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Well, as investors debate the depth of the Fed's first rate cut, largely expected in September, we want to talk about how investors should be positioning their portfolio. Here to give us his perspective, excuse me, Ken Mahoney, who's the CEO of Mahoney Asset Management, Ken, great to see you and thanks for hopping on the program with us. I mean, you heard the layout there of what we're expecting going into the next Fed meeting and how investors are best trying to position themselves, not fighting the Fed, but anticipating, perhaps, what the Fed may do in terms of the depth of the cut that we might see. What would you be advising?

Right. Well, first of all, I would say, Brad, be careful what you wish for. Like, if you have 50 and 50 and 50, that's usually accompanied by slow economic activity and something's just fell out of bed. And we're in the camp, we kind of like higher for longer, we know they've shifted. It was funny though, last week, when we had the market mayhem, Monday's meltdown, down over a thousand points and people screaming, "Oh my god, emergency rate cut, emergency." I mean, seriously, stop that. Okay? You don't want an emergency rate cut. That actually does worse for the markets having that. So, I think they start off with a quarter. I think, you know, Jerome Powell recognized, another people recognized, it's a campaign and rather go slow at it and slow at it, you know, because like the inflation numbers, while they are tame at 2.9% year over year, and certainly a lot better than 9.7% at its height, you know, look at the housing shelter numbers, look at the insurance, car insurance, home insurance, going up quite a bit. So, we're not totally out of the woods. We could just say, okay, down 50 basis points and not have an opposite reaction. So, I think for investors, remember, like, you'd rather have a quarter, and for a lot of companies, by the way, a quarter, especially the stocks we like Nvidia, Apple, Microsoft, really doesn't do much of anything to move the needle. But at the end of the day, be careful what you wish for.

And so with that in mind, Ken, and you started to touch on this, what is the playbook that you're thinking through and that you're kind of putting together here, as we enter into a cutting cycle set to commence?

Right. So we still think bigger is better. You look at the small cap Russell, it had some making up to do coming in July. The NASDAQ's up 24%, small cap Russell is unchanged. Of course, the big disparity, and we saw that kind of narrow a bit. But again, when you go through the Russell 2000, 70% of those companies do not make money. So, if we're going to be in a kind of different environment, we still like to think big is better. Those companies that, like Apple has 2.2 billion devices, Microsoft, 1.2 billion customers, they can leverage that. Great balance sheets, be able to buy back stock. And they're again, they have a pretty wide mode to get into the territories. So, again, we don't really buy the small cap into large cap. We still think large cap is the place to go and even with we start having some rate cuts, we still think money's going to go where there's the best chance for growth for top line for beats and raise guidance. And many of those companies that are in high-tech consistently beat and raise guidance.

When we think about the number of companies that are trying to show investors that they can maintain margins and maintain earnings growth, it also comes with this backdrop, this mindset that if the Fed is going to begin cutting and at an accelerated pace, then that means that they're seeing something in the economy that signals that they need to do so. And so how would that pass through to some of the earnings results that we do see in future periods?

Right. Well, you kind of go where, you know, kind of the William O'Neil story, you know, find the best sectors, the best companies in those sectors that usually lead it. Say my conductors. This CapEx expenditures, even with the backdrop of a software economy, perhaps, and with the Fed cutting, perhaps, it still remains a place to be. I mean, I look at other industries, autos, airlines, retailers, and there's not a lot of excitement there. You know, like Nike, one, 2% top line growth. You're going to find the growth, I believe in semiconductors, these companies are still building out. And then the CEO in Nvidia, which is the epicenter of all this, he said we're in the second or third innings. So there's a few more innings. May not be there for seventh inning stretch, Brad, but certainly there's still a lot more in front of us, a lot more CapEx spending. This is not just a couple quarters of spending. This should be a multi-year amount of CapEx spending to get companies up to snuff with their technology.

Just one last question for you here, as you were mentioning some of the winners that we've seen thus far, is there a shift in the investment thesis and the thesis that's been super thematic around generative AI that's benefited some of the large cap tech stocks, mega cap tech stocks that you mentioned just a moment ago? Are you foreseeing any shift and if so, where would it be into?

Look, this earning season, I think actually puts an exclamation point on it that AI spend is here, AI generator is here. So that does not change the theory one iota. In fact, it actually adds to the theory that we're in the early stage of this and there should be a lot of CapEx expenditures. The only thing that came out as, Brad, though, as a negative and it happened last quarter, too, is let's say Meta spends $4 billion. You know, they don't recoup that in two months or six months or a year. It's a longer-term investment for efficiency. And Zuckerberg said, "Look, I'd rather be in front of this and have, you know, these assets and have this technology than have to wait to get this technology." So I think the AI, this past earning season, a lot of these top line numbers were really good, a lot of CapEx spending. AI is going to be here for quite some time, but the investment return, investors need to be a little bit more patient, you know, until they run that out.

Ken Mahoney, who's the Mahoney Asset Management CEO, Ken, thanks so much for taking the time. Good to see you again.

Absolutely.