New York morning trade.
We are looking at the major US stock averages in negative territory, with the Dow Nasdaq and S&P 500 all off by about 0.5%.
Now interestingly, we are looking at Home Depot and Sherwin Williams leading the Dow lower this morning.
Meanwhile, all eyes are on Nvidia this week.
The AI Darling reports first quarter earnings this Wednesday after the closing bell, and the stakes are high, especially after CEO Jensen Huang recently joined Trump for a summit in Beijing with Chinese leadership.
Our next guest says it is time for investors to retire the max 7 and make way for a brand new basket of stocks called the Air 7 added a brand new fetch and rising oil prices, and we have a recipe for serious market volatility.
Joining us to break it all down is Kevin Mahn, President & CIO at Hennion & Walsh Asset Management.
Great to have you here, Kevin to be my pleasure.
Well, we are looking at red for the broader markets, but I do want to focus on tech, especially the max 7 names.
So when we.
Consider their performance in 2026 versus 2023.
We see a sharp contrast.
So what's going on right now?
I think back in 2023, the Mag 7 names accounted for 62% of the total return of the S&P 500.
Thus far this year, at least through May 1st, less than 10%.
But I think there's a better way to invest in the AI revolution going forward if you take a more diversified approach.
And that's why I debuted the Air 7 to contrast with the MAG 7 just a couple of weeks ago.
Yes, and Kevin, before the show I was remarking on how Air 7 actually sounds like a new footwear line, but it isn't.
So tell us what the composition is.
Certainly, so I borrowed two of the names from the Mag 7 and the Air 7.
Keep in mind these are seven picks associated with the AI revolution, hence Air that represent different components of the entire AI ecosystem.
My software.
Alphabet.
My semiconductor chip played, no surprise here, Nvidia, the hub of the AI ecosystem, which is expected to report earnings about $175 a share tomorrow, 80% year over year revenue growth.
They're going to knock the cover off the ball once again and investors are going to say, ho hum, it's just Nvidia setting new records again.
But that's where I start and stop with the Mag 7.
I then go into Taiwan Semiconductor, our third name, the largest dedicated chip foundry in the world.
The 70% market share that makes Nvidia's chips.
And how about memory?
When I think of memory or power, I first think of Micron Technologies, and they have a near monopoly on memory right now with their high bandwidth memory memory that they provide to Nvidia's chips right now.
Where do those chips go?
They go into data centers.
So in the A 7 we have Digital Realty, one of the largest operators of data centers in the world, with data centers in over 31 different.
But as you know Remy, these data centers run hot, so they need cooling solutions.
That's why I introduced Verta VRT into the Air 7.
And last but not least, a utility name.
Yes, utilities have become a backdoor play into the AI revolution.
We selected American Electric Power AEP because they supply electricity to about 5 million customers right now in 11 different states, including the state of Virginia, which has become the data center capital.
The world that's the year 7.
Yes, and I'm glad you highlighted this because when we're talking about the AI trade, there are a lot of moving parts and it's a big ecosystem, but as you mentioned, you are paying attention to Nvidia reporting earnings tomorrow after the closing bell, and we do know that some people are actually having watch parties for video, which is pretty funny, but it is really true that this happens.
So I do want to get your take on the national security geopolitics part of Nvidia, especially since Huang did make it to China for that summit.
Yes, I'm anxious to see what really comes out of that summit in China and will they allow more advanced chips to be sold into China, because clearly at the heart of the U.S.China trade debate is we need their rare earth minerals.
They need our advanced chips.
We're holding back right now on those advanced chips, and they're holding back on the rare earth minerals.
So hopefully there's a compromise there and if so that benefits Nvidia, but Nvidia doesn't necessarily need that.
Chip business right now because it's forecasted Remy, that up to 90% of their revenues this quarter isn't going to come from chips, it's going to come from data centers, so they've already diversified themselves and I hope we hear more about their next generation chip, the Ruben chip, after tomorrow's earnings call and see what the actual rollout schedule is for that.
Yes, I'm sure you and I will be hanging out on every word in that parties would be party tonight.
Tomorrow for sure and Kevin, I do want to shift our focus on back to central banks so we know that G7 finance ministers are meeting in Paris and of course they're concerned about what's happening in government bonds as well as global inflation.
But here in the US we're all awaiting Kevin Warsh, so he will be getting a special swearing in ceremony at the White House.
So what are your expectations for Warsh right now?
Sure, a lot of people assume that Kevin Warsh will be more dovish than Chair Powell because he's a.
I don't think he necessarily will be.
I don't think he necessarily needs to be right now.
If you look at the Atlanta GDP now cast, it's forecasting Q2 GDP of 4%.
We have a relatively stable labor market right now, but we do have inflated oil prices which has led to inflationary pressures which have led some to suggest that maybe the first move is a rate hike, not a rate cut.
I'm not in that camp, but I wouldn't expect a rate cut anytime soon.
Yes, and one thing we have to keep in mind is that Memorial Day is right around the corner and for Americans that means summer driving season, and this has come at a time when we're looking at costs rising almost everywhere it seems.
So what do you expect to happen when it comes to oil prices?
I think the Trump administration desperately wants to Reach an agreement with Iran so we can open up the Strait of Hormuz and start seeing some relief on oil and gas prices.
Why?
Because the more it costs consumers to fill up their gas tanks, the less they have to spend in the economy, and 70% of our economic growth comes from consumer spending.
So the longer that lasts, the longer the strait remains closed, the longer Oil prices stay above $100.
Now that becomes an affordability issue leading right into the midterm elections.
So I would anticipate that there will be some form of resolution in the near term future and then we'll start to see those inflationary pressures start to moderate, but oil prices aren't going to drop overnight even if that strait is open.
It's going to take months.
And if we take a step back and look at the leaders versus laggards within the S&P 500, of course we see energy leading the way higher, followed by the usual suspects including IT.
So for investors out there who want to weather the storm as well as the volatility, but also don't want to miss out on the AI revolution, where should they be right now?
It's a great question, and I would go right into one of those names.
A 7 that I highlighted, American Electric Power, because the sector that they belong to utilities is historically a sector that holds up well in the face of volatility.
Most utilities pay good dividends and they become a backdoor play into the AI revolution.
So that allows you to stay in the markets with some downside protection, some dividend yield, and a way to play the AI revolution going forward.
So I think that's one sector you should look at.
But if I Leave just with one sentiment.
I know every time there's a little bit more volatility, investors try and time the market.
They go to the sidelines.
Trying to time the market is an exercise in futility.
Stay invested, consistent with your risk tolerance, and avoid the temptation to try and guess when to get out, when to get back kicking in, because it's going to affect your longer term performance.
Yes, absolutely.
And speaking of which, we know that traditional 60 to 40 portfolio doesn't hold water anymore.
Given the fact that you've been through different market cycles, different policy cycles, not to mention economic cycles, what do you make of what we're seeing in the bond markets right now?
I think what the bond market is telling us right now is that these inflationary pressures have caught us somewhat by surprise, and they believe that they're not going away anytime soon.
Why else would we have a 2 year, actually 50 basis points, more than 50 basis points.
The Fed funds target right now.
They're actually pricing in a potential rate hike as opposed to an additional rate cut.
But as it stands right now, the Federal Reserve, at least as of March, was still forecasting one rate cut of 25 basis points this year.
Maybe that comes at the end of the year.
It's not going to come any sooner in my opinion.
Well, Kevin, a lot to watch out for as we head into this week as well as the second half.
So thank you so much for joining us, Kevin.
Appreciate it.
Thank you.
