Gross domestic product ("GDP") is a lot like the odometer in your car... When you take a trip, the odometer tells you how far you've traveled.
This Powerful Trend Is Like Gas in the Tank
By Joe Austin, senior analyst, Chaikin Analytics
Gross domestic product ("GDP") is a lot like the odometer in your car...
When you take a trip, the odometer tells you how far you've traveled.
But it can't tell whether your trip went smoothly or not. Heck, it can't even tell you if you ended up in the right place.
It also doesn't tell you if your engine is running well or how much gas you have left in the tank.
When it comes to the U.S. economy, that's what a lot of people don't like about GDP...
It tells us if the economy grew or not. But it doesn't tell us much about the quality of the growth or what to expect going forward.
However, GDP is still the most popular way to gauge the economy's health. Experts and talking heads track its every move for signs of what could happen next.
Of all the things U.S. GDP tracks, consumer spending is the biggest piece. Historically, it makes up about 70%.
Because of that, in normal times, consumer spending drives GDP's ups and downs.
But this year, things have been different...
Through the second quarter, U.S. GDP grew by an annualized rate of 3%. Consumer spending was up. This time, though, most of the 3% growth came from something else...
Put simply, our country is importing fewer things than we did last year.
When we import more than we export, it reduces GDP. The reverse is now happening.
Another anomaly this year ties into the relative contributions to growth...
For the first time in history, something else added more to GDP than consumer spending. And it relates to a powerful trend we've talked about a lot in ChaikinPowerFeed...
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I'm talking about the boom in artificial-intelligence ("AI") spending.
When you look at the data, you can see the massive change that's underway...
In the first six months of this year, spending on information-processing systems and software grew more than consumer spending. That's rare.
At some point, consumer spending needs to increase more. Otherwise, GDP won't grow.
In other words, the engine will start sputtering. And the U.S. economy will run out of gas.
But in the near term, this anomaly confirms the incredible reach of the AI boom. And it shows us just how big its impact could be in the years ahead.
When we think about the AI spending boom, the real question is...
What does this spending mean for jobs and productivity in the U.S.?
In a best-case scenario, AI won't replace workers. Rather, it will make them more productive. In that case, it will become a giant boost to the economic-growth engine.
In a worst-case scenario, AI will replace a lot of jobs. And consumer spending will shrink. Our economy would be amazingly efficient. But no one will have paychecks to buy anything.
Those scenarios are both extremes, though. Most likely, we'll fall somewhere in the middle.
By that, I mean the AI spending boom will result in some winners and some losers. That's like every past wave of breakthrough-technology adoption in history.
From an investment standpoint, we want to focus on finding the winners...
Tech companies are clearly winners in this powerful trend. They're reaping the benefits of all that AI spending.
But we can go beyond that...
In the years ahead, we'll likely see big winners in nearly every corner of the market. More companies will deploy AI to become more efficient – or to create entirely new businesses.
When it comes to the AI spending boom, my point is simple...
I've never made money in an economy. My goal is to help people make money in stocks.
If AI can generate the productivity breakthroughs that everyone believes it can, it will lead to massive GDP growth. We'll see more innovation, better jobs, and healthier consumers.
The real test isn't how fast GDP grows. It's whether people are actually better off or not.
And if everything goes according to plan, we'll have plenty of winning stocks to pick from.
Good investing,
Joe Austin
Marc Chaikin: 'Ask Me Anything'
This month, Marc Chaikin is doing something he has never done before. After a wild six months for stocks, Marc knows you may have many lingering questions. So, he'll be going on camera – NOT to discuss a specific opportunity, but instead to devote his time to answering YOUR most pressing questions.
But to do that, we need to hear from YOU. If something is keeping you up at night (whether it worries or excites you), we want to hear from you. Marc will answer as many questions as possible during his "Ask Me Anything" event this month.
— According to the Chaikin Power Bar, Small Cap stocks and Large Cap stocks have turned somewhat Bullish. Major indexes are mixed.
* * * *
Sector Tracker
Sector movement over the last 5 days
Consumer Discretionary
+2.62%
Consumer Staples
+2.31%
Information Technology
+0.7%
Materials
+0.32%
Communication
+0.02%
Financial
-0.15%
Industrials
-0.52%
Energy
-1.35%
Real Estate
-1.51%
Utilities
-1.61%
Health Care
-2.04%
* * * *
Industry Focus
Aerospace & Defense Services
20
13
3
Over the past 6 months, the Aerospace & Defense subsector (XAR) has outperformed the S&P 500 by +18.55%. Its Power Bar ratio, which measures future potential, is Very Strong, with more Bullish than Bearish stocks. It is currently ranked #6 of 21 subsectors and has moved down 4 slots over the past week.
Top Stocks
CW
Curtiss-Wright Corpo
DCO
Ducommun Incorporate
WWD
Woodward, Inc.
* * * *
Top Movers
Gainers
TKO
+10.23%
ALB
+7.0%
EA
+5.05%
MU
+4.06%
INTC
+3.51%
Losers
INTU
-5.73%
HSY
-4.8%
EPAM
-3.92%
PAYC
-3.83%
WDAY
-3.77%
* * * *
Earnings Report
Earnings Surprises
SMMT Summit Therapeutics Inc.
Q2
$-0.78
Missed by $-0.69
ASTS AST SpaceMobile, Inc.
Q2
$-0.41
Missed by $-0.33
MRCY Mercury Systems, Inc.
Q4
$0.47
Beat by $0.25
* * * *
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