Navigating the Market: Insights on the AI Boom and Economic Trends

We are looking at the major US stock averages opening in positive territory with the Dow up by about 200 points and the S&P 500 and Nasdaq up nearly 0.5% point.

This does come after Wall Street took a breather yesterday.

Now investors are focusing on the government shutdown now entering its 10th day.

The Senate failed for the 7th time to pass competing funding proposals with little sign of progress.

Between Republicans and Democrats.

Now Wall Street is watching closely to see if the shutdown will impact the economy, and some effects are already emerging now.

Attention shifting to corporate earnings next week for clues about the economy's strength and whether expectations for AI-driven boom will still hold up.

Well, joining me on this Friday morning ahead of a holiday weekend is Eddie Gabor, CEO and co-founder.

Of key advisors, wealth management.

Eddie, happy Friday.

Thank you so much for joining me.

So what a week it's been, Eddie.

New record highs for gold, Bitcoin, and the major stock averages, and we are starting to hear about this concept of the debasement trade.

So how does this market compare to say the late 1990s and what do you make of the gains that we are seeing right now?

I think there's a tremendous amount of similarities to the internet boom of the 90s.

I was managing money back then and right now the difference is it's the AI boom and it's a real and I think you're going to continue to see markets grind much higher because when you're in bubbles.

Which is what we are forming now.

And the term bubble is not a bad thing, right?

As long as you're riding it on the way up, the bubbles become a problem when they pop.

Uh, and it looks to me as though many people continue to doubt this market because of how high certain names have gotten.

But when you look back to the 90s, Valuations got extremely stretched before the March of 2000 and where that bubble burst.

So ultimately we believe history will repeat itself in a lot of similarities where you're going to see names in the market go to levels much higher in our opinion than many people can anticipate.

Um, and a lot of that, not only the AI boom, but when you take a step back and look at structurally, we have a Fed that's going to be cutting interest rates.

At a time that the market's at an all-time high, at a time when we're not in a recession, just that in itself is bullish for risk assets and should cause asset prices to go up.

So when you couple that on top of the AI boom that we're seeing in the amount of CAPX spending that people are saying they're going to be doing, uh, it is a really strong recipe for markets to continue to trend higher well into 2026.

Yeah, so Eddie, you and I, we don't have a crystal ball unfortunately, but we did get the Fed minutes earlier this week from the September meeting.

And when we take a look at expectations for the October meeting, we do see a rate cut of 25 basis points baked in the cake.

At month end and there are expectations that we may possibly get the CPI figures, although not scheduled as usual in next week.

But when it comes to data and Fed rate expectations not just for the October meeting but the rest of the year, tell us what you expect.

So this is going to really be dependent upon how long the government shutdown lasts.

The longer the shutdown lasts, the higher probability that we're going to have two rate cuts this year because this economic data will soften due to this shutdown.

If we get an agreement next week, then probability is just one and done for this year.

However, the trend going into 2026.

Whether it's 1 cut or 3 cuts or 4 cuts over the next 12 months, the bottom line is there's a strong probability that we're going to see cuts, and that's all the market needs to know.

So the fact that the trend is loosening monetary policy is more important than whether they're going to cut 1 or 2 times this year.

So again, it's really dependent upon this shutdown and how long it stretches out.

And any, of course, when we're in a bull market, things are easier, at least on the surface, but why do you expect any market dip in October or November to be aggressively bought?

Can you walk us through that?

So right now you're seeing the dollar start to show a little bit of strength here and we've had a real weak dollar and that's been a tailwind for risk assets.

So you know we are extremely overbought on a short term basis.

So we expect, uh, you know, 3 or 4% correction, but we expect it to be aggressively bought because so many.

People have been caught offsides, you know, even when you look at some institutions, they're net short, the small caps, they're net short, the S&P.

So when you look at the dynamics, people are going to have to play catch up going in the year end or they're going to have a lot of questions they're going to have to answer in regards to rates of return.

So this is why the Dips have been bought very quickly and we haven't seen that normal 7 to 10% correction that you almost get in a bull market.

So I don't think we're going to get a steep correction this year as we finish into the end of the year because I think a 3% drop is going to feel like a 7% drop with how hot this market's been.

Yeah, and Eddie, that leads me to my next question for you.

When it comes to both asset classes as well as sectors, what do you expect to see in terms of gains and which sectors will be leading the next leg higher into the new year?

So when we look forward into 2026 and we look at the areas that we think will do the best in a loosening monetary and an economy that's going to be accelerating, in our opinion, we want to own small caps, we want to own Bitcoin, we want to own financials, and we want to own tech.

The AI trade is going to continue to be a Leader, those four areas to us are areas that we will continue to buy on dips and increase our positions in as we go into the end of the year and look into 2026.

We believe in our opinion are those areas will outperform the S&P 500.

Now as you said, we don't have a crystal ball, so we could be wrong, but the dynamics are setting up, uh, beautifully for those asset classes.

And finally, Eddie, we have about 60 seconds here.

So next week we will start the beginning of official earnings season.

We'll be hearing from the big banks and of course we do get the IMF as well as World Bank gathering in the nation's capital.

So I do want to ask you about what to expect next week and with also gold at record levels, do you still see these pullbacks as buying opportunities?

We've been in gold, uh, since the 4th quarter of last year, and we do think that gold should be bought on dips for those that don't have any gold exposure because that's a play on the dynamics of the debt bubble we're in globally.

So I would expect in a booming market as we go the next 6 months gold may underperform those risk assets, but I think they'll outperform defensive assets like bonds, and that's why it's in our portfolios for clients in regards to as we look forward into the data that's going to be coming in next week.

I expect guidance to be more important than the actual earnings.

We're going to get a lot of information from financials, and I think their guidance moving forward is going to be very positive from a market standpoint.

The economic data, I think, is going to show some softening in the economy.

And that's going to be positive from a Fed cut rating perspective, but as we go into December, I think that softening will turn into re-acceleration as we go into 2026.

So the soft economic data to us is actually bullish, not bearish.

OK, well, thank you so much for joining us on this Friday morning.

A lot of moving parts here, so thank you so much for breaking it all down.

Thank you.