significant new tariffs.
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Transcript:
[00:00:04] Doug McIntyre: Lee, we’ve got the market. If it’s not an all time high right now, it’s within a billionth of a percentage of it. It’s interesting because you really had a significant sell off earlier in the year.
[00:00:17] Lee Jackson: 20% is significant for sure. Yeah.
[00:00:21] Doug McIntyre: And it’s like, well, why did this happen?Let’s think about it. It’s not like GDP, it’s great. It’s fine, but it’s sort of boring and not great. fed hasn’t done anything with interest rates at all. Nope. Unemployment hasn’t changed. oil prices jumped a little bit with Iran.
[00:00:39] Doug McIntyre: Now they’re, back. They go back
[00:00:40] Lee Jackson: to below where they were. Yeah.
[00:00:43] Doug McIntyre: Consumer confidence is still mediocre. Yeah. So if you look at what you and I would consider the indicators, the big indicators that would make the stock move market move up or down, they really are basically unchanged for almost a year.
[00:01:00] Doug McIntyre: Right,
[00:01:01] Lee Jackson: right.
[00:01:02] Doug McIntyre: So here’s my question to you. If your major indicators that would tend to move the stock market are almost identical to what they were six months or a year ago, what happened?
[00:01:14] Lee Jackson: You know that, that’s always a good question because if you just look at the sheer numbers for this year, S&P 500 (NYSEARCA: SPY) is up 3% now, and the Nasdaq (NASDAQ: QQQ) is up 3.5%, you Dow (NYSEARCA: DIA) is up a point and a half or whatever, depending on, what happens the rest of this week and next week.
[00:01:31] Lee Jackson: But yeah, I mean. It’s still, it’s expensive on a metric like trailing earnings, it’s like 25 times, which is, you and I both know that’s expensive on a
[00:01:43] Doug McIntyre: Yeah. I, mean, I’m just looking again right now. The Nasdaq today is up over 1%, so, I mean, I’m just, I’m looking at all this stuff and you listen, it’s, green across the board.
[00:01:57] Lee Jackson: Oh, absolutely. God no. And, but again, we dug such a hole. Wow. We dug such a fast hole in that February to April selloff that, we filled it in even faster, Well, again, just like, jumping back in,
[00:02:19] Doug McIntyre: I mean, I’m looking at all this stuff and it’s, there’s nothing but good news here, or there’s nothing but a feeling of, of good news and, something.
[00:02:31] Doug McIntyre: It’s. It’s across a whole bunch of industries. It’s not as if this is just, looking at some of the active stocks. It’s not just tech. No. you’ve got, it’s a very broad rally.
[00:02:45] Lee Jackson: The cyclicals have done well. The industrials have done well. Yeah. It’s, I mean, and the, the utilities which lagged for years has been, super hot the last year.
[00:02:57] Doug McIntyre: Well, because, the, AI server farm guys keep coming to them and saying, look, we can’t find the electricity someplace. Could we do a joint venture? Can we pay you enough money Yeah. To do a joint venture with you to build reactors or, build some solar out in the middle of someplace and make our server farms work.
[00:03:16] Doug McIntyre: So, you’re right. You’re, getting, AI is even helping utilities. It’s what, can you say? It’s lifting all boats.
[00:03:25] Lee Jackson: Yeah.I think it’s gonna be interesting to see, because clearly the economy is slowing down. And, the president keeps pushing Powell to lower rates other central banks have lowered rates and when they do lower rates, and if it’s say 50 points basis points this year, I’ll give another tailwind to a rally.
[00:03:48] Lee Jackson: the minute, and it probably won’t, there was some chatter about the, a, a increase in or a decrease in July, but most likely it’ll be September. ’cause Powell will wanna see what happens this summer. But they’re gonna, they’re gonna lower rates this year because the housing market’s dreadful.
[00:04:05] Lee Jackson: And, they gotta get that goal in again. And that’s one of the ways you can do it is bringing mortgage rates down.
[00:04:11] Doug McIntyre: Yeah, no, listen, it’s like, how much more fuel can you throw on the rally fire? And the answer is, there’s still fuel out there.
[00:04:21] Lee Jackson: Yeah. Yeah, there is. And, that fuel will be in the, form of, rate cuts, And, that’s almost a given. And, Powell’s not gonna bend to the president, but he knows we’re getting to a point where we probably need rate cuts because, major forces for inflation seem somewhat contained.
[00:04:41] Doug McIntyre: Well, one caveat and that is, is if for some reason they stop changing their minds about tariffs and actually put some tariffs on and assume Yeah.
[00:04:50] Doug McIntyre: And finish it up.
[00:04:51] Lee Jackson: Yeah. that’ll be a huge tailwind. You’re right.
[00:04:54] Doug McIntyre: Yeah. Well, no, to me it’s a headwind because it’s attacks.
[00:04:58] Lee Jackson: Oh, well, yeah. But I mean, I think to some degree, if just, if they were just finalized, what the heck, everybody’s gonna get charged, that would at least take the mystery out of it.
[00:05:07] Doug McIntyre: Oh yeah. It would take the mystery about it. Right now it’s hard to say if the market’s. Discounting or they’re just waiting for bad news. I don’t know.
[00:05:16] Lee Jackson: Yeah. Yeah. Well it’ll, we, if there’s any time when you can get a, get somebody to fade the market, it’s, this time of year, because, the activity drops on Wall Street, people go on holiday and, things of that nature.
[00:05:27] Lee Jackson: you and I’ve been in this business 35, 40 years and it happens every summer. Things slow down. less people probably read 24 7 Wall Street in the summer ’cause they’re busy, reading something at the beach. But,
[00:05:41] Doug McIntyre: yeah, well look, I’m gonna predict that the rally continues at a good pace, unless there are substantial tariffs.
[00:05:50] Doug McIntyre: Where it’s clear that the tax that’s being put on goods and services coming in the United States are really meaningful. Otherwise, I think it rallies straight through to Labor Day.
[00:06:01] Lee Jackson: Well, it, and it could, it, a lot of it’s gonna depend on second quarter earnings. ’cause that’s when we’ll really start to see the impact and, and what retailers are and people that are, have big supply chains that extend overseas.
[00:06:14] Lee Jackson: Then, we’ll know w what the damage, from the tariff standpoint, is. but if it’s not too severe, you’re right, we could blow right through to Labor Day.
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