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00:00All right, Mr. Jay Woods, CMT Capital Markets. How are you doing this morning?
00:05I'm doing great. Thanks for having me back.
00:08Of course, we love having you on here, Jay. A lot has happened since last time we spoke.
00:14Of course, you go back a couple of Mondays ago, it was our version of the Black Monday. It was
00:20the Japanese yen carry trade that lasted all of about 24 hours. Walk me through what your thought
00:26process was while this was going on, and where do you think we sit now?
00:30Yeah, we're kind of back to where we were before that even happened. When I see the VIX spike
00:36above 60, yeah, that was crazy. Put that in perspective. It was the third highest reading
00:44we've ever had in the VIX, and then it was bigger than 9.11. Are we serious right now?
00:50I know we shut down for four days, maybe that calmed the VIX down a little bit,
00:54but my God, there is panic, there is fear in this market. People are jittery. To think that
01:00we've gotten you all clear with this nice rally, which, hey, I think we overreacted clearly on
01:06August 5th, but we got a lot of things we're going to focus on and see some headlines that
01:11may come up. We'll talk Jackson Hole in a second. We'll talk about that September 18th meeting,
01:17we can talk election, but I don't think this is an all clear. You may hear a lot of technicians
01:22come on and say double top in the next few sessions here with you guys. I don't look at
01:29it as a double top. I look at it as consolidation, and we'll hit some resistance levels. Maybe we
01:34will make a new all-time high. If Powell says something we don't expect, that would shock me,
01:40to be honest with you. But yeah, that August 5th moment, there were a lot of factors in play,
01:45geopolitical concerns over that weekend, Harris getting even with Trump in the polls, and then
01:50we had that unemployment number on the Friday beforehand that kind of basically affirmed that
01:55the Fed screwed up at their last meeting. They should have cut rates when they didn't. The
01:59minutes basically told us that yesterday. It was a point flip. They could have cut rates last time,
02:04they didn't. Now we know they're going to cut. The question is, when he telegraphs this tomorrow,
02:11is it going to be 50? Because I think the market's anticipating more than a quarter point cut as
02:17early as September, and I don't think they're going to get it. What are the odds again,
02:22AB? Bring up that chart while I'll ask Jay just to further on that. It's like a third,
02:26two thirds. A third for 50 as of yesterday. I mean, that thing changes like the wind.
02:34If he comes in dovish and starts hitting about 50, we could get a rip-roaring rally on that. So maybe
02:39that is what we're looking at for tomorrow, is really the commentary. Are we getting 25 or 50?
02:45Because here, AB just brought up the current odds. It's 28.5% for a 50, 71.5% for a 25. It's
02:52zero for nothing. So we've already completely baked in at least a quarter of a point, and
02:57there's still 28.5% of people who are holding out for a half. So let's just take away from the
03:05recent rally. Are we now like green light for stocks overall, like going into next year,
03:12we're really going into an interest rate environment that's going to be more accommodating
03:15for stocks? Well, long-term, yeah, I think we are. Take off the short-term rally, yeah.
03:23Yeah, exactly. You take off the short-term rally, I think everything technically has played out the
03:29way it should in an election year cycle, in a seasonal cycle. August is up slightly right now.
03:35We haven't had an up August-September stretch in over three years. We'll see if we can break
03:39that string. I don't think we will by the end of September. Most markets bottom in October,
03:44and then you talked about the VIX. I went back and I looked at 2016, 2020. 2020 was COVID,
03:49so it's a little skewed. But the VIX had spikes in both those years early on, and then September,
03:57and as we got close to the election, we had another spike. So I think these headlines are
04:00going to cause a little angst, and I don't think it's all clear right now. But once that election
04:04is settled, go back to 2016. Controversial election. Trump was involved. 2020, controversial
04:10election. Trump was involved. Didn't matter what the outcome was, we rallied from Election Day
04:16into the end of the year, and I think the setup is there. And then you look at the earnings growth
04:20story. I mean, when Walmart and Target are doing what they're doing right now, the consumer is
04:25doing okay. It's not the ideal leadership. What we're seeing is a pause in those MAC7 names,
04:32and I know next week, I have a feeling you're going to talk about NVIDIA a little bit.
04:36I don't know why I have this premonition. Yeah, but let's see what they do. Last August,
04:42NVIDIA was the tell-to-me that the market was changing. It had its best quarter ever. It gapped,
04:49and watch Friday in the market, just like I watched NVIDIA on that August of 2023. It gapped on the
04:56open, and the gap filled. It closed up a dime, and then it went down from, it was trading at $400,
05:03so it would be $40 now, from $480 down to $400. It chopped sideways, worked its way up, and broke
05:09out in January. We're seeing consolidation in those MAC7 names right now. Will this be enough
05:15to break it out? We saw that happen in Walmart. I don't think it's going to happen in NVIDIA next
05:20week. I hope I'm wrong, but yeah, it's an interesting time where the leadership staples
05:27utilities. The equal weighted S&P 500 is outperforming the Magnificent 7 for the first
05:33time in a long time, so this is healthy, but it's not sexy. VIX, you get more clicks and sexy sells
05:42too. We may not get sexy until the end of the year, so. I've never heard of that. VIX,
05:49the more you've never heard that, that's as old as...
