Market expert warns we’re headed into more short-term bouts of volatility

CHERYL: TIME NOW FOR THE WORD ON WALL STREET, TOP INVESTORS JOINING YOUR MONEY. JOINING ME NOW, CHIEF INVESTMENT OFFICER KEVIN MAHN, ALSO WITH ME IS DIRECTOR OF RESEARCH, CHRISTOPHER MAMARONECK. KEVIN, WE'RE GOING. TO START WITH YOU THIS MORNING, GOOD TO SEE YOU. TAKE A LOOK AT FUTURES. DOW IS, WELL, WE'RE DOWN 87 POINTS, S&P TICKING HIGHER, ALL THREE MAJOR INDICES FALLING FRIDAY OVER WORRIES ABOUT CONSUMER SPENDING. THE S&P 500, THE NASDAQ FINISHING HIGHER FOR A THIRD STRAIGHT WEEK, AND WE'RE FOCUSING THIS MORNING ON SanDISK. THIS STOCK IS ACTUALLY MOVING HIGHER. IT'S UP ALMOST 5%MENT -- 5%. THE CHIP MAKER TOPPED LAST WEEK'S GAINS. HOWARD LUTNICK WARNED APPLE, DO NOT BUY CHIPS FROM CHINA, AND INVESTORS ARE ALSO KEEPING A FOCUS ON THE CONSUMER. RETAILERS COMING OUT THIS WEEK FOR THE SECOND QUARTER INCLUDE WALMART, TARGET, HOME DEPOT, LOWE'S ALL ON DECK. A LOT TO LOOK AHEAD TO. WHAT ARE YOU WATCHING? >> I WOULD START BY SAYING WE'RE COMING OFF A 3-WEEK WINNING STREAK FOR THE S&P 500. HOWEVER, I THINK WE'RE HEADED INTO MORE SHORT-TERM BOUTS OF VOLATILITY, AND INVESTORS ARE GOING TO NEED TO CONTINUE TO CLIMB THAT PROVERBIAL WALL OF WORRY WHETHER IT'S CONCERNS OVER A.E. SPENDING, WHETHER IT'S CONCERNS OVER THE EXPIRATION OF THE CEASEFIRE BETWEEN THE U.S. AND IRAN, HIGHER OIL PRICES, WHAT CHAIR WARSH IS GOING TO DO WITH THESE TASK FORCES AND, OF COURSE, THE MIDTERM ELECTIONS AHEAD. BUT INVESTORS SHOULD REALIZE THAT TRYING TO TIME THE MARKET, CHERYL, IS AN EXERCISE IN FUTILITY. YOU NEED TO STAY INVESTED IN ACCORDANCE WITH YOUR RISK TOLERANCE. LOOK, WE LOOK AT THE LAST 20 YEARS' WORTH OF DATA, AND WE FOUND OVER THOSE LAST 20 YEARS HAD YOU JUST MISSED OUT ON THE TEN WORST DAYS OF THE MARKET, YOUR RETURNS WOULD HAVE BEEN CUT IN HALF. IF YOU'RE ON THE SIDELINES, YOU'RE GOING TO MISS OUT. CHERYL: YEAH. I THINK SOME VOLATILITY, KEVIN, YOU MENTIONED THIS IN SOME OF YOUR RESEARCH, THAT VOLATILITY IS CERTAINLY ON DECK. ESPECIALLY CONSIDERING WHERE WE'RE AT IN THE CALENDAR YEAR, YOU COULD POTENTIALLY SEE A PULLBACK FOR THE MONTH OF SEPTEMBER. BUT, CHRISTOPHER, YOU'RE STILL BULLISH ON THE U.S. ECONOMY. I WANT TO GET A FOLLOW ON THAT BECAUSE, BASICALLY, IF YOU LOOK AT RETAIL SALES THAT WE GOT ON FRIDAY, THEY WERE WEAK. BUT THEN YOU GOT SOMEBODY LIKE VISA COMING OUT AND SAYING THAT AMERICANS ARE SPENDING, YOU KNOW, DOUBLE-DIGIT GROWTH. WHAT SIDE OF THAT DEBATE ARE YOU ON RIGHT NOW, CHRISTOPHER? >> I THINK THE ECONOMY CAN MOVE FORWARD. I THINK WE HAVE A LOT OF STRENGTH IN THE COMMERCIAL SECTOR. I THINK IT IS GOING TOCK MIX -- TO BE MIXED ON THE CONSUMER SIDE. FOR CERTAIN SEGMENTS OF THE POPULATION, WE ARE SPENDING VERY WELL, AND THAT'S WHAT VISA'S TELLING YOU. I THINK THE PAYBACK BEHAVIOR HAS BEEN QUITE POSITIVE. WE HAVEN'T SEEN SPIKES OF CHARGEOFFS OR PAST DUES. IT WAS A CLEAN SECOND QUARTER FOR ALL THE FINANCIAL INSTITUTION, AND I THINK THAT STILL BODES WELL FOR THE SECOND HALF OF THE YEAR. CHERYL CHER KEVIN, I WANT TO PIVOT BACK TO SOMETHING WE WERE TALKING ABOUT IN THE BREAK, BECAUSE I KNOW YOU LIKE ALPHABET. I WANT TO GET YOUR TAKE ON THIS FRONT PAGE STORY THAT'S EXCLUSIVE BY "THE WALL STREET JOURNAL." THE HEADLINE, BIG TECH'S A.I. SPENDING IS $3 TRILLION HIGHER THAN IT SEEMS. AND THEY SAY THERE'S A LOT OF SPENDING THAT HAS NOT BEEN REPORTED BY THESE COMPANIES IN THEIR