Well, in Wednesday's trade, we are looking at the major stock averages extending Tuesday's gains.
US stocks hit new record highs for the Nasdaq and the S&P 500 falling inflation figures.
We saw a core inflation rising 3.1% year over year in July, a tick above estimates.
Now most of the rise came from services while goods inflation remained muted, showing little impact from tariffs.
But the data does come in as concerns grow over a softening labor market and the Fed.
Next move could have an outsized impact on mega cap tech stocks.
The largest 10% of US companies now make up over 70% of total market value, the highest concentration ever recorded.
Joining me to weigh in this morning is Luke Lloyd, president and CEO of Lloyd Financial Group.
Well, Luke, great to have you here.
Another exciting day here at the New York Stock Exchange bullish apparently IPO, and we are looking at bullish price action for the major.
US stock averages as well.
So do you think markets are rallying for the right reasons?
For the right reasons, that's debatable, right?
I think it's rallying because there's just so much money on the sidelines.
This is probably one of the most hated rallies in history.
I think there's like $7.6 trillion in money market funds, and look, a lot of people, including my clients, you know, they have a little bit of cash on the sidelines, no one's complaining about earning 5% on cash.
But when you're missing out on these 10 to 15% returns on some of these large cab names year to date.
10% on the S&P, I think the Nasdaq's up maybe 15% year to date.
You're kind of feeling kind of bad about it, right?
But I think at the end of the day it comes down to the thought process between the Federal Reserve cutting rates in September, you're hearing like Neil Kasakari Kashkari getting a lot dovish more recently that something that kind of wasn't happening before.
He was always kind of more hawkish.
You're seeing more dovish tone in the Fed.
You're seeing earnings reports crush it.
You're seeing small caps finally catch up, which is good for the overall market indices.
You're seeing the breadth widen, which is awesome.
And earlier this morning, US Treasury Secretary Scott Dess was on Bloomberg and he thinks that rates should be 1.5 points lower.
But with Fed fund futures calling for a rate cuts later this year, what does this mean for investors out there, not just the short term but long term?
Well, that's a great question.
And look, the Federal Reserve has turned politicized already, whether it was politicized last time or now with kind of what Trump's kind of pushing out there, Scott. and try and cut rates because they say so.
I mean that's politicization of the Fed, right?
So what I think is important to kind of look at is that Neil Kasakari thought process that I brought up.
And what I think is happening is the younger members of the Federal Reserve, those in their 50s, like Neil, I think he's 52, not to bring age always into it, but they've been around technology for a long period of their life.
Not saying people in their 60s haven't been around technology, but when you grow up with like AI, you grow up with kind of like these these cool kind of innovative things, you start to understand how they're going to float their way through the economy and why I think it's happening is the dubest nature is coming because their projections from SHRM, which my wife works in HR, SH, SHRM is like the HR conference and group that they all pay attention to.
They're talking about AI replacing 20 million jobs.
I think that's what the Federal Reserve is finally factoring into some of their thoughts because of the dovish nature of this inflationary pressure because of AI.
I think that's what's kind of happening, which is bullish for really.
A lot of these AI companies, yeah, and you brought up artificial intelligence.
That is something that we're all keeping our eyes on, not just from a labor perspective but also investment perspective as well.
And I understand you're watching some key names when it comes to the space.
So give us a little bit of insight into this.
Yeah, so Qualcomm is one of the stocks I really still like that's undervalued compared to its peers like the AMDs and videos and chip makers of the world.
So Qualcomm sold off like 10% on its earnings report.
That was a buying opportunity.
I actually bought more for my clients there.
Their only risk is basically kind of the China possible geopolitical events that could happen, maybe slowing iPhone sales or slowing phone sales in general.
I think Ballcomm is kind of really putting their foot forward when it comes to AI.
I think that's an area you want to watch.
And then on top of that, I think you want to watch those other kind of names like the ancillary areas.
I talked about Accenture before, but even the energy sector kind of side of things.
So oil, oil is not talked about enough when it comes.
To the commodities and AI and inputs to AI and NOG is the stock that we own, has no operating company, so it's not actually doesn't have the overhead of operating and paying employees.
They basically buy these oil wells and they pump it up, so it's all dictated on oil prices, but I think oil prices, the path higher is higher because of AI demand and because maybe even some of the sanctions coming on because of the Russia-Ukraine talks from President Trump right now.
If sanctions get put on between the US and Europe, I think oil is going to go higher.
And Luke, I want to ask you a question that applies to Main Street.
So for Americans out there who are managing a small business, for example, so the types of challenges they face are different from the big corporations they listed here on the New York Stock Exchange.
So how is AI affecting small businesses?
So AI is one of the best things that could happen to small business.
So all we saw in the past 4 or 5 years was large corporations take market share.
You cited the number, the 10 top 10% of the S&P makes up 70% of the wait.
Right, so large corporations have taken so much market share.
AI, yes, it's going to help large corporations.
There's no doubt about it, but large corporations are dealing with different issues in small business.
Large corporations are dealing with the efficiency problem.
So the non-efficient employees, those not making money, they can kind of get rid of and probably have AI do their job.
Small business needs AI to innovate.
I think the innovation factor is going to come from small business, not large corporations, because of the inefficiency of large corporations.
So I think this is a way for entrepreneurs or those that are.
Employees that want to become entrepreneurs, they can use AI to their side instead of paying hundreds of thousands of dollars for employees or hundreds of thousands of dollars for other marketing activities they might need, but that AI can do so.
The cost of getting into business and the cost of doing business is declining so much.
It's allowing small businesses to operate, which again, small cap companies, I think it's got a rip your face rally coming off up here with small.
Caps you can use IWM or you can pick individual stocks in small caps.
And Luke, finally, before I let you go, one area of the economy that Americans are also paying attention to is housing.
And from both a rate perspective in terms of mortgages and affordability, we know that it's pricey out there.
So do you think from both an economic political perspective this is a ticking time bomb?
I do.
I mean, I don't want to be like.
Doom and gloom saying 2008, 2009, the games around the corner.
There's just so much supply and demand balance.
There's so much unaffordability happening compared to middle class America.
Obviously you can say, depending on the data from the cities compared to the rural areas, it's a little different.
Cities are a lot more expensive, but I do think it's a ticking time bomb, whether it's commercial real estate or whether it's residential.
I think the key area for real estate if you're an investor, you have to stick to the data centers.
I mean, there's one fact.
Certain I think demand for AI is 8 times over what supply is currently for AI.
So the infrastructure built out for AI is going to be there.
You need data centers, you need cloud computing, you know, data centers and warehouses to do that.
I think that's where you want to go.
You can go like CON cone.
It's like an example there, but yeah, I'd stick with definitely the data centers there.
OK, Luke, well, always great having you on the show.
Thank you so much for joining me again here at the New York Stock Exchange.
