TITLE BOUT: Semiconductors vs Spenders | Ben's Market Insights

TITLE BOUT: Semiconductors vs Spenders | Ben's Market Insights

In this week's episode we discuss the economic releases from Europe and the UK. The ECB is set to announce its rate decision. We see no room for manoeuvre. The UK is likely to witness a small uptick in headline CPI. We see further reliance on the debt market going forward, making it virtually impossible for the BoE to lower rates in this cycle and may even be looking at a rate rise before year-end. The Iran conflict doesn't look like its ending any time soon. Energy prices remain elevated creating a higher base for inflation in the US resulting in the 10 year UST staying above 4.5% and staying the Fed's hand in terms of interest rate declines. We don't believe an increase is on the cards before year-end but anyhow, lack of action is likely to keep the USD strong vs Euro and GBP in the coming weeks. The earnings announcements come thick and fast this week with the US consensus earnings expansion forecast at 26% vs Europe's consensus forecast growth of 16% largely driven by the European oils integrated companies currently taking advantage of significantly higher oil prices. Intel and Alphabet report on Wednesday after the close. This week presents a seminal potential turning point for the semiconductor trade. The SOX Index (Semiconductors) is already 20% below its June highs and investors are wary what Alphabet and the other hyperscalers might say about the capex cycle.  Alphabet is likely to re-iterate its 2026 capex plan of between $175-190bn but might revise its previous guidance for 2027 which was set at significantly higher levels than 2026. 'Significantly' (paraphrase for management's sentiments for 2027) may well be paired back setting in motion a more subdued positioning on the semi trade. Just as a reminder, MIcrosoft's capex plan for 2026 is $190bn and for Amazon at $200bn.  A quick look at who is the most cashflow resilient to cost pressure from increasing energy prices and higher overheads would suggest that Microsoft sits on top of the pile with Alphabet second and Amazon last. This is largely thanks to the higher margin other businesses at Alphabet and Microsoft that can offset any AI datacentre cost inflation. Analysts are looking for expansion on the operating margin for Alphabet from a current 32% to 35% over the next couple of years. Amex reports on Friday and will most likely confirm our view of an increasingly polarised consumer base. Higher non-discretionary prices are affecting lower income consumers considerably more resulting in potential fall away from discretionary spend by a large portion of the consumer base. More on this in the coming weeks as consumer related stocks report. ------------------------------------------- If you're enjoying this content, please comment, like, and subscribe to see our videos every week! Join our email list to be the first to see these videos every week: https://mailchi.mp/traderoutescapital/giuox24tmg Check out this and all of our episodes in podcast form on Spotify and Apple Music Spotify: https://open.spotify.com/show/67oVN7gzMjGBT1Xxk5BEXB?si=f7daa55608774ad0 Apple: https://podcasts.apple.com/us/podcast/bens-market-chat-insights-and-interviews/id1830524533 Join the community on LinkedIn https://www.linkedin.com/newsletters/7084134627111489536/  Always do your own research or seek the advice of your professional financial advisor. You can find us on LinkedIn and YouTube, Money Matters, Ben Hakham CEO at Traderoutes Capital.

The Earnings Season Begins

If you like this content please Like & Subscribe on our YouTube channel https://www.youtube.com/@bensmarketchat This week we discuss Iran's long game in the ongoing war, the week's economic releases, including US CPI as well as the potential scenarios from the upcoming earnings season. Iran has no interest in ending the war. They are fully aware that the US administration wants a swift cessation ahead of the Mid-terms and a significant lowering in oil prices. Equally however, Iran is not equipped or able to escalate the war. The plan seems clear. Low level attacks on shipping on the Straits of Hormuz leads to US bombing of what they see as strategic sites followed by counterattacks on US bases in the Gulf. Not quite all out but not quite all quiet! A perfect scenario from an Iranian perspective to keep the pressure on the administration. The end game, of course, is to create sufficient pressure on the current administration so that Congress falls to the Dems in November and effectively compromises the administration's continued execution of the war, thereby handing Iran an effective victory and control of the Straits. Iran also knows full well that the US administration is unlikely to escalate given its domestic pressures.  From an economic perspective, we get CPI this week. Month on Month the headline is likely to be tempered given the de-escalation in the mid east. However, when the Fed chair speaks to Congress this week, the median forecast of 3.6% CPI will be  uppermost in his mind. We still don't believe that the Fed will raise rates (consensus expectations are now looking for 25bps increase before year-end) but reducing rates is becoming less and less likely particularly if the conflict lingers, as we expect. UK GDP for Q1 26 is released this week and a potentially better than expected number is expected. Combined with a likely increase in reliance on the debt markets in Andy Burnham's new administration, expect the next potential move in UK rates to head higher to defend GBP and make UK government paper more attractive for foreign bond investors. On the corporate front, US financials begin to report this week. Significantly higher Investment Banking fees thanks to the SpaceX IPO and increasing Net Interest Margins (NIMs) should see strong results momentum maintained by strong guidance.  The yield curve in the US is steepening again allowing for better profitability for banks. The 2 year UST has remained steady just over 4% but the 10 year UST has been pushing towards 4.6% on the back of higher energy prices and the potential effects of a slowdown that this could bring with it. Finally, ASML reports this week. ASML is now Europe's largest company but its guidance is globally consequential. What they say about demand and likely spend on AI going forward is likely to set the trend for the semiconductor industry and technology generally for some weeks to come. ASML's management is forecasting a E36-40bn revenue range for 2026, an 18% increase YoY. If they increase the range, expect the sector to grind higher. The company has also been shipping more than 50% of its tools for memory production, outpacing logic sales.  On a risk basis, bad news or a slowdown in demand will result in significantly worse downside for the sector. Good news will only confirm investor expectations. week! Join our email list to be the first to see these videos every week: https://mailchi.mp/traderoutescapital/giuox24tmg Join the community on LinkedIn https://www.linkedin.com/newsletters/7084134627111489536/ Always do your own research or seek the advice of your professional financial advisor. You can find us on LinkedIn and YouTube, Money Matters, Ben Hakham CEO at Traderoutes Capital.

