Weekly Commentary

August 30, 2024

With Nvidia earnings and the PCE inflation number out this week, the markets were slightly down, mostly due to profit-taking from the prior week's rally, but also due to a negative market reaction from Nvidia's better-than expected earnings release.? The PCE, the Fed's preferred inflation number, was in-line with the market expectations, and likely cemented a Fed rate cut for the FOMC's next meeting in mid-September.? Interest rates continue to trade between 3.80% and 4.00% this week, with the 10-year note settling around 3.88% on Friday.? All in all, it was a slow week, given the upcoming Labor Day?weekend in the US.

We continue to like defensive sectors in this market, and given the market's lack of enthusiasm from Nvidia's beat, tech / Mag seven stocks are likely to be facing a high bar in order to move another leg up in September.? Apple will hold its long-awaited product release event on September 9, but its new iPhone 16 must achieve a blockbuster sales growth for valuations to be sustained, in our opinion.? We therefore continue to like the sell into strength strategy especially for the tech sector.??

With the Fed moving to cut and inflation still above its 2% target, look for inflation-sensitive assets to outperform, including gold, silver (which has lagged gold), as well as dividend-paying stocks.? The DXY dollar index is also likely to weaken given the shrinking interest rate differential.? High yield also remains a top pick given the economic environment and lower rate scenario.??

On the campaign trail, all eyes will be on the debate, which is scheduled for September 10, and will be the first head-to-head between the two current candidates.? Harris has the momentum, but polls only give her a slight lead, and national polls at this time in the two previous cycles gave the Democratic candidates a greater lead than Harris currently enjoys.? She will have to continue upon her success, or hope Trump commits errors, or both, for her to get to where Biden was polling in 2020.? ??