QUARTERLY REPORTS, AND ALPHABET IS THE BIGGEST STORY HERE IN THIS PARTICULAR PIECE IN THE JOURNAL ABOUT OFF-BALANCE SHEET OBLIGATIONS. >> YES. CHERYL: $3 TRILLION. THAT'S A LARGE NUMBER, KEVIN. >> IT IS. I STILL THINK ALPHABET IS ONE OF THE BEST SOFTWARE PLAYS WITHIN THE ENTIRE 56789I. ECOSYSTEM -- A.I. ECOSYSTEM BECAUSE THEY'RE SPENDING MONEY IN THE RIGHT PLACES. HOOK WHAT THEY'RE DOING WITH THE GEMINI SEARCH CAPABLE9S, WITH CONTENT MODERATION FOR YouTUBE AND AUTONOMOUS VEHICLES WITH WAYMO. I JUST CAME BACK FROM PHOENIX, AND THIS IS A NONSCIENTIFIC STUDY, BUT ONE IN EVERY FIVE CARS WAS A WAYMO. THE WAY THEY'RE ACTUALLY SPENDING TO IMPROVE THEIR BOTTOM LINE USING A.I. SEEMS APPROPRIATE TO ME. BUT SOME COMPANIES ARE SPENDING TOO MUCH, OTHER COMPANIES SPENDING TOO LITTLE. AND THE MANNER IN WHICH THEY'RE CONDUCTING THIS FINANCING WHETHER IT'S THROUGH EQUITY OR BOND FINANCING SHOULD BE CAREFULLY STUDIES BY INVESTORS BEFORE LEANING TOO MUCH INTO THAT SOFTWARE SPACE. LOOK TO THE INDUSTRIAL NAMES, THE INFRASTRUCTURE PLAYS, THE COOLING COMPANIES, THE POWER SOLUTIONS AND THE DATA CENTERS DESPITE THE NIMBY MOVEMENT FOR OTHER GROWTH OPPORTUNITIES. CHERYL: NO, IT ALL KIND OF FLOWS TOGETHER, TO YOUR POINT, KEVIN. THEY LOOK AT ALPHABET, AMAZON, META AND MOTH. CHRISTOPHER, I WANT TO -- AND MICROSOFT. I WANT TO TALK ABOUT THE ECONOMY AND THE CONSUMER. TAKING A LOOK AT YIELDS AS WE WAIT FROM THE MINUTES FROM THE FEDERAL RESERVE, THOSE JULY MINUTES COMING OUT ON WEDNESDAY, THIS IS GOING TO GIVE INVESTORS NOT JUST GREATER INSIGHT INTO THE RATE PATH AHEAD WHICH A 69% CHANCE THE FED HOLDS RATES STEADY FOR SEPTEMBER, BUT YOU HAD THAT UNEXPECTED DROP IN JULY RETAIL SALES, WE LOST.6% MONTH OVER MONTH. CHRISTOPHER, YOU KNOW, I KNOW THAT THE ECONOMY AND THE CONSUMER, THAT 75% OF THE ECONOMY, WHAT ABOUT RETAIL SALES DATA, WHAT DID THAT SAY ON FRIDAY? AND HOW DO YOU PARSE THAT WITH THE FACT THAT WE'RE GETTING ALL THESE BIG NAMES COMING OUT IN WALMART, IN PARTICULAR, COULD REALLY MOVE THE MARKETS. >> I'M WATCHING THE 2-YEAR TREASURY YIELD. IT'S BEEN ABOUT 50 BASIS POINTS ABOVE FED FUNDS. IF ANYTHING, IT'S BACKED OFF. I'M I THINK THE MARKET IS TELLING YOU THERE IS A PATH TO THE FED DOING NOTHING, WHICH IS PART OF YOUR QUESTION, I THINK. I THINK THE RETAIL SALES PUT A LITTLE BIT OF A DAMPER ON CONCERNS OF TOO HOT OF AN ECONOMY FORCING THE FED TO MAKE A MOVE. I THINK WE HAVE A PATH WHERE THE FED DOES NOTHING, AND I THINK THAT'S WHAT THE RETAIL SALES ARE HELPING US GET THERE. WE STILL HAVE DATA IN THE WEEKS AHEAD THAT WILL ASSIST ON WHAT THE FED DECIDES IN MID SEPTEMBER, BUT I THINK WE'RE AT A GOOD POINT HERE. CHERYL: KEVIN; WE HAD RYAN PAYNE ON THE PROGRAM, HE'SES WITH US FOR THE THREE HOURS, BUT HE SAID HE THINKS YOU ARE GOING TO EVENTUALLY GET A RATE HIKE BECAUSE OF THE INFLATION STORY FROM THE FED, BUT HE DOESN'T THINK THAT HAPPENS BEFORE THE MIDTERMS. YOUR THOUGHTS? >> I DON'T THINK THE FED NEEDS TO DO ANYTHING. UNEMPLOYMENT RATE AT 4.1%, INFLATION MODERATING. NOT BACK TO THE LEVEL THEY PREFER, BUT CONTINUING TO MODERATE. AND, OF COURSE, WHAT WE SEE WITH THE ECONOMY RIGHT NOW, THE CURRENT ATLANTA GDP NOW FORECAST FOR THE THIRD QUARTER, 4.3%. THAT'S NOT A SITUATION WHERE THE FED NEEDS TO STEP IN AND CUT RATES, AND I DON'T BELIEVE INFLATION CONTINUES TO MODERATE THEY NEED TO RAISE INTEREST RATES ANYWAY BECAUSE THE BOND MARKET IS DOING THE WORK FOR THEM RIGHT NOW.