Hyperscalers are Catching Up!

This week we discuss the productivity gains in the global economy thanks to the AI spend revolution. We witnessed a consistent 2-2.5% productivity gain throughout the late 90’s-early 2000’s as China opened up and started a global trade boom. AI is likely to deliver a similar if not even bigger opportunity. Productivity dampens inflationary pressure and drives growth.  In this week’s Ben’s Fireside Interview we talk to Martin Dubbey, CEO & founder of Harod Associates Group, one of the fastest growing fraud investigation and asset tracing businesses in the UK. Harod utilises a proprietary investigation and asset tracing technology platform which Martin and team architected and which he talks about. Harod’s clients include Family offices, Corporates and High net worths looking to protect their assets in a fast moving and digital world. Head to https://www.youtube.com/@bensmarketchat [https://www.youtube.com/@bensmarketchat] for the full interview. The $750bn of AI spend this year and at least this number again next year, has resulted in a major boost for semiconductors and hardware at the expense of the vast number of MAG7 companies YTD. However, the SMH (US semiconductor ETF) has fallen over 10% in the last 2 weeks. Earnings are upon is for Q2 over the next couple of weeks and guidance will be key. Do investors believe that capex spend momentum will slow? In terms of the 2nd derivative (ie the pace of growth) this may well imply a slower pace. Equally, if we see guidance from MAG7/Hyperscalers that AI related ROI is starting to grow, a potential rotation from PHASE 1 (the hardware beneficiaries) to PHASE 2 (the spenders) may well ensue implying a strong finish to the year for MAG7. Q3 guidance therefore could present a seminal turning point for the technology sector and focus therein. It looks like the war with Iran is back. It didn’t really ever go away. Anthony Scaramucci told us a few weeks ago that the US does not control the narrative. This war and economic consequences are likely to linger for many more months. Will this be enough to dislodge the growth trajectory in the US? We don’t think so. Despite the short term impact on inflation, longer term, productivity is likely to dampen the energy spike. We remain overweight the US going into the second half and increase exposure to US small caps as productivity gains tend to have a democratising effect on smaller company performance vs their larger rivals.  Europe remains a backwater for us despite its cheap valuation and EM is a cheaper play on the semiconductor trade in the US given the over reliance in the indices to TSMC, Samsung and Hynix. If we are witnessing a transition, EM, at least at the headline Index level, may not fair so well for the balance of the year. If you're enjoying this content, please comment, like, and subscribe to see our videos every week! Join our email list to be the first to see these videos every week: https://mailchi.mp/traderoutescapital/giuox24tmg Join the community on LinkedIn https://www.linkedin.com/newsletters/7084134627111489536/ Always do your own research or seek the advice of your professional financial advisor. You can find us on LinkedIn and YouTube, Money Matters, Ben Hakham CEO at Traderoutes Capital.

