Paul Hickey on the 'Lame Duck' Powell Fed and the AI Rally

Market Performance and AI Focus

• 💡 The current market feels lackluster, with technology and growth sectors leading, particularly semiconductors which are performing exceptionally well, while software continues to decline.
• 🚀 Despite the market being higher, the gains are primarily driven by mega-cap tech names (MAC 7), with fewer stocks trading above their 50-day moving average.
• ⚠️ The narrative around an AI bubble is dismissed, with the current phase focusing on addressing bottlenecks in the AI supply chain, evidenced by significant year-to-date gains in companies like SanDisk, Western Digital, and Micron.

The Modern Federal Reserve and Policy

• 🔑 The modern era of the Federal Reserve began in 1994 with Alan Greenspan, who introduced the practice of announcing decisions at the time of the meeting, moving away from the previous need to infer actions from market operations.
• 🗣️ While the blackout period for Fed speakers can be beneficial, the constant stream of contradictory statements from multiple Fed officials creates market noise and volatility.
• 📉 A consistent pattern observed is a late-day plunge in markets around Jerome Powell's Q&A sessions, suggesting a cautious or negative market reaction to his remarks.

Powell's Fed and Future Outlook

• ⏳ Jerome Powell is described as a 'lame duck' at this point, with limited significant policy moves expected in his remaining meetings, shifting focus to the next Fed chair and future policy direction.
• 📈 Despite short-term volatility, annualized market returns under Powell have been strong, but his recent actions have been perceived as a 'party pooper'.
• 🌐 The broader market is expected to trade higher, even with a less dovish Fed, as the market shows resilience and the AI trade is still expanding.

Sector-Specific Insights

• 💡 Intel is viewed positively due to improvements in its PC chip business (Panther Lake) and its foundry business, highlighting the critical role of semiconductors beyond Taiwan Semiconductor.
• 📉 The CFO of Nvidia buying shares after an earnings sell-off signals a potential end to that downturn.
• ✈️ Boeing is showing signs of recovery with new management and improving order flow, expected to turn cash flow positive this year, despite significant debt.
• ✈️ Global tourism has returned to pre-COVID levels, indicating healthy business travel and consumer spending in areas like restaurants and travel, even amidst broader consumer confidence concerns.