Powell cracks open the door to a September cut… where Luke Lango says we are in the AI cycle… what do Walmart’s earnings tell us about the U.S. consumer?… three charts to help inform your trades
That creaking noise you heard this morning around 10:02 a.m. Eastern time was Federal Reserve Chairman Jerome Powell opening the door to a September rate cut in his speech at the Fed’s annual Jackson Hole symposium.
In our Tuesday’s Digest, we wrote:
Given that there won’t be an explicit pre-commit to a rate cut, we’ll be listening for language indicating that he’s skewing in one direction when he discusses the balance of risks.
Right on cue, Powell said:
With policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance.
He went on to say that the “downside risks to employment are rising.”
Translation: rate cut.
In Tuesday’s Digest, we also wrote:
On inflation, we’re listening for Powell’s characterization of inflation as ‘one time pass-through’ or persistent.
The more he references the perspective of Fed governors Waller and Bowman (that inflation is pass-through), the greater the likelihood of a September cut.
And here’s Powell from this morning:
It is a reasonable base case that the effects will be relatively short lived — a one-time shift in the price level.
Now, he did leave himself some wiggle room.
Still speaking on inflation, Powell noted:
We expect those effects [of tariffs on consumer prices] to accumulate over coming months, with high uncertainty about timing and amounts.
The question that matters for monetary policy is whether these price increases are likely to materially raise the risk of an ongoing inflation problem.
But that hedging was offset by an unexpected dovish curveball.
For that, let’s go to legendary investor Louis Navellier from this morning’s Growth Investor Flash Alert:
So, here’s the big surprise – the thing that got everybody all excited.
The Fed Chairman said, “Our policy rate is now 100 basis points closer to neutral than it was a year ago. And the stability of the unemployment rate and other labor market measures allows us to proceed carefully as we consider changes to our policy stance.”
So, not only are they going to cut, they’re probably going to cut four times because they’re 100 basis points above where they should be.
Overall, this is what bulls wanted to hear
In the futures market, traders are suddenly recalibrating their bets on rate cut timing.
The CME Group’s FedWatch Tool shows that the expectation for a quarter-point cut in September jumped to 91.1% from yesterday’s 75.0% reading.
In the bond market, the 10-year Treasury yield is down more than seven basis points, trading at 4.26% as I write.
And in stocks, all three major indexes are soaring. The Dow is hitting a new all-time high while the S&P and the Nasdaq notch 2% intraday gains. And the rate-sensitive Russell 2000 is up nearly 4%.
If you’d listened to our hypergrowth expert Luke Lango, you were expecting this bounce
Let’s go to Luke’s Daily Notes in Innovation Investor from earlier this week as the markets have been selling off:
The Nasdaq and S&P have both pulled back about 2-3% to their 20-day moving averages. Historically, in this AI bull market, that’s often been where corrections stop.
Sometimes we’ve slipped a bit deeper, down 4–5% to the 50-day or 100-day, but very rarely much worse. This doesn’t smell like one of those rare 10% “200-day” sell-offs.
We are “bottom enough” to start bottom-fishing.
That’s why we’re scanning our Buy Lists and hunting for strong tactical opportunities in AI stocks.
Now, despite Luke’s hunt for new “buys,” his recent bullishness comes with an asterisk:
If the Fed does cut in the next year — and we think they will — that will juice the AI Boom, unleash animal spirits, and fuel more spending, borrowing, and growth.
But pile tariffs and extra stimulus on top, and you could get late-2026 or early-2027 inflation that forces the Fed back into “Volcker mode.”
That would risk ending this AI Boom just as the dot-com boom ended in the early 2000s.
Luke wrote this before Powell’s speech this morning. But in the wake of the Fed Chair’s apparent openness to a September cut – and the market’s buoyant reaction – it rings true.
Luke believes we still have time to make money from this market before its eventual curtain call
Here he is to explain:
Eventually AI’s first boom will run into macro headwinds and morph into a bust. But not yet.
Over the next 12 months — and likely longer — the AI train will keep barreling down the tracks.
Better still, Luke believes we’re in a window when AI trading gains can snowball. It’s courtesy of where tech stocks are in their growth cycle: “Stage 2,” which is the accumulation phase of a market framework called “Stage Analysis.”
When high-momentum AI stocks rip higher in Stage 2, the gains can pile up quickly. Luke calls these moments “income events”:
AI is creating the biggest, fastest moves I’ve seen. I call them “AI Income Events” — and most investors miss them.
With these moves, you can pursue income far faster than simple buy-and-hold.
Many of my members are doing exactly that with a system my team built called Nexus, which helps us zero in on when a stock enters Phase 2—the growth phase.
Luke believes his Nexus system can help traders turn $5,000 into $30,000 in just six months. To explain more, he just put together a special free broadcast that goes into far more detail on Nexus – and on how it this strategy beats dividends, bonds, options, or any other “traditional” income strategy by 40X.
