Good morning investors! Crypto continues to rise as bonds fall and stocks gather momentum.
Today we cover:
What to expect this week
Big earnings coming
What to do if Fed chairman is gone
Sponsor: They Called 93% AI Gain
March alerts: BTC +80%, ETH +48%, AI +93% - Second wave starting - $99 ends Thursday
Should Trump have the power to fire Powell?
📊 Economy and News
What to expect this week
Here’s everything you need to keep an eye on:
Monday, July 21
Data: Leading economic indicators (June)
Earnings: Verizon, NXP Semiconductors, Roper Technologies, Domino’s Pizza
Tuesday, July 22
Events: Fed Chair Powell and Gov. Bowman speak at a banking conference
Earnings: Coca-Cola, General Motors, SAP, Philip Morris, Texas Instruments, RTX Corp., Intuitive Surgical, Lockheed Martin, Sherwin-Williams, Capital One, Northrop Grumman
Wednesday, July 23
Data: Existing home sales (June)
Earnings: Tesla, Alphabet, IBM, T-Mobile US, ServiceNow, AT&T, Thermo Fisher Scientific, NextEra Energy, Boston Scientific, GE Vernova
Thursday, July 24
Data: New home sales (June), initial jobless claims (week ending July 19), S&P Flash US PMI (July)
Earnings: Intel, Honeywell International, Union Pacific, Blackstone
Friday, July 25
Data: Durable goods orders (June)
Earnings: HCA Healthcare, Aon, Charter Communications, Phillips 66, Booz Allen Hamilton
Global hits:
Japan’s markets brace for election impact on JGBs, yen.
US to release over $1 billion after-school funding that it withheld.
US single-family homebuilding hits 11-month low; building permits slump.
Bonds not bonding: Bonds are experiencing their worst decade, with 10- and 30-year Treasury returns at historic lows, worsened by inflation.
Long-term Treasurys, like the iShares 20+ Year Treasury Bond ETF, have dropped over 40% since 2022. However, higher starting yields now offer better future returns, with a 0.95% correlation between starting yield and five- or ten-year returns.
Short-term bonds provide stability, while intermediate-to-long-term bonds suit investors seeking to lock in yields. Analysts advise diversification and thoughtful allocation to navigate risks like inflation and rate changes.
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📈 Stocks
S&P 500 6,296.79 (-0.0090%)
DJIA 44,342.19 (-0.32%)
NASDAQ 20,895.66 (+0.048%)
BRENT CRUDE 69.37 (0.01%)
* Prices as of Jul 20th 3rd, 12:20 AM UTC
Big teach earning time
Tech stocks are once again propelling the market to record highs, with the S&P 500 hitting a new milestone driven by strong performances from the Magnificent Seven. Alphabet and Tesla kick off the megacap earnings season this week, with investors anticipating robust results amid the artificial intelligence boom and solid economic data.
Market Performance: The S&P 500 and Nasdaq Composite are on track for weekly gains, largely due to tech exposure, while the Dow Jones Industrial Average is slightly down. Nvidia, Tesla, Alphabet, and Amazon have seen weekly gains, with Nvidia alone up over 4% after crossing a $4 trillion milestone.
Earnings Expectations: The Magnificent Seven are projected to drive nearly half of the S&P 500’s expected 5.6% earnings growth for Q2, with the group posting over 14% growth compared to 3.4% for the remaining 493 companies, per FactSet’s John Butters.
Analyst Confidence: Strong forecasts for Alphabet could further lift market sentiment, with analysts expecting the Google parent to outperform.
Early Earnings Results: Of the 60 S&P 500 companies reporting Q2 results so far, 86% have beaten expectations, with stocks rising 2.1% on average post-earnings, above the five-year average of 1%, according to FactSet.
There is uncertainty regarding tariffs, potentially rising to 15-20% in EU trade talks, with a 30% tariff threatened by August 1 if no deal is reached. However, analysts seem hopeful.
Good to know: Nvidia CEO Jensen Huang sold 75,000 shares for ~$12.94M, per an SEC filing, as part of a March plan to sell up to 6M shares. Also, Berkshire Hathaway continues to underperform after Buffett’s exit news, now trailing the S&P 500.
💵 Personal Finance
Strategic Trades Amid Potential Fed Chair Change
The S&P 500 continues its strong performance, achieving a record close on Thursday and heading for a weekly gain, with Bank of America clients investing $4.8 billion into equities last week.
Amid this bullish backdrop, speculation surrounds President Donald Trump’s public pressure on Federal Reserve Chairman Jerome Powell, including reports of a drafted letter for Powell’s dismissal, though Trump later denied immediate plans.
This tension, highlighted by Trump’s Truth Social post urging rate cuts, echoes historical presidential pressure on Fed chairs, such as George H.W. Bush’s criticism of Alan Greenspan.
Bank of America strategist Michael Hartnett notes Trump’s push for lower rates stems from constrained fiscal options, with $7 trillion in government spending, including $4 trillion in mandatory spending, $1 trillion in discretionary spending, and $1 trillion in defense, limiting policy flexibility.
Recommended Trades
Should Powell be removed and the Fed cut rates without a recession, Hartnett suggests the following trades to navigate the market implications:
Short US Dollar: Anticipate dollar debasement as monetary policy eases.
Long Gold and Crypto: Position for anarchy hedges amid potential policy uncertainty.
Short 30-Year Treasury: Expect Fed cuts during economic growth, not a downturn.
Long US Tech and EAFE/EM Value: Use a barbell strategy to hedge against market bubbles while capturing growth.
These strategies aim to capitalize on market dynamics while managing risks from a potential Fed leadership shakeup.
Here’s an interesting video on the topic:
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👩🏽⚖️ Legal Stuff
Nothing in this newsletter is financial advice. Always do your own research and think for yourself.