A Masterclass in Fraud Avoidance, with Martin Dubbey

We have a very interesting discussion this week with Martin Dubbey. Martin is the founder and CEO of Harod Associates Group, one of the fastest growing fraud investigation and asset tracing businesses in the UK. Harod utilises a proprietary investigation and asset tracing technology platform which Martin and team architected and which he talks about in the interview. Martin is a seasoned professional and public servant. He set-up Harod back in October 2010 having spent a number of years as head of cocaine intelligence at HM Revenue & Customs & was a senior co-ordinating officer at the Serious Organised Crime Agency. Today Harod has completed over 4500 investigations, has 50+ investigators globally and has identified over $3bn of assets through International tracing. Harod has also developed in-house proprietary technology sourcing data from the dark web, social media and other sources to find patterns and follow leads that would otherwise take weeks if not months to track down and pursue. The team is composed of former Serious Organised Crime Investigators and computer scientists. Thanks to the advances in computing, technology and AI, crime has no borders. Harod aims to find, track and bring fraud and criminality to justice using its professional team and technology platform. Martin shares many fascinating ‘war stories’ and tells us how prevention is always better than trying to reclaim lost assets after a crime has been perpetrated. We talk about the advances and challenges that AI is presenting in the industry. We also get to hear about techniques criminals use to try to extract information and assets from victims. With a crypto economy getting larger and larger, trying to find monies is becoming a task that not even cross border law enforcement authorities are able to deal with. Harod is one of the few that are able to fit all the pieces together. As Martin says in the interview “If the money stays in one bank account for more than 1 day, there’s something wrong with the bad guys”. Harod’s clients include family offices, corporates, wealthy individuals and institutions who are either looking to put in place policies to prevent fraud or who need Harod to chase and track down assets that have been illegally taken. Martin also appears in a Netflix dram documentary blockbuster, Icarus in his role of Chief Investigator on the Sochi Olympic doping scandal. The film is based on work in breaking up a  nation state doping conspiracy at the Sochi Winter Olympics. Fraud can occur in all walks of life and Harod has set its vision on chasing down the bad guys, supporting clients and retrieving client assets in a time when law enforcement agencies worldwide are facing major resourcing issues. ------------------------------------------- Join our email list to be the first to see these videos every week: https://mailchi.mp/traderoutescapital/giuox24tmg Check out this and all of our episodes in podcast form on Spotify and Apple Music Spotify: https://open.spotify.com/show/67oVN7gzMjGBT1Xxk5BEXB?si=f7daa55608774ad0 Apple: https://podcasts.apple.com/us/podcast/bens-market-chat-insights-and-interviews/id1830524533 Join the community on LinkedIn https://www.linkedin.com/newsletters/7084134627111489536/ Always do your own research or seek the advice of your professional financial advisor. You can find us on LinkedIn and YouTube, Money Matters, Ben Hakham CEO at Traderoutes Capital.

Bitcoin is all grown up

Check out our YouTube Channel @BensMarketChat for this week’s comment. Don’t forget to like, subscribe, and tell a friend. Join our email list to be the first to see these videos every week: https://mailchi.mp/traderoutescapital/giuox24tmg This week we focus on 3 key topics, the potential peace plan between the US & Iran, the options the new Fed governor has in the short-term & the maturation of the bitcoin story. Both the US & Iran have intimated that a peace plan is in motion. We discuss what investors care about and what can wait. The market needs to see a Straits re-opening (even if tolls will be renamed into something more palatable eg an ecology fund!). Investors are less concerned about an Israel deal, Uranium enrichment discussions, reparations or size & magnitude of asset unfreeze. Whilst those issues are clearly significant from a geo-political perspective, they are nonetheless non-market sensitive issues and are likely to get kicked down the road.  Therefore, the most likely outcome (largely discounted by investors already) is an agreement to end the war with the lifting of the US blockade & the re-opening of the Straits. From a market perspective, that’s deal done and time to move on. This could make Kevin Warsh’s life ( the new Fed governor) significantly easier. The inflationary pressure from higher energy prices could dissipate sufficiently to allow him to drive Fed rates lower. However, the PCE Indicator (The Fed’s favoured inflation signal) for April is out on Thursday and the expectations are for a rise of 0.3% MoM to 3.4%, well ahead of the Fed’s 2% long-term target. With the Effective Fed rate at 3.62%, there’s little room for the FOMC to move on rates.  Warsh still has other tools to hand to create liquidity in the system. He can reduce the reserves levels the banks have to hold (ie create more liquidity), or lower the rates offered to banks holding deposits at the Fed (so they go looking for alternative sources of higher returns in the private markets) or alter the rates offered through the emergency discount window. All these liquidity enhancing strategies do not require an FOMC vote and can be executed unilaterally.  Markets remain buoyant however transitory or not inflation turns out to be given that over the longer term, Warsh is likely to pull the Fed rates lower faster than his predecessor would have done. Bitcoin has matured into a young adult (in asset life cycle terms!). Bitcoin is down 12.5% YTD and Ethereum is down 24.5%. But even worse for investors, volatility has more than halved since the period between 2017-2021. We discuss the impact of Institutional investors in the free-float, the impact of regulation, the declining effect of FOMO, the rise of Stablecoins & how the ‘halving’ process implies less tension in the price of bitcoin going forward. Always do your own research or seek the advice of your professional financial advisor. You can find us on LinkedIn and YouTube, Money Matters, Ben Hakham CEO at Traderoutes Capital.