August finished stronger than many expected. The Dow, S&P 500, and Nasdaq all rose, with tech leading. My view for the rest of the year stays positive but selective. The market sits within 1% to 2% of its all-time highs, so stock picking has to be precise.
Big tech as a supply chain bet
Microsoft (MSFT), Google (GOOGL), and Broadcom (AVGO) together make up 18% of the S&P 500. Buying one or all three is really a bet on the AI supply chain. Microsoft (MSFT) does not need AI to work; AI just speeds up its growth. It is a strong company I have called undervalued all year, and it has popped recently. People overlook it, but well-funded franchises like this often have the best research and best AI behind them, so they should be core holdings.
Wall Street keeps writing Google's (GOOGL) obituary, yet it keeps out-earning everyone. These big companies are well-funded. Long term, whoever can invest the most in AI will do best.
Broadcom (AVGO) trades at 60 times earnings, but every hyperscaler's AI roadmap runs through Broadcom's schedule, so it stays a real play despite the test its results present.
Energy side of the barbell
I favor a barbell between tech and energy. Some data centers use as much power as a mid-size city, which has kept energy strong. Energy can be tricky and volatile because so much hinges on geopolitics; oil prices can slide fast and the stocks tied to them fall with it.
EOG Resources (EOG) trades at 11 times earnings, below the S&P 500, and pays a 3% yield. I see it as best in class among shale operators - lowest cost, disciplined, with a real dividend and strong contracts. These companies are here to stay.
AI names and the rest of the year
Nvidia (NVDA) has done well recently. The under-the-radar pick is Microsoft (MSFT), a franchise with name recognition whose growth AI will accelerate.
September is usually a weak month. I stay selective. Cash still pays up to 4%; some money markets return 4.1% right now, so keep dry powder ready. This is a midterm election year, which brings volatility. Volatility has run about 9%, below the average of roughly 13.6% since the 1980s, so I expect more of it.
A client who runs Chevron's (CVX) operations at the Strait of Hormuz is very worried. Iran has been disruptive there. I do not think it turns catastrophic, but it has played into inflation, which has crept up. At the same time, corporate profit growth is extremely good right now, and that is what will drive the economy.
