(CONFIRMED) The Stock Market is about to go CRAZY

Well, it looks like the ceasefire is back on. What does this mean for the markets and what could this cause? We will get into all of that at the top of today's video. But we also have major earnings this week that are going to be critically important for one hyperscalers, but two AI stocks because of their capex guidance. We also have major economic data like your PCE reports, personal income, personal spending, but we have the Fed meeting this week. So tie all of these things together around ceasefire again, major economic data, huge earnings, and the Fed meeting, we got a lot to talk about. And the markets are going to get pretty crazy here. I will share my insights, my thoughts and opinions, where I think could be an outperforming area for this week. Before we begin, hit that like button for the YouTube algorithm and subscribe to the channel if you guys find value or perspective out of today's video. CBS News reported earlier this morning that US bombing in Iran is paused as Omani officials visit Tehran for talks. Iran says they will suspend their military operations as long as the United States maintains its pause in air strikes, a senior Iranian official told Reuters. Following Donald Trump's decision to halt a two-week bombing campaign, after 13 consecutive nights of US strikes, Washington has now gone two days without launching new attacks on Iran. US Ambassador to the UN Mike Waltz says Donald Trump is giving Iran talks, quote, some space. There was also some weird news here in the past 12 hours or so that Ukraine strikes Iranian vessels in the Caspian Sea. Tehran accuses Kyiv of hostile and criminal acts. Ukrainian President Volodymyr Zelenskyy says his country's forces struck targets in the Caspian Sea including vessels used in military cargo shipments involving Iran. So, kind of a weird development to this, and we've seen other countries begin to get involved in this conflict like Kuwait and Bahrain. They they sent fighter jets to attack Iran in retaliation for Iran attacking US bases in Kuwait. So, this has started to evolve into a little bit more than a just Iran and US conflict. But, as of where it sits right now, it looks like we kind of have a ceasefire again. Although that's not the terminology that is being used, it it looks like a ceasefire. Now, as I've talked about before on this channel, what what really matters for the ceasefire and what areas of the markets benefit from this war with Iran coming to an end, it is the areas of the markets that are excluded in the AI trade. Because, look, hyperscalers and their spending, that's not really affected by the Iran war. AI stocks that are the beneficiaries of that are not really affected by whether or not the Iran war continues. In fact, your AI stocks actually are benefited from the Iran war continuing. Why? Because if you're a fund like Cathie Wood that you have to be invested at all times, you can't short the markets, and there's a lot of these funds out there. There's a lot of these investors out there that are like, "Would I rather own, you know, cyclicals if oil continues to go up, and I don't know how long the war is going to last, or would I rather own AI stocks that are in this massive AI tailwind that are benefiting from spending, right?" It It makes the risk-reward look better for AI stocks. It moves capital into AI AI and out of other areas of the markets. So, the areas of the markets that benefit from a ceasefire or this conflict hopefully inevitably ending are cyclicals, non-AI industrials, financials, smaller communication services names, maybe areas like healthcare or real estate or, you know, small caps. These are areas the rotation trade effectively is the real winner from a ceasefire. It's not AI, it's not Mag 7. Unfortunately, Mag 7 and AI stocks, they really control the broader index. So, you can have the rotation trade in full effect. If Mag 7 or AI stocks are not participating, you might not see much of an impact on the headline markets, but tomorrow is going to be a day where if you're invested in small caps, cyclicals, financials, the areas that I just mentioned, you're probably going to have a pretty damn good day. Tomorrow, you are also very likely to see oil begin to come down again. We peaked at $92 a barrel on July 23rd again after going through like a 3-week rally from the $68 a barrel level. So, definitely seeing another rise in oil. You came down to $89.31 on Friday. You're probably going to come down into the low 80s tomorrow following basically the ceasefire, and that's also going to help propel the broadening trade. But, you're also going to see 10-year Treasury yields and 2-year Treasury yields likely come down as well. And this is a much bigger concern I think for the markets because, look, 10-year Treasury yields are at the highest level they've been at in the last year. You're basically at multi-decade highs for 10-year and 2-year Treasury yields. You really have to go back to like 2007 to see 10-year Treasury yields this high. And there's a lot of people that are concerned that we could make a run towards 5% and if 10-year Treasury yields get to 5%, that's where a lot of things could begin to break in the markets. So this ceasefire does sort of slow that down or prevent that. So