VIDEO: Here's Where Our Focus Will Be This Week

In today’s Daily Rundown video, Chris Versace details the economic numbers and earnings reports in and out of the portfolio we’ll be focusing on this week, including what we’re watching for Applied Materials AMAT. 

He also discusses the fallout from President Biden dropping out of the 2024 presidential race and why two portfolio holdings should benefit. 

Transcript

CHRIS VERSACE: Hey, folks. Chris Versace, here it is Monday, July 22. And we've got another full week ahead of us, one that is incrementally more interesting given the developments over the weekend with President Biden withdrawing from the 2024 presidential election and endorsing VP Harris for the top spot.

Recently, as I'm sure you probably thought, the thinking was that candidate Trump had a pretty good probability of winning the election. But we'll have to see how these events shake things up or not over the coming days and weeks. Now, we're going to be mindful of all the bluster, all the rhetoric-- rhetoric, excuse me, realizing the true course of policy will hinge not only on who wins the presidency but the overall status of Congress after the election.

Now, as I shared with you in some comments this morning, when it comes to the portfolio, it's policy and the probability of it being passed that we'll focus on. Now, also, too, over the coming months, things could be a little more volatile for certain sectors, perhaps EVs and the energy sector, solar.

But one of the areas that we don't think we're going to see a lot of volatility is going to be on infrastructure spending. And we also think this is the case with the CHIPS Act. Why? Well, if Harris wins, that will be a continuation of the Biden policies. But if Trump wins, both fit with his Make America Great Again bent.

Now, we have a long way to go to election day, but it will be ticking lower and lower over the coming weeks. We will be having more policy conversations out of the candidates. We will have debates. So we will continue to revisit our thinking as fresh information becomes available. The real key is going to be assessing who is likely to win, what their policies are, and the odds of those policies getting passed. Again, this is going to be an evolving playing field, one that we'll continue to watch and share our thoughts with you.

One area, however, that we do expect to benefit, given the change in the Democratic presidential candidate, is digital advertising. I say this because up until now the public has been more familiar with President Biden than VP Harris and that means that the Democrat-- the Democratic Party and Harris' campaign is going to have to really make a concerted effort for the public to understand much more about Harris, her policies, and other aspects of it. And this means very simply that they are going to pour on the digital advertising as they look to compete against the Trump campaign. And make no mistake, the Trump campaign is going to answer like for like.

So from the portfolios perspective, when we look at this, we had been thinking that the uptick in presidential advertising and campaigning would benefit our shares of Trade Desk, as well as Google's advertising business and YouTube. Coming out of the weekend and the change, I think that is even more the case. We continue to both of those. And, remember, Google will be reporting after the market close on Tuesday.

And with that that brings us back to this week. It's going to be a little bit of a busy week here. We do have some relief in the sense that we have the Fed blackout. There will be no Fed speakers this week or early next week, at least until Fed Chair Powell takes the podium after the Fed concludes its next policy meeting on July 31.

However, we will have some very important economic data coming out this week. Moving through the week, the first set of key economic data that we'll want to pay attention to is the July flash PMI report. You know that we typically see really like this data report because of what it says about the speed for the manufacturing and services economy, employment, as well as inflation. And all that is going to be true yet again.

But when we think about the market's expectation for rate cuts, which now are hovering around-- at least according to the CME FedWatch tool-- potentially three rate cuts for this year, we are going to want to dig into this a little more in terms of what the July data is telling us on these various efforts. And here's why.

One of the factors that led the market to ratchet up from one to two to potentially three rate cuts was, yes, the continued move lower on inflation. But it was also the notion that the economy was really starting to slow.

Now, last week, the Atlanta Fed GDPNow's model actually moved back up, saying this may not be the slowing economy that many people were thinking for. But, remember, that's for the second quarter. So the question for us now is what does the data start to say about July and the start of the current quarter is on that slower slope. And, if so, does that support the market's thinking that more than one, maybe more than two rate cuts are likely? So we're going to want to pay close attention to that data when it comes out later this week.

