• This week’s Market Alert focused on a rapidly changing economic environment, where weaker employment data, shifting interest rate expectations, and continued enthusiasm around artificial intelligence are giving investors plenty to watch.
• The economy lost 23,000 jobs in July, marking the first outright monthly decline in employment in several months and raising new questions about the strength of the labor market.
• The unemployment rate declined to 4.1%, but that headline does not tell the entire story. Part of the decline resulted from people leaving the labor force and no longer actively looking for work.
• Previous employment reports were also revised lower by more than 100,000 jobs, reinforcing the importance of looking beyond any single economic report when evaluating the health of the economy.
• Those weaker employment numbers have dramatically changed expectations surrounding the Federal Reserve and its next move on interest rates.
• The probability of additional interest rate increases this year has declined, while Citigroup has gone even further by forecasting that the Federal Reserve could lower rates three times before year-end.
• Markets have responded positively to the possibility of lower interest rates because a lower cost of capital can support corporate profits and stock valuations. However, we should remember that the reason rates may come down is a weakening labor market, which deserves our attention.
• We continue to closely monitor the concentration within today’s stock market. The Magnificent Seven now represent approximately one-third of the market, while the ten largest stocks account for nearly 40%.
• That level of concentration is the highest we have seen in roughly 26 years and brings back memories of the technology-heavy market leading into the dot-com crash.
• The four largest technology companies are expected to spend approximately $725 billion on AI infrastructure this year, representing a substantial increase from last year’s already significant investment.
• The question is not whether artificial intelligence has tremendous potential. The question is whether today’s extraordinary levels of spending and market valuations can ultimately be supported by sustainable profits.
• We are also watching the quality of reported technology profits, particularly where gains may be influenced by acquisitions and other forms of financial engineering rather than traditional operating results.
• At the same time, some of the largest technology companies are taking on substantial amounts of debt to finance the AI race, despite historically being companies with exceptionally strong cash positions.
• History reminds us that revolutionary technologies can transform the world without guaranteeing that every investment made during the excitement will succeed. We saw similar dynamics during both the railroad expansion and the development of the internet.
• None of this means we are predicting an imminent market crash. Our objective is to recognize potential risks in advance and have a strategy in place before those risks become a problem.
• Our Invest and Protect strategy is designed to allow us to participate in market growth while maintaining what we believe is a tolerable downside if conditions deteriorate significantly.
• If markets continue higher, we want you participating in that growth. If conditions change and our strategy signals elevated risk, we are prepared to take action with the goal of protecting your retirement from catastrophic losses.
• Most importantly, we do not share these risks to make you worry. Quite the opposite. We want you to have confidence knowing that we are watching these developments, minding the store, and managing your investments with your retirement goals in mind.
• Our goal remains simple: make your money last as long as you do, so you can spend less time worrying about markets and more time enjoying your second childhood without parental supervision.

Transcript:

Hello, everyone, and welcome back to our weekly market alert video for today, which is August seven, 2026, and we have a lot to talk about because we are on essentially a roller coaster ride. It goes up, it goes down, it goes up, it goes down with regard to what the Fed is going to do, and of course we all care very much about what the Fed is going to do because it affects our investments. So we have a ton to talk about. We got jobs numbers, we got what the Fed did, and then what the future looks like. And then I’ve got four things for you to worry about if you want to, or you can let us do the worrying for you so that you don’t have to pick yours. I would pick the one. Let us worry about it. So first of all, before we get going, I want to have a shout out for Scwper Nation. All of you out there who are Scwper’s, and again, if you don’t know what that is, Scwpers is the acronym for Second Childhood Without Parental Supervision. That’s what we want you to do. We want you to retire, go play, have fun, enjoy. That’s what you work so hard to do. Let us worry about all this boring stuff for you, so that you don’t have to.

So, we’re going to talk then. First of all, the economy in July. By the way, if you’re looking at me loud right now, you’re noticing I may I’m not wearing a tie here. This is not a clue as to the result of the survey that we took a couple of weeks ago, okay, we’re going to announce that and the comments that you guys made, you guys are funny. You know, we’re going to share some funny stuff, but also, we’re going to just we’re going to finally put to bed: should I be wearing a tie every week in my weekly market alert videos, or should I have the more relaxed look that you know is prevalent today. Which one wins?

So, we’re going to have that burning question answered for you next week. But in the meantime, let’s talk about first of all, the economy lost 23,000 jobs in July. This is the first outright decline in months. And economists, by the way, I heard something really funny. Economist economics is the art of predicting the past. Okay, but anyway, the unemployment rate went down to 4.1% and but that’s a bad thing. Why? Because the reason why it went down is because people have given up looking for jobs, and so you know that that’s not a good thing when there are not enough jobs to satisfy the demand, and people just quit. And also we got revisions. Now you guys know how we feel about the Labor Department, right? Last year they actually had a month where they revised the jobs numbers that they had come out with by 1 million jobs. 1 million jobs.

How can you be off by a million jobs? I don’t even get it. But here they are. They’ve revised the last two months, and guess what? Over 100,000 fewer jobs were created than existed a month ago when they gave us the data.

So, we’re supposed to make decisions. The Fed is supposed to make decisions based on data they give us that is so wrong that it’s almost like I don’t know how you do it. So, what do we take from all this? Well, one of the things that’s happened is that the likelihood that the Fed is going to raise interest rates later on this year-that’s what everybody thought. Inflation’s high, jobs are plentiful. The economy is roaring. We need to cool it down. We need to raise interest rates and get everything under control. Well, that was a 60% plus chance that later on this year the Fed was going to raise interest rates.

