Daily Rundown: July 25

CHRIS VERSACE : Good morning, Action Alerts Plus members. As promised in yesterday's rundown, between earnings season and the Fed we are in the midst of another busy week. For the Fed, let's take a deeper look at what we're expecting heading into tomorrow's decision.

The stock market sees a 99% probability the Fed will hike rates by another 25 basis points. It's essentially a lock and something the market won't be surprised by. However, what could surprise the market is the forward commentary on monetary policy.

Currently, the market sees the Fed ending its rate hiking cycle with this next rate hike. But a few times we've seen over the last year the market has leaned into what it hopes to see paying far less attention to the data, and it's gotten itself into a tight spot more than once.

Now, while we have seen progress on inflation, we think the Fed will note that progress, but once again say there is more work to be done and that it needs to see further-- and this is the key-- sustained progress before it throws in the towel on inflation. We strongly suspect as a result, the Fed will once again trot out its data-dependent phrasing.

Now, we do have a bit of time until the Fed's next policy meeting in September, and that means several looks on inflation before then. However, we will need to see something that we did not see earlier this year.

What I'm referring to is the CPI data, the PCE data, was very bouncy in the first half of the year. It would make some forward progress. It would stall. It would go back up. Essentially, there was no sustained movement. And again, that is what we're going need to see-- steady, continued progress in the data. And if we don't, the market may need to adjust its thinking once again.

Now, let's pull back our lens because the Fed isn't the only central bank making headlines this week. We'll hear from decisions from other-- [LAUGHS]-- sorry, folks. Getting a little tongue-tied here. We'll hear from other central banks as well this week, including the ECB and the Bank of Japan, which will make monetary policy decisions later this week as well.

Now, how do we think about these things? Well, first, inflation is global, and mismatches in monetary policy across different central banks can influence currencies.

Recently, we've been talking about the falling dollar and how that looks to help multinational companies based in the US in the coming quarters. As these other banks make their policy decisions, we'll want to monitor what they're doing, what that means for currencies as a result. But we will also want to get an update on how they see their economies unfolding over the balance of the year.

Now, as we wait for all those central banks and what they have to say, let's take the opportunity to review our game plan. Ahead of the Fed meeting, ahead of more June quarter earnings season, and of course, comments that we received from team members Carly Garner and Helene Meisler about August, which in their view, is shaping up to be a challenging month for the market, we have built up some extra cash in the portfolio, and we do have our inverse ETFs in play. We've also identified with you stocks on our shopping list, as well as bullpen residents we would look to bring up to the portfolio if certain conditions are met.

Now, let's turn to some individual positions. Samsung holds its Unpacked event on Wednesday, and that has us really revisiting our thoughts on universal display. We say this because Samsung's invent-- event-- excuse me-- will unwrap its latest smartphone models including widely expected updates for its foldable products.

Now, when we review the announcements, we will be focusing on not only larger screen sizes, but also these foldable products largely because they not only contain multiple displays, but the sheer size of display space is far greater compared to a regular smartphone. And let's remember, the larger the display area, the greater the demand for universal solution set.

So we are going to pay close attention to the shares of universal display. And if they do happen to fade to around the 140 level, we're likely to pick them up, again, if we get the chance.

And we'll end today's rundown with our latest action. You probably have seen by now that we trimmed our position in Sebo and added to both Applied Materials and Axon. These moves are in keeping with our strategy of using pullbacks to add to well-positioned companies in the portfolio.

With Applied Materials in particular, the shares have extremely strong support, while with Axon, the outlook for federal, state, and local public safety spending should continue to drive its business, especially as its recurring revenue stream continues to expand.

As far as Sebo, look, we've previously commented we would look to use the shares of this three-rated stock, of course, as a source of funds, especially above our 140 price target. And that's essentially what we did.

Now, finally folks, it is earnings season, so please remember to check your email today and the rest of the week as we share data points and other tidbits as we work our way through that sea of earnings reports.

That'll do it for today. And JD and I will be back tomorrow for takeaways from our next wave of earnings that happen after today's closing bell. And, of course, we'll be answering your biggest questions of the week.