Markets with Megan

Can the resurgence of growth and technology stocks sustain the bullish momentum in the market, or is it merely a fleeting illusion? This week on Markets with Megan, Megan dissects the stock market rebound we've witnessed over the past two weeks, driven by strong performances in tech and surprising earnings reports from retail giants like Walmart and Target. She challenges the narrative of a robust consumer sector by examining conflicting data from New York Fed surveys, including worrying trends in debt payments and unemployment expectations.

One of the key takeaways from this episode is the need for a nuanced understanding of market dynamics. While the recent rebound in tech and growth stocks is encouraging, Megan emphasizes that investors should not take it at face value. The episode encourages listeners to look beyond headline numbers and consider the broader economic context. For instance, while retail earnings have been strong, underlying consumer sentiment and spending patterns suggest a more cautious outlook.

We’ll also look ahead at key factors that could sway the market trajectory, such as Nvidia's upcoming earnings report and Jerome Powell’s anticipated speech at the Jackson Hole Symposium. As we anticipate crucial employment data for August, I’ll discuss what the mixed signals from the market and the Fed's potential rate hikes or cuts might mean for investors. Tune in for a nuanced analysis of the current market landscape and discover what lies beneath the surface of this recent rally. Don't forget to subscribe, hit that alarm bell, and explore more of our insights at Markets with Megan dot FM.

It's been an impressive comeback. Guys, this is Megan Hornman and you're listening to Markets with Megan. Thanks for being patient. I was out last week so I know there's a lot that's been going on, but I wanted to address today why we've been seeing the big rebound in stocks over the past two weeks. Remember it was just August 5th that we had seen a pretty big pullback in the market and we have rebounded almost all the way back.

There's a couple of reasons driving this market up. First of all, it is highly concentrated back into that growth and technology space, so we're seeing that basically drive this market higher. Secondly, we've gotten some earnings, some of the retailer earnings, but specifically those discount retailers your Walmart, your Target. These came in a little bit better than expected, and so there's this optimism around the consumer. This coincided with a better than expected retail sales report and all of a sudden, everybody thinks the consumer is in fantastic shape. Let's just step back there for a sec. Let's be careful in saying that the consumer is in fantastic shape and it's going to help lead this soft landing in the economy, because consumers right now feel like we're in a recession, inflation in the areas where it's most important and most needed to spend money. These are still running much higher than wages are, and when you look at some of the recent New York Fed surveys, these don't show a pretty picture for the consumer. You've got the most amount of people that have credit card balances that think they're going to miss a debt payment. This is the most amount of people in this survey that we've seen since April of 2020. You also have the most amount of people who think they're going to be unemployed soon the highest level since 2014. This doesn't really make sense. A lot with that retail sales report. This doesn't really make sense. A lot with that retail sales report. Also, keep in mind that some of the retailers Amazon Prime Day July 15th, that it was followed by Best Buy, target, walmart also putting big sales in July. This drove consumers to maybe pull forward some of that back-to-school spending into July as opposed to August. We'll see if we get that back in August. The last thing is the optimism now because the inflation is coming down towards the Fed's target. The employment market is starting to show signs of cracking that.

The Fed will come in with aggressive rate hikes for the rest of this year. The market's pricing in the chance we might see 50 basis points in September. We think that's way too aggressive, but the market's also pricing in the chance we might see 50 basis points in September. We think that's way too aggressive, but the market's also pricing in that they'll follow with additional rate cuts in their next two meetings for the rest of this year. Again, way too early to bank on this, but the market surely is. So we're seeing valuations back to where they were before we had that pullback in early August.

We're seeing the drivers of this market back to being those same tech names as well. This just isn't a market that we think is necessarily steady. We'll get Nvidia earnings next week that can make or break this tech rebound, and then we'll get the Fed Reserve Chairman, jerome Powell. He will come out on Friday in the annual Jackson Hole Symposium, which has in the past, led to some volatility in the markets. So there's a lot to look forward to here that can disrupt this rally or fuel this rally.

The other big report that we'll look at before the next Fed meeting will be the employment report for the month of August, and we'll get that in the first week of September. So we had a lot more stuff to get back to you with. We'll be back with the minutes from the last FOMC meeting to see if they gave us any more indication on what the Fed's path will be. Thank you very much, and if you like this, please don't forget to like this, subscribe, hit that alarm bell and if you'd like to hear additional podcasts, you can find the rest of our podcasts at marketswithmegan. fm. Thank you so much.