Yahoo Finance

Dana, great to have you back here on Yahoo Finance with us. First, as we get all of these different readings over the course of this week, which one should take center stage for investors who are watching out for what is historically a weak month of trading?

Yeah, I think Well, certainly the jobs report is gonna be a, a singular focus, I think, really just from the standpoint that, you know, we had our our Fed share come out and more or less guarantee us a rate cut in September. And when you get that kind of dovishness, the market thinks, "Wow, maybe it's a 50 basis point, not a 25," right? So, I really, you know, what what the jobs report is gonna um, be meaningful in terms of, you know, the expectation it sets with the market. Quite honestly though, I think either way, I'm not expecting a 50 basis point cut. I think Powell needed to reassure, he felt that he needed to reassure everyone that the rate cuts are on the way. You know, there has been chatter that it's been It had taken too long to begin with. So, uh, you know, I think it was important, and he thought the signaling was important. I don't think that means we're getting a 50 basis point rate cut uh, regardless.

So are rate cuts and 25 basis points as it may be, and is expected, is that enough to offset what is typically the seasonality that we would see in September?

Yeah, it's a good point. And and you know that I mean, obviously no guarantees about anything, but we do tend to see that. You know, there's a big question, I think, investors are facing right now: are these rate cuts coming because it's just time, you know, we're high, uh, we've defeated inflation, unemployment is still low, and so it's time to avoid the the potential for a market correction or a recession, or is it coming because we kind of have already looking out and anticipating some weakness? And I think, you know, if you if you fall in the camp of the latter, where you think that there's some weakness coming, and that we have to get rate cuts going in order to avoid that weakness, then I think, you know, the 25 basis points may not cut it, just from the standpoint that it's already priced in at this point. It's been expected for quite some time now.

So with that in mind, I mean, we've been keeping close tabs on the tech sector, as historically, we've also seen that be one of the the biggest beneficiaries during rate cutting cycles. And so, is that, especially with the setup that we have right now, where it seems like more investors are apt to take profits where possible, and then broaden those investments out elsewhere, uh, is tech set to perform differently? And and if we do see some of those dollars being reinvested elsewhere, where does that broadening narrative start to really prevail?

Yeah, it's interesting what happened with Nvidia, right? Because I mean, it wasn't a bad report by any stretch of the imagination, but you just have these overwhelming expectations on tech right now. Of course, we are seeing the broadening out that you're speaking of, and uh, it's been a good thing, I think, for the market. So many discussions I have with advisor firms and, um, you know, just, uh, home offices who are looking at these indexes and this very top heavy concentrated view that you get when you're in a passive investment and kind of grappling with whether they should be actively managed, and, you know, kind of front run what the market is doing, create some breadth here, you know, even out a little bit uh, from a, you know, one over end perspective as opposed to a market cap weighted perspective. So, you know, my my overall on this is that from an investing perspective, I am definitely a proponent of kind of trying to uh, tilt a little bit towards these smaller areas, maybe more value areas of the market, but that's more of a long-term play, right? And I think that from a market perspective, there's no guarantee that you can expect You know, again, it falls in the camp of if we're going You know, if these rate cuts are coming, and we've avoided, uh, you know, the the worst, the headwinds, and and we really do stick this landing, that's great for small caps. Small caps are interest rate sensitive. They rely on capital markets more for funding. So that would be a great thing for them. If we're headed to a correction and a recession, small caps are gonna suffer, and typically, they will suffer in that kind of a period more than large caps. But if you wait it out, you you can benefit in the long run anyway.

Just lastly, while we have you here, Dana, and you mentioned Nvidia, and naturally, that takes us into the conversation of where AI the and the trading thesis around generative AI stands right now. Where do you think we are within that larger cycle here, as a lot of investors are waiting for real return on investment from the big capital expenditures that have been put forward by companies?

Yeah, it's so interesting to compare it, right? To the internet, the dot-com era, and, you know, all the expectations there. I mean, certainly, you know, the internet, dot-coms, this thesis was 100% correct, but there was a lot of fallout before we actually got there, right? And this is so often the case with new technologies that being right about the thesis and actually making money on that thesis are two very different things. It wouldn't surprise me at all, and, you know, I'd I'd say my base case for AI is probably that it looks something like that, that it that it takes some time for these types types of productivity improvements, efficiency improvements that we're expecting from AI to really penetrate the economy in a way that you see a productivity increase that actually translates to a better bottom line for companies that are receivers of this, not the Nvidias, the creators, but, you know, the users. And I I I I think that's going to take some time. I think it's going to be, um, chunky. You know, some companies are gonna be leaders, and other companies are gonna talk a lot about all these great things they're doing, and they're not really doing anything at all with AI. What they're doing is, you know, standard tech stuff. So, I I I think, you know, making money on this and the thesis, um, is probably a slower, longer burn than maybe the market is pricing at the moment.