Well, because of the jobs numbers we just got, now that went to 44% So now the odds are that they will not raise interest rates, and get this, Citigroup, Citigroup actually came out and said they think that the Fed is actually going to lower interest rates three times before the end of this year. So, we have a totally contrarian Citigroup, and they’re one of the biggest banks in the world, if not the. And so yeah, so we got to pay attention to them. So, the Fed right now is like, you know, what do I do? Remember, welcome back, Cotter. I’m so confused, right, John Travolta? I’m so confused.

So, what do we take from all this? Well, you know, the market is celebrating. Why? Because if the Fed is going to maybe lower interest rates or at least not raise them, then the cost of money doesn’t go up. And as you guys know, the cost of money is what drives a lot of for a lot of companies their profits. And if their profits go up, then it means their stock price should go up as well. And it’s a it’s a virtuous circle. So, if if this data tells us we’re not raising interest rates, the market is celebrating, but you know they’re celebrating a bad thing, and in the long run, the bad things don’t bode well for investor investments.

So, I want to give you four things to to think about, four things to worry about if you want to, or four things that you know we’re worrying about for you, so that you don’t have to. Okay, number. One concentration, and this is the theme we’ve been talking about. You know, in terms of are we in a bubble? There are seven companies. They’re called the Mag Seven, the Magnificent Seven. They now are about a third of the entire stock market, and the top 10 stocks we talked about this are almost 40% of the entire stock market. That’s the most top-heavy we’ve seen in 26 years.

This is going back to Y2K when we were so concentrated in all those technology stocks, and the market crashed 49% after that. Okay, so this is not good stuff. Number two, spending: the four biggest tech companies are now pouring roughly 725. billion dollars into AI. Okay, so this is about 77% increase over last year, and the projections are now that it’s going to be over a trillion dollars next year. So this is a massive amount of spending on this infrastructure, this AI, and we’ve seen where companies are saying we can’t afford this stuff.

Microsoft blew through their budget in the first three months for the whole year, so they’re like, “Okay, we’re done spending on AI. They cut it off, so it’s expensive. Maybe even more expensive than humans. Who thunk? Right. Number three is that the profits are actually not all cash. We talked about this last week. A lot of this is financial engineering. Amazon, for example, and Alphabet, which is Google, they are buying these small companies at these low prices. Once these small companies become part of Amazon, they get the Amazon stock price.

So, what happens is you get this immediate increase in in the stock price, but it’s not profits. It’s financial engineering. They’re basically like manipulating their stock price by buying these small companies, and so you know this isn’t real profits. And then number four is they’re financing this with incredible amounts of debt. The predictions are that it’s going to be 1.5 trillion dollars of debt. These are companies that were swimming in cash, and now they’re all going into debt to in this in this race. So, all these things are not good things necessarily. Now they’re investments in the future. They may pay off, but if we learn from history, what we know is, for example, Y2K.com crash.

What happened there was they were building out the internet, and sure enough, you know those stock prices went way, way up. We had the crash of Y2K. Why? Because this incredible infrastructure that they built, nobody knew how to use it and make a profit with it. Well, right now there are signs that yes, we’re building out all this AI, but it’s turning out to be very, very expensive, and it’s not as smart as we thought it was. You know, right now I’m wondering if if maybe we should be scared of AI because it’s dumb, it’s not smart, and so because of that, now we have a situation where potentially yes, we’ve built out this whole thing, and then we have a crash coming. There’s another example of that if you go back in history, and that is the railroads. You know the railroad companies when they were building out all the railroad tracks to go from east to west in the United States. Their stock prices went through the roof. It was a massive buy because wow, these companies are going to make so much money.

They’re going to be shipping stuff across the country, and it’s cheaper than all these other ways, and it’s fantastic. And they built it all out, and everybody goes, “Well, wait a second. There is nothing between the east and the west. We got to wait for all these towns to be built up, so they buy all this stuff. We got to be, you know, nobody knows how to ship this stuff. We don’t have the trains, you know, that we can put the stuff in to ship it across the country. And those stocks crashed, so don’t get cocky, kid, as Han Solo famously said in Star Wars. Right.

So, what does this all mean? Well, what it means is I hope you have the peace of mind of knowing that our invest and protect strategy tells us we want to ride this. You know the upside. We want to have an unlimited upside, and we want to have a protected downside. That’s what we want-a tolerable downside. So if the market wants to run some more and go up another 50% great. We’re going to ride that wave right along with it. We want to do that. But if it turns and it goes down the other way significantly, then you know. I hope it gives you that peace of mind that we will take action to protect your retirement from catastrophic losses. And of course, you guys know, you know. And this falls under the category: if you don’t blow your own trumpet, ain’t nobody else going to do it for you.

So, in 2007, in November, we told everybody, you know, on my radio show and everywhere we could scream for the top of the mountaintops. Get out, stay out, and we stayed out. We told people to stay out for a year and a half during all of that. And the crash that came after that, those that followed our advice, they didn’t lose money because they were in cash. So we want to, we will act on your behalf.

I want you to know that we will mind. Store, so all of this is not to worry you. In fact, I hope it is to give you the peace of mind that we’re on it. We’re minding the store for you. Now, if you do want to worry about something, worry about your friends that are not with us, because if this comes, if this is a big bad bear like what happened in the past, then they’re going to be subject to massive losses, and you can spare them that by bringing them over to us, and to the best that we can, we will we will adopt the same strategy for them that we have for you, and potentially protect them from another market crash. So you’ll be doing them a favor. So send them our way. So a lot to talk about this week. Bad news was good news. The good news is bad news and bad. My head is swimming. I hope you have a great weekend. I hope this video finds you healthy, wealthy, and wise. And we’ll talk soon.

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