Good Morning,
I hope everyone had a great 4th of July weekend! Maybe it's just me, but there always seems to be a bit of a "jet lag" feeling on the Monday following the holiday.
Markets are coming off a holiday shortened week that saw the Dow close at a record high on Thursday. The narrative appears to have shifted away from Iran (barring any significant escalation headlines) and back toward hyperscaler AI spending and its durability.
Reports emerged last week that Meta may look to monetize excess AI compute capacity, sparking one of the first meaningful challenges to a core market assumption: that hyperscalers will continue expanding AI spending at an extraordinary pace for years to come. The key concern was not necessarily weaker AI demand, but rather whether signs of an emerging compute surplus at the hyperscaler level could imply a slower than expected trajectory for future AI capital expenditures.
That said, industry data continues to suggest that AI compute demand remains well above available supply. As a result, I would expect any short-term pullbacks to be bought. Looking ahead, Q2 earnings season begins in earnest next week and represents the catalyst I will be watching most closely.
More broadly, lower oil prices, last week's softer payrolls data (+57K versus +113K expected), and easing interest rate pressures remain supportive of the overall market backdrop. I continue to believe we will see market participation broaden, with any near-term pullbacks presenting potential buying opportunities.
As always, please don't hesitate to reach out with any questions or comments.
Attached is this week's Market Strategy Radar Screen Report from John Stoltzfus, Chief Investment Strategist at Oppenheimer Asset Management.
Have a great week!