Markets on Edge as Fed Decision Looms and Powell Signals Likely Hawkish Tone

New York morning trade, we are looking at the major US stock averages pulling back and oil back above $100 per barrel now no change is expected this afternoon at the rate announcement from the Federal Reserve and focuses squarely on Fetcher Powell's comments.

So what will Jay Powell's swan song sound like?

Well, the Senate Banking Committee is set to confirm the nomination of Kevin to replace Powell.

With the full Senate expected to hold a final vote shortly after that and after the market closed today, all eyes will be on the 47 names traders will be watching to see if their revenue in terms of the earnings results justify the high multiples they trade out and AI spending will also be a key focus, and tomorrow Apple will be reporting earnings and the Fed's preferred.

Gauge will be coming out.

Well joining me this morning to break all of this down is David Busch, Co-Chief Investment Officer for Trajan Wealth.

David, great to have you here.

Thank you so much for joining me.

It's good to see you again.

Well, here we are on that day.

A lot happening in the next several hours.

So give us your take on where we stand right now.

Yes, so the macroeconomic picture is is mixed to say the least, so.

Labor markets are relatively solid.

We have economic growth, but it is slowing.

Really what we're focused on is the inflation data.

So earlier this month we had a CPI and a PPI print which were both higher than expected by 1 and 1.2%.

Tomorrow, as you mentioned, we have core PCE, which is the Fed's preferred inflation measure.

So the Fed is really in a bind because on one hand, inflation.

Inflation inflation expectations will drive decisions today, and on the other hand, we are seeing that slowdown in economic growth and I think inflation is the key word here because the longer that the Strait of Hormuz remains effectively closed, the longer we can continue to expect these elevated oil prices.

So what does this mean for the central bank so that the central bank has to be on hold at a minimum.

And really what we need to pay attention to is Jay Powell's press conference today, so we need to listen for hawkish tone and then, you know, make a determination on how that will play out in the future.

So my assumption is that they're going to go in and not change rates, but will have a hawkish tone.

And of course another event that we're paying attention to after the Federal Reserve rate announcement and that presser from Powell is of course the max 7 earnings so for of those names that we're paying attention to in addition to those cap numbers that were all closely watching what are you waiting for in terms of the earnings calls and some of the guidance so today with the with the companies out of the max 7 that are reporting.

They represent 15% of the S&P 500 market capitalization, so any earnings misses or earnings beats will drive market reaction.

So yes, focused on AI CPX, the monetization of the AI technology, as well as specifically cloud and cloud computing.

So AWS specifically, I'm looking to see, you know.

Is the disruption in the Middle East is that slowing down sales of that of their cloud infrastructure.

And in addition to that, when we take a step back and look at the leaders as well as laggards for the S&P 500, we see this diversification in terms of gainers here to date for the S&P 500 versus the gainers starting on March 30th of 2026.

So what does that tell you and in terms of market bread as well as dispersion where your concerns.

I do think that the market will continue to broaden out specifically with those big tech names.

You know, I'm still a believer that tech is the wave of the future, but there are other sectors within the economy that will benefit from that AI infrastructure buildout, specifically it's the traditional value sectors like industrials and energy and materials and so on.

So I think we'll continue to see that broadening.

And of course in addition to this we're talking about the macro picture you and I were talking about the average price for a regular gallon of gas here in the US that continues to rise, but at the same time when we're looking at some of the economic data, it does appear as though we're holding up.

So what are you concerned about and the longer this conflict in the Middle East lasts, what does it mean for both sides of the cases shaped economy?

So really when we think about the Khad economy.

The higher oil prices are leading to higher gasoline prices and consumers are feeling it.

We all have that pinch at the gas pump.

So if you look at that combined with Visa's earnings yesterday where we're seeing that increase in credit card usage, I think consumers are really strapped to say the least.

So with the Kha economy.

It's really a drag on the bottom quartile or half of the economy, and consumers represent 60 to 65% of economic growth within the country, so we are feeling it.

And when we take a step back and look at where the S&P 500 is, we have to keep in mind that we saw new record highs in April of this year.

But we all know that the stock market is not the economy.

So given the fact that we know this, we've seen volatility across all asset classes, of course we're paying attention to the equity market, but also bonds as well as commodities and alternative assets.

So what are you most bullish on?

So really right now the energy sector, because the energy sector is benefiting from these higher oil and gas prices, BP announced their earnings yesterday, and what we learned is that they've had outsized earnings from just trading the oil markets, so it will be a benefit there, but ultimately it will be deflationary because that has to permeate the rest of the economy.

And what does diversification look like?

In my mind it's a combination, so I'm still bullish on large cap tech, and, but I'm also cautious, and that's where the value tilt comes into play.

And also with yields where they're at.

I mean Treasury yields are higher than they've been over the last 15 years, so fixed income can be a good diversifier as well.

Well David, always great having you on the show.

Thank you so much for joining me today.

We have a big afternoon ahead of us, so I appreciate your time and all of your insights.

Thank you, Remy.

Thank you so much.