And then after that, we have the June PCE price index. And this is going to be important because as we know, the PCE price index is the Fed's preferred metric when it comes to inflation. It's a little more well-rounded than the CPI. And that has shown really good progress, especially on the core front. We will want to see that continue. And if for some reason there's a wrinkle in that data and the July flash PMI report says that the economy is a little stronger than we thought, we might see, the market have to start reconsidering those three rate cuts, maybe it's two. So we'll see.

As you know, generally speaking, our thinking has been that the market, at least thus far, is a little out over its skis when it comes to the topic of rate cuts. But, as we've also said, we will continue to evaluate the landscape and the potential for incrementally more rate cuts based on fresh data. We will start to get some of that this week. We'll get a lot more of that next week and the week after.

Now, let's turn to earnings because we do want to understand what reports are coming at us. We do have a number coming at us from the portfolio. I already mentioned Google, but we are also going to have on Tuesday Lockheed Martin. Wednesday brings US United Rentals, ServiceNow, and Waste Management. We will be updating our thinking for each of those-- refreshing, not a overall recasting of our investment thesis, but certainly refreshing them. It also means that as we understand the prospects for their earnings in the second half of the year, we will be revisiting our price targets as needed.

But there are some other reports out there. Case in point, today, Monday, will get earnings after the close from SAP and NXP Semiconductor. With SAP, what are they seeing about cloud and AI adoption? Are they starting to see and build the case for monetization of these services? That would be a very big positive for the AI story.

With NXP Semiconductor, while it's largely automotive, what is it seeing for its mobile business that will be a precursor to what we hear from Qualcomm, Skyworks, RF-- Qorvo, sorry, as well as Apple and Samsung. So we'll want to pay close attention to that. That will be helpful, obviously, for our shares of Qualcomm but also Universal Display as well.

On Tuesday, we also have Tesla. And because of its weight in the S&P 500 and a cult stock, it could have some impact on the overall market. So we'll at least want to pay attention to that rather closely.

Wednesday, two other reports that we want to pay attention to. One will be AT&T, simply because we want to understand how it's talking about its recent cyber attack and what it says about efforts to, not only shore up its cybersecurity efforts, but how it's going to win back consumers after that, what we can only call, significant hack.

The same day, we also get quarterly results from KLA Corp, or KLAC-- more insight into the semiconductor capital equipment. As you know, we are also going to be waiting for what Lam Research has to say. And the reason we're evolving these competing comments is given what we heard from ASML last week and the negative impact it had on our shares of Applied Materials.

What we're looking for is support in Applied Materials shares, as well as comments about the 2025 market from KLAC, as well as Lam Research. Our thinking is that semiconductor capital equipment industry capacity is tightening. That bodes well for incremental capital spending. But, also, these companies will continue to benefit from the robust demand in AI chips, the rebounding PC market, the rebounding smartphone market, and, of course, finally, seeing the flow of funds hitting their business for the CHIPS Act.

And then, on Thursday, we've also got Northrop Grumman, H&E Equipment, [INAUDIBLE], Juniper, and Lazard. For that, we will want to pay attention just from incremental insight for our shares of Lockheed Martin, United Reynolds, Vulcan Materials, Juniper, which will bring comments on digital infrastructure. So we'll pay attention to that for Marvell and then Lazard, just another perspective on the outlook for investment banking. We'll be paying close attention to that for our shares of Morgan Stanley and Bank of America.

So, as you can see, the week is going to become increasingly busy. So with that, we would please suggest that you pay attention to your emails, your alerts. We want to make sure you're getting our latest thinking. And any moves that we make with the portfolio, we want you right there with us. Thanks for watching.

At the time of publication, TheStreet pro Portfolio was long AMAT, TTD and GOOGL.