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Transcript

Felix Prehn - ⚠️What the FED Just Said + Stock Market News 1 Aug 2024 · Felix Nikolas Prehn's Podcast

• 0:00
  Speaker 1: Good morning.
• 0:00
  Speaker 1: The Fed dropped a bombshell on the market yesterday and I want you to understand what the heck's going on here.
• 0:06
  Speaker 1: I'm Felix.
• 0:07
  Speaker 1: This is your essential market briefing from this old retired investment banker here.
• 0:12
  Speaker 1: And you might be thinking, Felix, I know what happened at yesterday's FOMC Fed meeting, but I assure you there is a twist that you probably didn't see coming.
• 0:20
  Speaker 1: We will also look at NVIDIA and Meta earnings from yesterday both massively important to what's happening today into your portfolio.
• 0:27
  Speaker 1: So stick around, we're going to reveal how all of this could impact your portfolio in ways you haven't seen coming.
• 0:34
  Speaker 1: First of all, the Fed kept interest rates unchanged at the highest level in over two decades.
• 0:40
  Speaker 1: No surprise there, right?
• 0:42
  Speaker 1: But it gets a little more interesting than that.
• 0:44
  Speaker 1: Chair Jerome Powell signaled that a September rate cut is now on the table.
• 0:49
  Speaker 1: Yes, you heard that right.
• 0:51
  Speaker 1: Powell stated, and I quote a reduction in our policy rate could be on the table as soon as the next meeting in September.
• 0:58
  Speaker 1: Now, why is that significant?
• 1:00
  Speaker 1: Well, it marks a seismic shift in the Fed's stance.
• 1:05
  Speaker 1: They're no longer solely focused on inflation risks.
• 1:08
  Speaker 1: Instead, they're now and I quote attentive to the risks to both sides of its dual mandate.
• 1:13
  Speaker 1: And this is crucial, and I'll explain why in just a moment.
• 1:17
  Speaker 1: But before we unpack this further, I want to share something rather extraordinary with you.
• 1:21
  Speaker 1: Our teaching portfolio is up 80% this year so far.
• 1:24
  Speaker 1: That's $24,000 gained on $30,000 traded.
• 1:29
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• 1:42
  Speaker 1: Now let's get back to the Fed.
• 1:44
  Speaker 1: This shift in language is more than just words.
• 1:47
  Speaker 1: It's a clear signal that the Fed is increasingly worried about potentially weakening the labor market, and the ADP data we just got in shows there is a definite weakening in the labor market.
• 1:59
  Speaker 1: We're going to get unemployment data out on Friday.
• 2:01
  Speaker 1: That'll really matter.
• 2:02
  Speaker 1: So they've been laser focused on inflation for two years now.
• 2:05
  Speaker 1: So the change is huge.
• 2:08
  Speaker 1: As some might say, the Fed is really walking a tightrope here.
• 2:11
  Speaker 1: They're determined to lower inflation without sparking a recession, which is a hard thing to accomplish, and if they cut too late, we get a recession.
• 2:21
  Speaker 1: If they cut too early, inflation might come back.
• 2:23
  Speaker 1: Now, how certain is this?
• 2:23
  Speaker 1: September rate cut now?
• 2:23
  Speaker 1: Well, things get a recession.
• 2:24
  Speaker 1: If they cut to early, inflation might come back Now.
• 2:25
  Speaker 1: How certain is this September rate cut now?
• 2:28
  Speaker 1: Well, things get a little murky here.
• 2:30
  Speaker 1: Powell was careful not to commit fully.
• 2:33
  Speaker 1: He said, and I quote the question will be whether the totality of the data, the evolving outlook and the balance of risks are consistent with rising confidence on inflation and maintaining a solid labor market.
• 2:46
  Speaker 1: Clear as mud, right, In other words, it's not a done deal.
• 2:49
  Speaker 1: The Fed will be watching the next two inflation and job reports like hawks, so watch out for Friday's unemployment numbers.
• 2:56
  Speaker 1: Now let's look at how the market reacted to it.
• 2:58
  Speaker 1: Treasuries rallied after the Fed's press conference.
• 3:01
  Speaker 1: Interest rate swaps now show traders are fully priced in a quarter point cut in September.
• 3:07
  Speaker 1: In fact, they're now pricing in a 0.7% cut in interest rates this year.
• 3:13
  Speaker 1: Difficult words early in the morning, but the massive rally in small caps that we've been promised by some hasn't materialized.
• 3:24
  Speaker 1: The market overall didn't jump for joy, and that's kind of where it gets a little more interesting.
• 3:30
  Speaker 1: The market was well.
• 3:32
  Speaker 1: The reaction is a little unexpected, and some of the biggest tech names have a lot to do with that.
• 3:37
  Speaker 1: So let's dive a little bit more into that.
• 3:39
  Speaker 1: Now.
• 3:40
  Speaker 1: There are some comments here from some of the big boys on Wall Street, like UBS, for example, saying the statement is more dovish than June's.
• 3:48
  Speaker 1: It's definitely not a complete pivot, and I think that's kind of what the market was a little bit.
• 3:53
  Speaker 1: Yeah, OK, it's good, but it's not wonderful.
• 3:56
  Speaker 1: Though, in reality, I don't think anybody expected Powell to stand up there and say we're cutting in September, because if that's his view versus view, he would have just cut yesterday, but he didn't want to do that.
• 4:07
  Speaker 1: So it's kind of exactly what I expected him to say.
• 4:10
  Speaker 1: So I thought it was rather good news, but the market's a little bit more well.
• 4:13
  Speaker 1: It was a little more optimistic, I'd say.
• 4:15
  Speaker 1: Now, the other major story out there was, of course, a tech giant that made history yesterday with a mind-boggling single-day value increase.
