VIDEO: Our Roadmap for This Busy Week

In today’s Daily Rundown video, Chris Versace lays out what events the portfolio will be focusing on this week.

These include Apple’s AAPL WWDC keynote, May CPI, the Fed’s updated economic projections, and earnings from these three companies. 

Transcript

CHRIS VERSACE: Hey, folks. Chris Versace here, Monday, June 10th. Let's get this busy week rolling. We're going to kick it off with WWDC today. That's right. The event that everybody has been looking forward to when it comes to Apple and its questions about the company's ability to integrate AI and what that might mean for the AI on device upgrade cycle. It's going to kick off today, 1:00 PM Eastern, and we'll be digging into it, trying to understand exactly across its various platforms, IOS, MacOS, even tvOS, and iPadOS. How is it bringing AI to bear across these devices?

And probably the biggest question that we'll be trying to answer, although we may not get it just yet, is exactly what models out there will be able to run these next iterations of their various software platforms. And this is really kind of key because if you think about it, we're going to get the iPhone 16, probably announced in September, going on sale shortly thereafter. But if you've got an iPhone 12, 13, 14, 15, and you want to take advantage of these new capabilities on their devices, the question will be, will your device be supported?

We have seen Apple in the past go back and support a multiple number of years of devices, but sometimes not. And if we think about the AI and the capabilities, it's really going to come down to the question of what kind of power, horsepower, do you have inside your phone. In other words, what type of chips do you have? Will they be able to do it? Or will they may be able to do some, but not all of those capabilities that Apple will be rolling out?

So these are the things that we'll be looking at. And the answers will not only help us better understand what's ahead for Apple, who we do think will benefit from the overall AI on device upgrade cycle, but also for our positions in Qualcomm and Universal Display. So that's what we'll be watching for today. Now, as we move through the week, it's no surprise that Wednesday is going to be a big day as well.

We will get the May CPI report. And we'll also have the outcome of the Fed's latest policy decision. But also their latest economic projections will be updated. So let's just think about these things for Wednesday and what that could mean. If we take a look at the May CPI, the current expectations are for core CPI to dip slightly to 3.5%, down from 3.6% in April.

Have to say, not necessarily sure that we're going to see that dip. I'm saying this on the back of what we saw last week in the May PMI reports, but also the wage data that we saw both from ADP and in the May employment report on Friday. If we kind of see it stall, call it 3.6%, potentially slightly higher, the market's going to react to that in a negative way because it does mean the Fed is going to be higher for longer in the back half of the year.

Currently, the market's kind of, is it one, is it two rate cuts? And I think if we get a in-line with April CPI print or something higher, it's going to be another signal that we're likely to see even fewer rate cuts in the second half of 2024. You know that we're only looking for potentially one rate cut, but I do think we will need to see more good data in order for us to get there. And if we don't see that good data, could it mean that a rate cut slips into 2025? It certainly does. And that's what we'll be thinking when we go through the May CPI report.

Now, when it comes to the Fed policy meeting on Wednesday afternoon, they're not expected to do anything exiting this meeting, leaving monetary policy unchanged. But, we and the market will be listening for what they have to say about the second half of the year. Remember, they've been in a quiet period. So there haven't been any comments about this recent slate of data for the month of May. So we'll get their take on that.

But again, based on what we've seen in the various reports, it's hard to see them getting comfortable with the notion that inflation is back, moving lower towards their 2% target. And again, you know, I think they're going to look for more good data. The big question is going to be, is it six months worth of data? That's something they've communicated in the past. If that's the case, well, you know, five, six months says November.

So increases the prospect that maybe it's only one or two rate cuts. But again, it will be data dependent. To me, though, when the Fed updates their economic projections, that's going to be far more insightful because they will be giving updates about GDP, about the PCE, and other items in there. But remember, they're also giving it for 2024, 2025, 2026. So we'll be kind of parsing the projections, comparing them to what their latest ones were in March and seeing, OK, what has changed.

That means most likely the Fed might have to positively update their 2024 GDP expectation. They're probably going to have to boost their inflation expectation as well. That means we'll be watching closely for what they see for the Fed funds rate for 2024. So kind of parsing that math will reinforce the comments that we're likely to get from Fed Chair Powell on Wednesday's presser.

But here's the but. For 2025, back in March, the Fed only penciled in two rate cuts. So now I'm starting to think, OK, we're in June, 2024. What's the outlook for the total number of rate cuts between now and June 2025? And if the market had been looking for three or 4, which they are, the prospect is maybe we get two. That's a bigger deal for the market.

So I do think that while a lot of folks will be focusing in on the second half of 2024, we're also going to take a look at 2025 and what the prospects are for the first half. I think that's going to become increasingly important as we move through the second half of the year. So that's Monday, that's Wednesday.

Throughout the week, we are going to have a number of investor conferences, you know that we'll be listening to them, wanting to update our investment mosaic, our outlook, our landscape, you know, kind of looking for anecdotal comments about the industries that they serve as well as what's going on from a 360 view by taking comments from a company's competitors, customers and suppliers. And as I shared in Friday's roundup, we do have a couple of companies making presentations this week, including Coty. They had a great one last week. We'll be listening for even more this week, again, especially with an eye for the second half of 2024.

And as we parse these comments, not only from Coty but others, we'll be sharing those insights and thoughts in our alerts to you. But we also have a couple of companies that are reporting this week. There are no portfolio companies reporting, but we have Oracle, we have Adobe, and we have Broadcom. So with Oracle and Adobe, the questions will be what does enterprise spending look like and where are they spending? Is it more on AI, what about cloud, that sort of thing.

That will help reinforce our views when it comes to, say, a company like Microsoft and their cloud efforts, but also Google and Google cloud, Amazon, Amazon Web services. And then the other is Broadcom. Now this is another chip company. We heard great things from Taiwan Semiconductor last week with its May revenue report. Blockbuster numbers, went through it with you.

And here we're just looking for more confirmation, more follow through. So when Broadcom reports, we're going to be paying very close attention to what it says about its mobile business as well as data center. With mobile in particular, we want to see what's the outlook for the back half of the year? Do they see a strong seasonal ramp? That's what we're expecting in part because of one, that's the seasonal trend, but also two, it would give us another layer of confirmation for that AI on device upgrade cycle.

So that's kind of our roadmap for the week. But again, please be sure to check your emails, check your alerts. We want to make sure that you're getting our latest thoughts and any trades should we happen to make any for the portfolio. Thanks for watching.

At the time of publication, TheStreet Pro Portfolio was long AAPL.