What Happened Last Week
- Nvidia Earnings: Nvidia reported strong earnings, but its forward guidance fell short of expectations, signaling slower growth ahead.
- Equity Rotation: Investors continued to favor cyclicals over the Mag-7 and AI theme.
- Fed Fight: A judge heard DOJ and Fed arguments over Governor Lisa Cook’s firing but issued no ruling.
What We’re Watching This Week
- AI Earnings: Salesforce and Broadcom wrap up the last of Q2 earnings, and they will be another test for the AI theme.
- Labor Data: Friday’s labor data will be in focus as the debate around monetary policy swirls.
- Fed Status: The fight to oust Fed Governor Cook continues in the courts, as Stephen Miran’s confirmation hearing is set for Thursday.
Investment Management Team’s Views
Nvidia’s earnings came and went without much fanfare. One of the market’s most watched names reported strong earnings and improving margins, but the stock sold off modestly on a slowdown in its growth rate. Other reports from AI-adjacent firms also weighed on tech sentiment later in the week. In addition to the weaker reports, positioning appears to have played a role, as investors seem overexposed to tech and have begun to reach for cyclicals to capitalize on a potential September rate cut. Political strife in France and some U.K. fiscal concerns have contributed to weakness in European fixed income and equity markets. Meanwhile, 50% tariffs on India and the expiration of the de minimis trade exemption rule have brought trade back into focus.
The President’s attempt to fire Fed Governor Lisa Cook has intensified the fight over Fed independence, while a court struck down most of his tariffs as illegal—a ruling the White House plans to appeal; it may also seek to justify the tariffs through other legal means. A weaker dollar and a steepening yield curve appear to be the path of least resistance as markets assess the slow but persistent shifts in institutional structure. This Thursday, the Senate will evaluate the nomination of Stephen Miran, Trump’s replacement for Fed Governor Adriana Kugler, who stepped down last month. On monetary policy, Christopher Waller, the Fed’s loudest dove, has said that any tariff-related inflation would be transitory and called for rate cuts. Friday’s labor market data will be the next key report for the Fed’s current rate cut battle, although absent a major increase in payrolls, the Fed looks set to cut in September.
Regarding corporate earnings, the week ahead looks slow. Broadcom and Salesforce are the last two major reports of the season and will be another test for the AI theme. Lululemon and American Eagle, the market’s newest meme stock, will offer updates on consumption, tariff impact, and general market appetite for risk. The end of corporate earnings season, the Fed blackout period, and seasonal weakness will likely make for a choppy month as markets await clarity on trade, Fed policy, and the Fed’s composition.