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This Week on Wall Street
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| This week hands markets two policy deadlines and one earnings report. The major averages come in off a losing week driven by the bond market, but the questions that matter now are ahead. Nvidia reports Wednesday after the close. Consensus looks for revenue near double last year's level, yet the shares have fallen after each of the company's recent reports even as results beat, so the reaction may say more about expectations than about the quarter. Washington supplies the other two. Treasury Secretary Scott Bessent details the administration's Iran sanctions plan this afternoon, and the scope is what matters for crude: whether the measures reach Iranian oil buyers, shipping and financial intermediaries, or stay narrower. Tariffs on Canadian cars, trucks, auto parts and steel are set to rise to 50% on January 1, with Ottawa's dollar-for-dollar response beginning September 8. Neither timeline resolves this week, but both now sit in the outlook for goods prices. |
| The week's centerpiece is Jackson Hole. Every August the Kansas City Fed brings central bankers, academics and finance officials from dozens of countries to a lodge in Wyoming for a three-day symposium on longer-run policy questions, and the chair's keynote has a history of signaling shifts before the Fed formally makes them. This year's runs Thursday through Saturday, with Kevin Warsh speaking Friday morning in his first appearance as chair. The stakes are higher than the official theme of financial innovation and payments would suggest, because the questions in front of this Fed are more immediate than the ones the symposium usually takes up. Hiring has stalled while inflation has stayed above target, a combination that pulls policy in opposite directions, and the committee is divided enough that some members have pushed to raise rates rather than cut them. Warsh inherited that split in May and has said very little about the policy path since, which leaves markets without much to go on heading into the September meeting. Wednesday's PCE report, the Fed's preferred inflation gauge, is the last major reading before he speaks, with consensus looking for core prices to rise about 0.2% in July. Friday is the first real look at how he frames the tradeoff. |
| Underneath the calendar sits a slower question working its way into prices. Federal debt crossed $40 trillion this month, and the path from here matters more than the milestone. The deficit is running near 6% of GDP, and the Congressional Budget Office projects federal debt climbing from roughly 101% of GDP today to 120% over the next decade. That trajectory means a steadily larger volume of bonds to sell, and somebody has to buy them. When supply grows and the inflation path is unsettled, investors ask a higher yield to take the other side, which is why long-dated Treasuries have pushed to levels last seen before the financial crisis while short rates have barely moved, a pattern also visible in the United Kingdom, France, Germany and Japan. The Treasury has said it will at least double its buybacks of longer-dated debt over the next two months, though buybacks change who holds the paper, not how much of it has to be issued. For households the transmission runs through the 10-year yield, the reference rate for mortgages, auto loans and business credit. Interest on the debt has already cost the government roughly $1.2 trillion this year, and that bill grows with every move higher in long-term rates. |
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Every Person's Share of the Federal Debt
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| Dividing total federal debt by the population gives each person's share of the bill, which now works out to about $116,800 against a Census Bureau count of roughly 343 million people. Adjusted for inflation, that is a little more than three times the 2001 figure. The financial crisis and the pandemic account for much of the climb, when borrowing rose far faster than the population did. |
| Source: U.S. Census Bureau and U.S. Treasury, via USAFacts |
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Economic Releases This Week
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| Monday | None |
| Tuesday | Consumer Confidence, New Home Sales |
| Wednesday | PCE Price Index, Personal Income,
Consumer Spending, GDP (Q2 Second Estimate) |
| Thursday | Initial Jobless Claims |
| Friday | Consumer Sentiment (Final) |
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Stories to Start the Week
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What is Newton?
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Our Newton model determines the highest probability of future price direction using advanced algorithmic and high-order mathematical techniques on the current market environment. It scores securities over multiple time periods on a 0–20 scale (0 worst, 20 best). Trend and level both matter. A name moving from 18 to 16 still signals a strong level, with slight exhaustion in the trend.
