What is your view on the tech pack? The global IT outage a week ago disabled banks, airlines, hospitals, and more. Is that also an overhang on investor sentiment right now besides what we are seeing by way of earnings from Alphabet and Tesla?
Peter Cardillo: You have to go back a little bit and look at what happened in the market. There was artificial intelligence exploding on the upside and for good reasons – a new technology that opens up new paths in terms of technology. There were the big tech groups, the Magnificent 7, which have been the leaders for many years now. So, the market got a little bit ahead of itself.
Google’s earnings beat expectations but was a little bit soft on other components. So the market needed an excuse and it found a perfect excuse to weigh in on this over-speculation that we saw in the marketplace. But if you looked at the fundamentals of the stock market, especially here we are moving into the full season of earnings and if you look at the overall picture, there has been just a handful of stocks that disappointed. Every other company and sector has beaten expectations.
When we talk about the tech stocks back home as well, we have an outlook when we talk about US growth vis-à-vis inflation, vis-à-vis interest rate cut expectations. So, on those counts, how should we be looking at the US markets right now when you consider all these factors at play because we have the GDP numbers, we are talking about some kind of a decline when it comes to consumption patterns, but is that going to be enough to see a rate cut in September perhaps?
Peter Cardillo: Yes, there is no doubt in my mind that we do not see any rate cuts next week. There had been some talk of that in the marketplace, but we did get some nice GDP numbers today. The economy grew at 2.8% and it was the consumer that carried the stronger growth. And why did that happen? Well, you had lower inflation. The PCE in the second quarter averaged around 2.6%. So that indicates that the consumer is continuing to spend if inflation continues to move in the right direction. So, we are looking at a rate cut in September, one in December.
But I also think there is a very good possibility that with the weakness coming out of the Chinese economy, which will eventually hurt the global economy, we might get a surprise move by the Fed in September by half a percent rather than a quarter of a percent. And I say that because China has been cutting rates almost daily for the past week and nothing seems to work.