Louis Navellier is miffed at the Fed … no cuts till September? … get ready for AGI to rip the market in half … avoid this AGI loser … on Jonathan Rose’s watchlist – a crack spread trade

I hope this week’s evidence is going to make the Fed cut. The Fed seems to be very stubborn.

That was from legendary investor Louis Navellier during yesterday’s Flash Alert podcast in Growth Investor.

Louis’ referenced evidence included yesterday’s Producer Price Index (PPI), that showed wholesale prices declined by 0.5% in April. This was a massive surprise as economists expected a 0.3% increase.

Back to Louis:

The PPI demonstrated that despite all the trade chaos, wholesale prices are falling due to lackluster economic activity as well as surplus goods being dumped into America.

After listening to “stubborn” Fed Chair Jerome Powell at his press conferences for years now, I imagine he would respond:

That’s all well and good, but it’s backward-looking information.

Looking forward, too many unknowns remain – what tariff rates will be, how long they’ll remain, and how consumer spending will respond.

The greater risk today is moving too quickly.

Traders finally appear to be taking Powell at his word

We can see this in the CME Group’s FedWatch Tool. It shows us the probabilities that traders are assigning different fed funds target rates in the future.

One month ago, traders put 72.4% odds on at least one quarter-point interest rate cut by June. As I write, those odds have plummeted to 8.2%.

So, what’s the prevailing expectation for when we’ll get the first cut?

September. And as you can see below, even then, it’s a coin toss at just 51.4%.

If the Fed does hold off until September, I suspect we’ll be hearing some very frustrated commentary from Louis.

Here’s a preview from yesterday’s podcast:

[The Fed is] disobeying our President. They’re disobeying our Treasury Secretary. They’re disobeying market rates…

You’re going to see next month that the European Central Bank is going to cut again. So, pressure is mounting on global rates around the world.

We are still in the midst of this global interest rate collapse. That means as all central banks cut their rates, the U.S. will be the last country standing…

The Federal Reserve is chasing a mythical inflation boogeyman that doesn’t exist.

Louis has gone on record that the Fed will enact the equivalent of four quarter-point rate cuts by the end of the year

That prediction is running into a calendar challenge. Come the fall, the Fed only meets in September, October, and December.

So, if the first cut comes in September, Louis’ forecast will require one of the meetings to bring a 50-basis point cut.

Traders appear less confident in such an outcome. As I write, the heaviest odds (at 37.4%) go to just two more quarter-point cuts for the rest of the year. The next highest probability goes to three cuts, coming in at 30.1%.

Whatever the outcome, Louis urges investors to focus on the one thing that matters most – fundamental strength:

It’s every stock for itself when it comes to earnings…

 If you can beat analyst expectations, you’re going to be rewarded. It’s as simple as that.

For the fundamentally superior stocks Louis is recommending in Growth Investor today, you can learn more about joining him by clicking here.

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Yesterday, we highlighted the “Road to AGI” with our macro expert Eric Fry

AGI stands for Artificial General Intelligence. It refers to the watershed moment when an AI system can match or exceed the cognitive ability of the smartest human across any task.

The arrival of AGI is hurtling toward us, and it’s drawing a sharp dividing line in the investment world.

Back to Eric:

In effect, artificial intelligence is slashing the world of commerce into two distinct groups: the AI appliers and the AI victims.

The companies that hope to survive and thrive must adopt and integrate AI technologies as quickly as possible.

Those that fail to do so will perish… and time is of the essence, especially as we get closer and closer to achieving artificial general intelligence (AGI).

In yesterday’s Digest, we highlighted one of Eric’s AGI “AI Applier” recommendations from last summer – Toast (TOST). It’s up more than 80% since he flagged it for subscribers.

Let’s check in on an example of an “AI victim.”

Last August, Eric pointed toward Shutterstock Inc. (SSTK) as a company “sitting in the crosshairs of AI.”

Here’s what he wrote then:

Once upon a time, Shutterstock was a cutting-edge graphics company with a massive, and valuable, library of proprietary images. Today, that library looks more like an anvil than a pair of wings.

Thanks to GenAI technologies like OpenArt, “proprietary graphics” are nearly a thing of the past…

Because of these competitive threats, subscriber “churn” is increasing at Shutterstock. As a result, gross margins and net income are both collapsing… These declining fortunes reflect declining demand for the company’s core content library.

Sure enough, since the start of last August, the stock has fallen more than 50%.

Shutterstock isn’t a rare anomaly. It’s a preview of what’s coming for companies that can’t adapt to AGI.

This is why Eric says AI is one of the most important screens through which investors must base all market decisions today:

We must examine every prospective investment through the lens of AI and be alert to both the opportunities and the hazards it will create.

He just put the finishing touches on four new research reports focused on investing in AI before AGI arrives. Three of the reports highlight a stock to buy; the fourth warns about three stocks to sell.

You can learn how to access them right here.

Looking for a trade idea?

Expert trader Jonathan Rose has a suggestion.

For newer Digest readers, Jonathan is the analyst behind Masters in Trading Live.

He earned his stripes at the Chicago Board Options Exchange, going toe-to-toe with some of the world’s most aggressive and successful moneymakers. He’s made more than $10 million over the course of his career, profiting from bull markets, bear markets, and everything in between.

Let’s jump to yesterday’s MIT Live Update:

One area I’m laser-focused on right now: refiners.

The crack spread—which is basically the profit margin refiners earn turning crude into gasoline and diesel—has surged over 30% since mid-March. That kind of divergence doesn’t last forever.

To illustrate, Jonathan provides a chart that I’ll show you below.

The yellow line represents the crack spread. You’ll see how it’s become increasingly disconnected from refiner stocks like HF Sinclair (DINO)and Valero Energy (VLO).

Back to Jonathan:

This creates opportunity for creative traders.

When margins are expanding and the equities haven’t caught up, we’ve got a window to strike.

This is the exact kind of setup I love to track… because when the market catches on, the move can be fast and aggressive.

Beyond DINO and VLO, check out Marathon Petroleum (MPC) and Phillips 66 (PSX). These companies’ profits rise when refining margins are fat. So, a widening crack spread means a long position (or call options) could be a profitable way to play this.

If you’d to learn more, Jonathan wrote a fantastic primer for how to trade crack spreads. You can check it out for free right here.

I’ll note that Jonathan makes education the foundation of his videos and market approach. He’s one of the best teachers out there.

Want more trading ideas like these?

Then join Jonathan for his free Masters in Trading Live broadcasts at 11:00 a.m. every day the market is open. They’re a fantastic way to learn more about trading, while also giving you the tools to put a wad of cash in your pocket.

And if you’re new to trading, there’s no pressure to move faster than you’re comfortable. You can simply tune in, watch, and learn.

We’ll keep you updated on all these stories/opportunities here in the Digest.

Have a good evening,

Jeff Remsburg