The Divergence Unfolding...

KR Opinion

As we enter Tuesday, I've been watching the market set the tone for potentially dovish news. Jerome Powell is scheduled to speak about the economic outlook and take questions, and while I don’t expect any surprises, I've noticed that Powell's public appearances typically carry a more dovish tone than anything else.

Yet here we were again, caught up in the latest game being played on Wall Street - another government shutdown threat.

I've been through this scenario so many times, only to see Congress pull together some kind of continuing resolution at the last minute. The chance of a real shutdown seems almost zero to me, but I can’t ignore the potential consequences if it did happen. The government would stop producing the economic reports that the Fed relies on for its policy decisions—payroll numbers, CPI data, retail sales figures, and many other indicators. If we found ourselves in a long-lasting disagreement and the Fed truly depends on data, I wonder what decisions they could make without this critical information. Still, I believe the odds of this happening are virtually nonexistent, though I know it’s on some investors' minds. With the potential shutdown date of September 30th approaching—and here we are on the 22nd—I suspect they will create quite a bit of drama before they inevitably resolve it.

What really caught my attention was NVIDIA's announcement about investing $100 billion in OpenAI, while OpenAI was openly saying they couldn't operate without NVIDIA's chips. I found this rhetoric fascinating - was NVIDIA simply making a strategic investment, or was OpenAI tapped out and needing the loan to keep building? I suspected there were more details behind the scenes than what we were seeing on the surface. This wasn't the first time we have seen NVIDIA at the center of a controversy involving a customer investment.

I am tracking a bunch of PMIs scheduled to come out, along with other elements that might set the tone for the markets. Meanwhile, I continued to watch equity markets punch out new highs virtually every day. The bubble talk was starting to flow, as it always does when we get into these vertical moves.

I've been working on rebuilding my studio and hoping to get a YouTube video out soon - it's coming along but still has a way to go. Once it's ready, I'm planning to do a livestream where we can discuss some of the longer-term implications of the current market flows.

I'll admit, I spent a lot of time earlier this year discussing how I expected a slowdown in Q3 and Q4. Now, as we near the end of Q3, there has been no slowdown from either a labor standpoint or a broader economic view. When we get GDP data later this week, I anticipate seeing continued growth of over 3%, which seems to be gaining momentum. My initial concern about a potential Q3 slowdown stemmed from what appeared to be vulnerable data in the WaveTech Models. However, I now see that they have gained enough traction to turn the outlook positive, likely driven by the influx of new investments into the US, which is fueling even more bullish sentimen