that's really good again for the broadening trade. Now, we're going to have a bunch of earnings this week starting off tomorrow morning AstraZeneca and Baker Hughes and um the South America Coca-Cola, right? A bunch of companies. Monday and after hours, you're going to have Applied Digital, Novidades, Celestica, um all kinds of names there. F5. Tuesday premarket, PayPal, Boeing, Coca-Cola, UBS, uh UPS, uh JetBlue and Royal Caribbean. Tuesday and after hours, Bloom Energy, Seagate, Enphase, KLA, Visa, Tilray, Teradyne, Avis Budget Group, Ford and The Cheesecake Factory. Wednesday premarket, SoFi, Boston uh Scientific, Vertiv, Eastman Chemical, General Electric, ADP, Humana, P&G. Wednesday and after hours, this is where things are going to get good. You have Microsoft Meta Robinhood Arm Qualcomm, Lam Research, Chipotle. Thursday premarket, Bristol Myers, Cigna Mastercard Altria Stellantis and Ferrari. Thursday and after hours, you have Apple Amazon Roblox Reddit Rivian and some others. And then Friday premarket, you have Moderna, Exxon, Chevron and AbbVie, you know, Colgate, Arm & Hammer, companies like that. So this week, you know, you're really going to start to get a lot of different areas reporting earnings. Not as much for the software trade, but a lot of companies that are, you know, tied to the physical economy like UPS and even Amazon to a lesser extent. Lots of AI companies, Novidades, Applied Digital, um you know, but ARM, Qualcomm, right? Lam Research. But what's really going to matter are your hyperscalers. Microsoft and Meta Wednesday and after hours, and then Amazon Thursday and after hours, and then to a lesser extent Apple. What really matters here is what happens with CapEx. And we kind of have an understanding of what this could look like from Google earnings. Google, they raised CapEx. Personally, I was expecting CapEx to raise to about 220 billion for this year. So I was actually, you know, a little I don't want to say underwhelmed cuz that makes it sound like a bad thing, but I actually thought CapEx was going to go up more than it did go up. And I think this is why AI stocks have not actually performed well following Google's earnings because CapEx, yes, it went up, but people were expecting it to go up more. AI stocks, even after their decline from highs, some of them down 20, 30 plus percent, are still expecting very high expectations. If Microsoft or Meta or Amazon come out and they raise CapEx a little bit, but not enough to ignite the AI trade, that's where you have a problem on your hands. Because if Microsoft, Meta, and Amazon, if they raise CapEx, their stocks are going to fall because they're spending more. But if they don't raise CapEx enough to ignite AI stocks, you have a scenario where AI stocks are disappointed. And there's selling pressure in your hyperscalers. In that scenario, if we take a look at the heat map, you could see a lot of red in semiconductors and Mac 7, which from an index level would cause the markets to fall. You could actually accelerate this correction based on hyperscaler earnings. Now, this would be really good for the broadening trade. It would be good for software, for financials, for cyclicals, for healthcare, for non-AI industrials, and real estate, and areas like that. But, that's not those aren't big enough weightings to support the markets in any kind of meaningful way. So, in conclusion here, I think CapEx is going up from Microsoft, Meta, and Amazon on net, but I don't think it's going to be impressive enough to drive upside in AI stocks, and then you're going to sell off your hyperscalers for spending more. So, it's There's not a clear opportunity in either hyperscalers or AI stocks right now. And, this could add pressure to the broader index, but kind of ignite the rotation trade at the same time. Now, last but not least, we do have economic data this week and the Fed meeting. So, starting off tomorrow morning, you're going to have durable goods orders month-over-month. The previous month was -4.5%. So, we're expecting positive 1.8% month-over-month. That's actually not great. So, uh let's let's see what that looks like tomorrow morning. Tuesday, you get the ADP employment change weekly. This is something that I I I'm surprised not a lot of people are looking at this, but the ADP employment numbers have went from, you know, 40-ish thousand per week throughout March and May, and you've been falling ever since. Last week, you were at 16.5 thousand. Mix that with the last jobs report that actually came in really bad, and it's like, why are we not talking about the labor market that seems to be weakening in real time? You know, everyone's focused on oil and inflation and the Iran war and all of this, but it does look like the labor market has been weakening. And, that's something that I think the Fed might talk about later this week. Now, you're also going to have a bunch of real estate data. You're going to have CB consumer confidence, as well, on Tuesday, but your big catalyst, again, is the Fed meeting on Wednesday. So, you're going to have the interest rate decision, and then at 2:30 p.m. we have the Fed press conference, which that is where the actual um information comes out. That's That's where we get a better understanding of things. We're We're not going to get