Cover:
-Crypto firms, including Coinbase Global, Kraken, and Ripple Labs, have been urged to embed crypto into American daily lives by President Donald Trump's cabinet and leadership team. During President Joe Biden's administration, many of these companies had been sued by securities regulators or under investigation. The Trump administration's approach has led mainstream financial institutions to embrace crypto, encouraging banks that were almost prohibited from doing business with digital-asset firms to dive in. Companies that were sued by securities regulators are now being courted to implant themselves into American systems. The last major crypto crash, FTX's failure in 2022, had virtually no effect on the economy or wider financial system. However, Lee Reiners warns that a major downturn is imminent, with the pain likely to be acute.
Interview:
-no update
Tech Trader:
-The long-awaited tech tariffs arrived this week, and the market rallied despite uncertainty. President Donald Trump announced a new tariff of approximately 100% on chips and semiconductors, with no charge for those building in the US or committed to build there. Apple will be one of the recipients, and the stock rallied 3.2% on Thursday. The Philadelphia Semiconductor index (SOX) was up 1.5% that day as investors tried to sort through the president's meaning. The term "chips and semiconductors" has had an elastic definition since April, with the SOX beginning the year down 28%. The International Emergency Economic Powers Act (IEEPA) tariffs have been modified twice by the administration, most recently with tariffs ranging from 10% on imports from the UK to 41% for Syria.
The Trader:
-Stocks have risen to near all-time highs, despite concerns about President Trump's tariffs and a weakening labor market. The Dow Jones Industrial Average has increased over 1% this week, while the S&P 500 and NASDAQ Composite have gained 2.3% and 3.8%, respectively. Corporate earnings have been strong, with stocks like Shopify and Arista Networks soaring on big beats. Investors are hoping that bad job news will prompt the Federal Reserve to cut interest rates next month, with traders now pricing in a nearly 90% probability of a quarter-point ease at the Sept. 17 meeting. However, the Cboe Volatility Index (VIX) was on track to end the week trading around 16, indicating the absence of fear in the stock market. Frank McKiernan, managing partner and co-founder of Third View Private Wealth, believes the S&P 500 can hit 6900 by year's end, 8% higher than current levels.
-Healthcare stocks have been the worst performing sector in the S&P 500 this year, with the Health Care Select Sector SPDR ETF falling 3.7% this year. The ETF, which includes insurers, pharma companies, and medical-device makers, has been hit hard by reimbursement costs, Trump administration efforts to lower drug prices, remaking the Food and Drug Administration, and potential tariffs. Eli Lilly, an obesity-drug maker, has also experienced losses due to competition concerns. However, the healthcare ETF has stabilized, finding support near $130, the level that has attracted buyers since the S&P 500's early April selloff. The fund has remained in a long-term uptrend since early 2009, suggesting a potential recovery.
Features:
-Experts predict that quantum computers could eventually crack the security codes of blockchain, the underlying technology for Bitcoin, which could severely damage investors' trust in the $2T-plus market. Around a quarter of all Bitcoins are protected with algorithms that could be cracked by quantum computers in five or 10 years. As quantum computing advances, the damage could spread to newer wallets and the market's structure. The crypto industry is aware of these risks and is quietly preparing to defend itself. Some firms are already working on quantum computing, but the big question is how quickly quantum develops, and whether the security features of blockchain will match those of quantum. Blockchain, the easier to understand technology, is the beating heart of the Bitcoin market.
Europe:
-European defense stocks have plateaued for the past two months, following a two-thirds surge from January to June. Germany's Rheinmetall now has a trailing price/earnings ratio around 95, compared to 57 for Nvidia. European weapon makers trade at a one-third premium to US peers, and the majority of European spending increases has been anticipated in market forecasts. However, questions still linger over the anticipated Old World arms bonanza, as the industry needs to believe that the interest is neither transitory nor likely to be spent outside Europe. Northern Europe, led by Germany and the Nordics, should march steadily toward the North Atlantic Treaty Organization's new goal of spending 3.5% of gross domestic product on defense. Buying European could prove challenging in some of the sexier and more expensive weapons systems, as US-made F-35 fighter jets and Patriot air defense systems are best in their class globally. However, Europe holds its own on the ground and at sea, with Germany signaling big spending on Euro-made Boxer and Patria armored vehicles, along with Leopard tanks. Six European companies are "tier one" contractors on the F-35, including BAE Systems, Italy's Leonardo, and a vertical takeoff mechanism from Rolls-Royce Holdings.
Emerging Markets:
-no update
Commodities:
-Rare-earth miner and refiner MP Materials reported better-than-expected second-quarter numbers, causing shares to rise again. The company reported earnings before interest, taxes, depreciation, and amortization (Ebitda) of negative $12.5M from sales of $57.4M, which was below Wall Street's expected $20M. In the second quarter of 2024, MP reported an Ebitda loss of about $27M on sales of about $31M. Shares added 4.6% on Friday, closing at $74.32, a new 52-week and all-time high. Despite the positive results, investors are focused on the future with MP Materials stock and remain optimistic about that future. MP stock has been up roughly 200% over the past three months, with an average Wall Street price target of about $60. A transformational deal with the Department of Defense in July led to the gains, with the Pentagon agreeing to a $400M equity investment, a commitment for up to $350M in additional funding, and a $150M loan. The money will fund the construction of a new domestic rare-earth magnet-manufacturing facility and the expansion of MP Materials' current mining and processing capabilities.
Streetwise:
-Yeti Holdings, a company that started making rugged coolers for anglers and other outdoorsy types, has experienced a drop in its shares, with net sales falling 4%. The company, which will turn 20 next year, now makes more than half of its business in drinkware. Jefferies analyst Randal Konik, one of Yeti's biggest boosters on Wall Street, points out that management trimmed its sales guidance for the year but raised its profit guidance, indicating that the company is navigating the drinkware spill well. Inventory fell, suggesting that sell-through at stores has been stronger than wholesale orders. Yeti is launching 30 new products this year, including tote bags, camp chairs, dog beds, skillets, flasks, and more. Free cash flow is healthy, management is buying back stock, and the valuation is down to 12 times next year's projected earnings.