05:54Jay, Philip, you mentioned here in the chat that we are coming into an election,
06:00and the Fed is supposed to be just focused on its dual mandate, and maybe me and Phil are
06:09the only ones thinking this, that no rate cut at all. There's zero chance of no cut. He's going
06:17to cut, and he should have cut last time, and yes, people will say you can't do this during an
06:22election year, because whatever happens, one side of the aisle is going to condemn him for not
06:28cutting. The other side is going to condemn him for cutting. You're making this party look good
06:33right now because the market's getting that tailwind. Well, guess what? It's already baked in,
06:38and I hope I'm wrong, but I think we've already bought the rumor, and what's the other side of
06:44that old adage? Sell the news, and I have a feeling we're going to get a sell the news event at first,
06:51but I think you look at the data. When we cut rates in a non-recessionary time, and this is not
07:00a recession right now, I'm sorry, but it is not, the market will rally three months later,
07:06six months later, 12 months later, and what is the one sector that does really well? Small caps,
07:12and I've been early to this party. I know I've touted small caps, and I'm getting my head kicked
07:17in by a few people. It deservedly so, but small caps have yet to make that all-time high. They
07:23got a little way over, I think 10%, but when they move, as we saw in the beginning of July,
07:29when we had the rotation, they move quickly. It happened October 27th to December 23rd last year.
07:35They were up 27%, so the setup is there for small caps to finally catapult, and people just rush
07:43into that trade, and I still think there's a leg there, and historically, when you do start to cut
07:48rates, and he's not going to cut 50. I'd be shocked, especially in an election year. Now,
07:55you want to add fuel to this political narrative? Cut 50 points. People on the right-hand side of
08:02the aisle are going to be like, what are you doing? You mentioned it. You mentioned he was
08:07late. He was late when we started raising rates. He is late now because we should have had a
08:12quarter-point cut, and I go back to July of 23. That last quarter-point hike was so unnecessary.
08:19He could have eased off on that and kept it at 5% and see where we go, but the Mr. Data-dependent
08:27Jerome Powell, he is probably just going to test the waters with 25, see where we go,
08:32and I would be shocked if we got maybe one more at the end of the year. I'm not in this camp that
08:40they're going to cut, cut, cut. I don't see the need for that right now. 25, and then maybe another
08:4525, and done, because some people are calling for like 50, 50, 50. I've seen, like, I'm like,
08:51are you crazy? There's no way that's happening. These are the same people that called for six
08:56in the beginning of the year, and that's when the rustle took off. Emergency rate cuts.
09:02That was the other thing. Now, emergency rate cuts because we had one bad day. That lasted all
09:09of 24 hours, as you mentioned, and cooler heads have prevailed. Thank goodness the Fed did not
09:16jump to do something, because if you have an emergency cut, when did we have an emergency cut?
09:20COVID. Guess what? That was an emergency at the time. If you remember, people were dying. We had
09:26no idea what was going on. The Japanese yen carry trade? No, I'm sorry. I mean, I'm not too astute
09:34in exactly what could be the ramifications of that. I think there could be another, you know,
09:40shoe to drop there that didn't resolve itself in one day. I don't think so, but we may see more
09:44headlines there, and the market is still jittery, going back to my original point, but let's look
09:50at some charts. I see you got some fun charts up there. We can talk economic policy. So speaking
09:56of the chart, Jay, I mean, it looks like as we're running up on this Fed decision on the 18th of
10:02September, the S&P 500, the overall market, we could be at this inflection point where we're
10:07kind of creeping back toward all-time highs. It could, you know, some people with a bearish
10:11outlook might say it looks a little double-toppy. Other people might say we're prone to breakout.
10:16Which side of the aisle would you find yourself on? In the near term, I'm in the camp. If you
10:23were smart enough, which most of your audience probably was, to buy stock on that dip on August
10:295th, you got to lighten up a little bit because we are at an inflection point. I think we could
10:36have a near-term double-top and a chop, and we go sideways. We could have a 5% correction. That
10:41brings us down to, what, 5,200. That's not out of the realm of possibility. We got there in three
10:46days before. So I don't expect us to explode upward immediately on that initial rate cut on the 18th.
10:54I don't think he's going to say anything at Jackson Hole tomorrow that's going to cause the
10:59market to explode. Watch how we close. If we do get a pop, see if we can hold it into a Friday close
11:06coming into the end of August the following week. I'd be surprised, but we'll see.
11:14The one stock, and I hate to put it on one stock, but NVIDIA. Let's see if that can get
11:18back to that 140 level as we go into earnings and eclipse it and hold it. I don't see it happening,
11:28but it very well could. But if it does, then, oh my God, the leadership is there, and it will
11:36take a lot of boats with it, and the boats that are important because they're the largest market
11:41cap stocks. But right now, no, I think we're near-term. Let's take a little off the table,
11:48see how this shakes out. And if I miss the initial move out on a breakout in the S&P 500,
11:53I'm not afraid to chase with stops in place because you'll have that risk reward set up
11:58where if it's a failed breakout, you want to get out quickly.