▼ 0–8 declining
▬ 9–13 neutral
▲ 14–20 strong
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| Equities |
Trend |
This Wk |
Last Wk |
| Emerging Markets | ▬ | 10 | 11 |
| Foreign Developed | ▬ | 10 | 11 |
| Large Cap | ▬ | 9 | 13 |
| Small Cap | ▼ | 8 | 9 |
| Mid Cap | ▼ | 7 | 13 |
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| Fixed Income |
Trend |
This Wk |
Last Wk |
| Floating Rate Bond | ▬ | 12 | 12 |
| Short Term Bond | ▬ | 11 | 11 |
| Intermediate Term Bond | ▬ | 9 | 9 |
| Corporate Bond | ▬ | 9 | 7 |
| High Yield Bond | ▼ | 8 | 8 |
| Long-Term Bond | ▼ | 8 | 6 |
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| Sectors |
Trend |
This Wk |
Last Wk |
| Health Care | ▲ | 15 | 10 |
| Energy | ▬ | 13 | 15 |
| Consumer Defensive | ▬ | 9 | 9 |
| Financials | ▬ | 9 | 8 |
| Real Estate | ▬ | 9 | 7 |
| Technology | ▼ | 8 | 14 |
| Consumer Cyclical | ▼ | 8 | 6 |
| Industrials | ▼ | 6 | 12 |
| Utilities | ▼ | 6 | 7 |
| Materials | ▼ | 6 | 4 |
| Communications | ▼ | 5 | 7 |
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| Market Segments |
Trend |
This Wk |
Last Wk |
| Large Value | ▬ | 12 | 10 |
| Mid-Cap Value | ▬ | 11 | 11 |
| Large Growth | ▼ | 8 | 12 |
| Small Growth | ▼ | 8 | 10 |
| Small Value | ▼ | 8 | 10 |
| Mid-Cap Growth | ▼ | 7 | 11 |
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Notable Newton Moves This Week: Scores fell broadly, and Health Care was the only read to improve into the strong band, jumping from 10 to 15 and taking the top sector spot. Technology reversed hardest at 14 to 8, with Industrials matching it at 12 to 6 and Energy easing out of green at 15 to 13. Weakness was uniform across equities and styles, Mid Cap sliding 13 to 7, Large Growth 12 to 8 and Mid-Cap Growth 11 to 7, leaving Large Value at 12 as the firmest read in the group.
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Technical trading models are mathematically driven based upon historical data and trends of domestic and foreign market trading activity, including various industry and sector trading statistics within such markets. Technical trading models, through mathematical algorithms, attempt to identify when markets are likely to increase or decrease and identify appropriate entry and exit points. The primary risk of technical trading models is that historical trends and past performance cannot predict future trends and there is no assurance that the mathematical algorithms employed are designed properly, updated with new data, and can accurately predict future market, industry and sector performance.
Disclosure: Investing involves risk, including the possible loss of principal and fluctuation of value. Past performance is no guarantee of future results. This newsletter is not intended to be relied upon as forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of the date noted and may change as subsequent conditions vary. The information and opinions contained in this letter are derived from proprietary and nonproprietary sources deemed by Waterloo Capital to be reliable. The letter may contain "forward-looking" information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecast made will materialize. Reliance upon information in this letter is at sole discretion of the reader. Please consult with a Waterloo Capital financial advisor to ensure that any contemplated transaction in any securities or investment strategy mentioned in this newsletter aligns with your overall investment goals, objectives and tolerance for risk. Additional information about Waterloo Capital is available in its current disclosure documents, Form ADV, Form ADV Part 2A Brochure, and Client Relationship Summary report which are accessible online via the SEC's Investment Adviser Public Disclosure (IAPD) database at www.adviserinfo.sec.gov, using SEC # 133705. Waterloo Capital is neither an attorney nor an accountant, and no portion of this content should be interpreted as legal, accounting or tax advice.
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