We’ll bring you more next week, but to get a jump on the details right now, just click here.
Yesterday, Walmart’s earnings provided insights into tariff inflation, consumer pricing, and the health of the U.S. consumer
The big box retailer blew past Wall Street’s quarterly sales estimates but missed on earnings – the first time that’s happened since May 2022. However, management raised its full-year earnings and sales outlook.
What conclusions can we draw from the interplay between tariff pricing, earnings, and consumer spending?
In short, tariffs are increasing consumer prices – at least somewhat… they’re impacting profits and consumer behavior – at least somewhat… and yet the U.S. consumer is still hanging in there – once again, at least somewhat.
Digging in, here’s The Wall Street Journal on higher prices and profits:
Of the products Walmart sells in the U.S., about a third come from overseas.
Because of tariffs, the company is raising prices on about 10% of the goods it imports, absorbing the rest of the elevated cost, Walmart Chief Financial Officer John David Rainey said in an interview…
Walmart executives said that as the retailer replenishes inventory at higher tariff levels, its costs will continue to tick up…
Rainey went on to say that “there are certainly areas where we have fully absorbed the impact of higher tariff costs.” He also added that “tariff-impacted costs are continuing to drift upwards.”
And on the earnings call, Walmart CEO Doug McMillon said:
We’ve continued to see our cost increase each week, which we expect will continue into the third and fourth quarters.
Overall, Walmart’s prices rose by an average of about 1% last quarter.
So, what does this mean for U.S. consumer?
At a high level, “resilient” continues to be the story.
Here’s Rainey:
Everyone is looking to see if there are any creaks in the armor or anything that’s happening with the consumer, but it’s been very consistent.
They continue to be very resilient.
However, when we dig deeper, we see the same through-line we’ve been covering for years: lower-income shoppers are slipping, and buying behavior is changing to reflect higher prices.
Here’s Business Insider:
Some shoppers seem to be feeling the squeeze and either skipping purchases or switching to lower-priced alternatives.
“Not surprisingly, we see more adjustments in middle- and lower-income households than we do with higher income households and discretionary categories,” McMillon said.
McMillion went on to say:
We see a corresponding moderation in units at the item level as customers switch to other items, or in some cases, categories.
So, what’s the takeaway from all this?
Cautious optimism.
Tariffs are raising costs – though only somewhat (so far) …
Those costs are pressuring profits and reshaping consumer choices – though only somewhat…
And the U.S. consumer, despite it all, is still out there opening their wallet – though, once again, only somewhat.
It’s this “somewhat” economy that we’re living in: resilient enough to remain optimistic, fragile enough to remain cautious.
We’ll keep tracking this.
(Disclaimer: I own WMT.)
Finally, three charts to take you into the weekend
First, in yesterday’s Digest, we pointed you toward power companies as a way to play AI.
AI requires enormous amounts of energy. Below is a visual on where energy costs are – and the rate at which they’re increasing.
For context, note how prices went nowhere for the decade between 2010 and 2020.
Then, the green circle shows the spike in average price from 2021/2022 due to the conflux of natural gas cost surges, supply-chain issues, extreme weather events, and our bout with inflation.
Meanwhile, the blue circle shows the spike that we can largely attribute to AI and its surging energy demands.
Here’s a reminder from Luke as to where we’re headed with energy demand:
According to new research from Bloomberg, AI data centers could consume 1,600 terawatt-hours of electricity by 2035 – about 4.4% of global electricity.
If they were a country, data centers would rank fourth in electricity use, just behind China, the U.S. and India.
In terms of growth, global data center power demand is expected to quadruple in the next 10 years.
All this means that big AI data center operators will keep buying more and more power from major power suppliers, which investment-wise means that AI power stocks should keep powering higher.
Next, here’s why you need to own plenty of gold, silver, and Bitcoin…
The chart below shows that social benefits in the U.S. now make up 46% of all U.S. government expenditures.
This is only going to get worse as our demographic inversion intensifies.
Though we could draw many conclusions from this chart, we’ll keep it simple…
The purchasing power of our dollars is headed down the toilet. Invest accordingly.
Finally, does this week’s selloff have you nervous?
Here’s something to give you the warm-and-fuzzies beyond Powell’s dovish words today.
Historically, periods of elevated monetary policy – where we find ourselves today – have been “buy” signals.
From Charles-Henry Monchau, CIO at Syz Group:
October 1987, the Iraq-Kuwait recession, September 11th, the 2003 “jobless recovery,” Covid lockdowns.
These are times to buy the US stock market, not sell it.
At 358, the MPU index is about as high as ever.
Bullish.
As I write Friday, with both the S&P and Nasdaq up about 2% and the Dow at an all-time-high, “bullish” does appear to be the takeaway.
We’ll keep you updated on all these stories here in the Digest.
Have a good evening,
Jeff Remsburg