a rate hike this week. The probability of a rate hike is sitting at 38%, but following the ceasefire news, that's going to fall to like 20%, you know, and the Fed always does what is priced in. Now, from my general perspective, I don't think the Fed wants to do anything until they have their committees set up and getting some insights and trying to figure things out. It It It's It's you know, preemptive. Like, if you're starting if you're going to start a business, right? You don't go out and buy everything you're ever going to need for the business up front. Nine times out of 10, you buy a truck or whatever you need to just start, [snorts] right? So, I don't think we're in a position where the Fed wants to go out and make dramatic decisions and start changing before they have a better understanding of what things actually look like out there in the economy. So, I don't think we're going to get anything from the Fed this year. And the markets are pricing in two rate hikes. So, yeah, following the ceasefire, and I believe this week's Fed meeting on Wednesday, you're going to see those probabilities come down quite a bit for rate hikes. And that also helps the broadening trade as well. You know, it doesn't really help AI stocks, it doesn't really help hyperscalers, but it's really going to help small caps and financials and cyclicals and areas tied to the consumer, tied to broader macro trends like, you know, oil and and things like that. So, I you know, it's it's hard not to be bullish on the rotation trade. All things considered, kind of every one of these catalysts um points towards the rotation trade um being the area that you want to be positioned for. We'll see, obviously it's not a recommendation, not financial advice, just my opinion. But, on Thursday you're going to have core PCE month-over-month. You're expecting that to come in at 0.1%. Probably going to come in negative. Yeah, I I would think the last CPI report came in negative. It was really good. GDP growth rate quarter-over-quarter advanced data for Q2, expecting that to come in at about 2.3%. Personal income month-over-month expected at positive 0.3%. Personal spending month-over-month expected at positive 0.4%. You will also get initial jobless claims, expecting those at 206,000. So, some big data on Thursday, but you know, by then I I think we're still going to be just reacting to what the Fed does. Now, on Friday you're going to have Chicago PMIs, Michigan consumer sentiment final numbers for July, things like that, smaller data sets. But, again, by Friday we're really going to be reacting to what's going on with this Iran conflict, hyperscaler earnings, and what the Fed said. And I I'm actually quite optimistic. Do think the rotation trade could be quite quite powerful, quite strong. But, look, if the Fed comes out and they're kind of in in the gray area still, they don't give us any solid guidance, if we don't have progress with Iran talks, if hyperscalers come out and do what I think they're going to do and raise CapEx, but not enough to, you know, cause AI stocks to go up, but they're still spending more, so hyperscalers are going to sell off like Google did following their earnings, you could have a lot of downside pressure on the markets that could also weigh on the rotation trade. So, it's like I'm bullish on the rotation trade. I think there's reasons to be optimistic on that. You know software cyclicals financials industrials, small caps, and maybe even real estate. But, if you have a bunch of selling pressure on mag seven and AI stocks and all of that, you are in the period of time before a midterm where you do tend to get seasonal volatility, a a pretty normal correction before the midterms. These things could drag everything lower in the markets. So, that's something I'm also prepared for. So, in conclusion here, I do think tomorrow morning's probably going to be a pretty good day for the markets broadly speaking because of the ceasefire effectively ceasefire news that we have. Our big catalyst are the Fed, 2:00 p.m. on Wednesday, and then hyperscaler earnings after hours on Wednesday. I'm skeptical that hyperscalers are going to raise CapEx enough to drive AI stocks higher. And if they spend more, you're not going to buy hyperscalers either, right? So, that could be a scenario just like Google earnings where Google sold off and AI stocks kind of sold off. So, that's the real risk I think this week. I think the Fed we're going to get a lot of the same old same old, just kick the can down to the next economic data set, right? So, I don't think there's going to be too many changes there. We don't get a dot plot or anything like that to react to. All else equal, I think the rotation trade makes a lot of sense right now, but if there's so much pressure in the headline markets, it will start to damage the rotation trade and just suck everything down with it. So, you know, I would say I'm cautiously optimistic for this week following the bounce that you're likely going to see on Monday. Hit that like button, subscribe to the channel if you guys have not done so already. If you guys want to come trade and invest alongside of us, that link is down below in the description of today's episode. Have a fantastic rest of your day, and I will see you in the next one.