• 4:23
  Speaker 1: Can you guess which one?
• 4:24
  Speaker 1: Yes, of course.
• 4:25
  Speaker 1: It is the one at the forefront of AI, and we're, of course, talking about NVIDIA.
• 4:29
  Speaker 1: They added a record $329 billion in value to its market cap yesterday, obliterating its own single-day record.
• 4:39
  Speaker 1: Now, Now that 13% rally came just a day after a 7% route wiped up about $193 billion from this, now $2.9 trillion, juggernaut.
• 4:49
  Speaker 1: Talk about volatility.
• 4:50
  Speaker 1: So why has it been so volatile lately?
• 4:52
  Speaker 1: It makes a Bitcoin or an altcoin look stable?
• 4:55
  Speaker 1: What's driving this insane volatility?
• 4:58
  Speaker 1: Well, let's dive into that a little bit further, but let's have a look at Meta first.
• 5:02
  Speaker 1: Meta, formerly known as Facebook, reported after the close and the results.
• 5:07
  Speaker 1: Well, let's just say Mark Zuckerberg's been reported to be doing a little jiggy dance around his bunker somewhere and is probably feeling rather happy.
• 5:16
  Speaker 1: Meta beat on both revenue and earnings.
• 5:19
  Speaker 1: Revenue came in at 39 billion, up 22%, beating its own estimates.
• 5:22
  Speaker 1: And Revenue came in at $39 billion up 22%, beating its own estimates.
• 5:24
  Speaker 1: And earnings per share came in at $5.16, almost 50 cents higher than expected.
• 5:30
  Speaker 1: But there is always a but, isn't there.
• 5:33
  Speaker 1: Despite these strong results, Meta's ad impressions actually slowed and missed estimates.
• 5:38
  Speaker 1: The number of ad impressions grew by only 10% below the 13% expected.
• 5:44
  Speaker 1: So how do you beat on revenue when people are seeing your ads less often?
• 5:48
  Speaker 1: Well, the average price per ad jumped 10% nearly double the expected increase.
• 5:54
  Speaker 1: So they just cranked up prices.
• 5:56
  Speaker 1: Now that raises kind of an intriguing question metas ai driven ad targeting paying off, or is this increase maybe not sustainable if we head into a recession, and that's kind of what people are worried about a little bit now?
• 6:10
  Speaker 1: Stock did jump significantly um after markets.
• 6:14
  Speaker 1: And this is where it ties back to the green elephant in the room nvidia.
• 6:20
  Speaker 1: The rally yesterday wasn't really just about its own performance.
• 6:23
  Speaker 1: It was also driven by Meta's earnings report.
• 6:26
  Speaker 1: Why?
• 6:27
  Speaker 1: Because Meta raised its four-year capital expenditure projections to a range of 37 to 40 billion and the day before, Microsoft said that they had capacity constraints in their cloud business.
• 6:39
  Speaker 1: Microsoft said that they had capacity constraints in their cloud business, which might also make you think well, they need to get their hands on more GPUs from NVIDIA.
• 6:47
  Speaker 1: So that's really the connection here between Meta, Microsoft and NVIDIA, and a significant spending of their CapEx capital expenditure will likely go towards buying NVIDIA chips.
• 6:59
  Speaker 1: So Meta's CEO Zuckerberg, however, recently made a rather candid admission.
• 7:05
  Speaker 1: He said I think that there is a meaningful chance that a lot of the companies are overbuilding now, and that you look back and you're like, oh, maybe we all spent some number of billions of dollars more than we had to.
• 7:19
  Speaker 1: And it makes you realize that billionaires look at billions like you and I look at a fiver.
• 7:25
  Speaker 1: Right, but it is a startling admission from one of tech's most prominent CEOs and it raises some serious questions about the sustainability of this AI-driven rally.
• 7:35
  Speaker 1: Or are we maybe in another meta bubble?
• 7:38
  Speaker 1: Because do you remember?
• 7:39
  Speaker 1: He renamed the company to Meta because the metaverse was going to be the next big thing, and that's, of course, what people are thinking.
• 7:47
  Speaker 1: Maybe they're not saying it, but they're thinking.
• 7:49
  Speaker 1: So let's recap the key important points here.
• 7:51
  Speaker 1: The Fed has signaled a potential rate cut in September, marking a shift towards a more balanced approach.
• 7:57
  Speaker 1: Tech earnings from Meta are pretty good, but there is a little bit of a concern of overspending here, and the story that we had last week, which is what tanked the market the worry about is this gobbling up of GPUs, really really a good use of big tech companies' money.
• 8:17
  Speaker 1: That concern is very much still there.
• 8:20
  Speaker 1: So the AI boom led by NVIDIA is going to keep causing some serious volatility in the market here, and I think we can make money out of this.
• 8:27
  Speaker 1: And if you want to do that while really really managing your risk and automating your risk management and everything else, and do that in a very, very lazy way, that way that I do it, come and join me on Tuesday and learn our three-step system.
• 8:40
  Speaker 1: This is intended for beginners, so don't miss that opportunity and head over to FelixFrancoiscom now to secure your spot while I am on the way to Korea, fora little trip to enjoy myself, and I wish you a beautiful day.
• 8:56
  Speaker 1: I'm not going to be trading today or tomorrow.
• 8:59
  Speaker 1: We bought a bunch of leaps on some of the things that I think are going to go up, and, other than that, we're going to see what happens at the end of this tech earning cycle and then we're going to get busy again and maybe we'll do another month like we did in July.
• 9:13
  Speaker 1: We're up 30% in just one month.
• 9:15
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• 9:17
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• 9:25
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• 9:27
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• 9:35
  Speaker 1: I wish you a beautiful day.
• 9:36
  Speaker 1: Thanks for tuning in.