I hope everyone had a great 4th of July holiday.
2026 Q2 ended on 6/30/26 with a big bang! Best Qtr since 2020!! Market kept broadening and this is extremely good. In June 2026 alone Mag7 lost $2.3Trillion in market cap. Most bullish part of the market were the companies’ receiving funds from the Mag7 -companies benefiting from the data center buildup which went up 40% in June 2026 alone! The economy and the manufacturing sector is growing as we have never seen before. Onshoring is happening and President Trump should get the credit. The “memory” stocks have been skyrocketing but that does not mean they are overvalued. Valuation of a stock depends on the price to earnings ratio-lower the better. I was considering buying Micron Union (MU). a few months ago but now I am sorry I did not do it. Price of MU went up 837% in one year! Gross margins are at 85%. They will be investing $200 Billion in the US and will create 90,000 jobs. Their forward Price/Earnings (PE) is a mere 8 (very cheap!)! The whole economy, including small businesses are growing at a high rate. The CEO of Paychex stated that the job growth in the small business sector is very robust.
For the past 6 months, everyone expected the new Fed Chair to lower rates but intuitively I did not believe the hype. The Federal Reserve is like the Supreme Court. They are loyal to the people and to the constitution and they always think of their own legacy. Fed Chair Volker who killed 20 years of inflation with high rates is considered as the best central banker we have ever known. On the other hand, we have the worst Fed Chair Arthus Burns who created 20 years of inflation by not raising rates. Even on his death bed, he apologized to the people for allowing this to happen due to bullying he got from LBJ. It is said that LBJ invited him to his ranch, lifted him up and punched him in the belly. New Fed Chair is determined to keep the rate of inflation low. Good news for the bond market as well as the stock market.
We have some concerns about AI. Are the US ‘hyperscalers’ spending too much on AI. Will the investment payoff. The U.S. leads the world in AI development and private funding, but lags in business adoption. In 2025, U.S. private AI investment reached $285.9 billion, over 23 times more than China's funding. Despite this financial dominance, U.S. organizational AI adoption ranks 24th globally due to regulatory hurdles and a trust gap. Chinese use of AI and all countries using Chinese AI products are growing faster than the US side.
On 6/17/26, the new Fed Chair Warsh had a press conference and stated:
• In the future, policy statements will be shorter.
• There will be no economic projections.
• He will have task forces to communication purposes.
• High prices are a burden.
• First priority-going back to 2% inflation.
• Will not give forward guidance.
• Will meet again in 6 weeks.
• He was impressed with his colleagues on the needed changes.
• Press conferences are important but only when it is needed.
• Feds have been using old fashioned survey methods which are not valid anymore.
• Task forces will include people who have ‘family fights’ -for internal debates.
• I will not react to market conditions.
• “We will deliver on price stability”.
Jeffrey Edward Gundlach is a billionaire investor, philanthropist, and the CEO of DoubleLine Capital, a mutual fund company he co-founded. He's known as the "Bond King" and a leading bond expert. On 6/17/26, Jeffrey made the following comments:
• Rates will not change till Fall 2026
• Rate of inflation would drop by the end of the year.
• The new Fed Chair might inflation in a different manner.
• Focus is on inflation and not on unemployment.
• Warsh will be more agile like Volker.
• By the end of 2026, inflation will be at 3.5%.
• No hikes in 6 weeks.
• With Warsh, we can buy long term bonds.
• Inflation will not lead to a rate hike.
• Michigan consumer index is at its lowest level.
• “I am glad that Trump did not start a fight with Warsh on his first day and I am glad that Trump does not head the Federal Reserve”
Have a great month!
Fernando