Power Lunch 8/31/26

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**Brian Sullivan** (1:05)
A good month for your money. Going out with a bit of a whimper. Welcome to Power Lunch, everybody, with Brian. Kelly is back today, as you just saw her in the previous program. The Dow is at about 300 points. Brent crude oil back above 90 The 30-year bond topping five and a quarter percent. All this, as President Trump threatens new Iran strikes and strikes a big deal with Venezuela for oil, your entire. The setup is ahead.

**Kelly Evans** (1:28)
And forget the home field advantage. This year, it's overseas markets stealing the show. From Asia to emerging economies, international stocks are beating Wall Street at its own game with several markets topping US returns. David Harrow, the co-CIO of International Equities at Harris Oakmark, he joins us live to break down where the value still is and where he's putting money to work. That is coming up.
We've been range bound for August, but even still the major averages are on track for decent gains this month as we move on to September. The Nasdaq's up 3.6%, S&P making some new highs, but September, historically, a weak month for stocks. In fact, since 2006, it's higher just 45% of the time. Its average performance is down 0.6%.
Both are the worst stats for any month of the year. Thank you to Ryan Dietrich for that. We also have the odds of a Fed rate hike at the September meeting ticking up. On the other hand, we're coming off a blowout earnings season with Big Tech that showed the AI story is still very much intact and companies are starting to report tariff refunds. So which signals should you lead? Should lead you? Should you bet on right now? Let's ask UBS Global Wealth Management Head of Equities, David Lefkowitz. It's great to see you here. Welcome.

**David Lefkowitz** (2:38)
Thank you for having me.

**Kelly Evans** (2:39)
So, I mean, we're sailing, we're using the sailing metaphor, sailing through five months straight for the Dow, moving higher. Now September comes and look at the market today. I mean, it's giving you some sense. Look at the momentum trade and how difficult that's been in the past couple of months. So what's your advice here?

**David Lefkowitz** (2:55)
Yeah, our advice is we think the bull market's intact. I think the drivers that have been propelling equities have been, first and foremost, the strong earnings season, which you guys mentioned. And everything that we're tracking says we're going to continue to see very good earnings growth. Not only do you have the AI infrastructure story, you now have a cyclical improvement in manufacturing, in industrials, in financials. So those earnings are coming through at a faster clip. And the consumer, yes, bifurcated, case-shaped, whatever you want to call it, but still resilient because the labor market is still pretty healthy.
Job losses are not very high. So we think earnings growth is still going to be the story.
But as you point out, Kelly, yeah, the Fed is now a little bit more uncertain, a little bit more in play. Could that be some choppiness as we go into that Fed decision period? For sure.

**Brian Sullivan** (3:47)
From September 16th, I think we'll be in DC. That's a live meeting, is it? I mean, the Fed could raise rates.

**David Lefkowitz** (3:54)
Sure.

**Brian Sullivan** (3:55)
Does that kill the stock market rally or is the stock market already pricing in a 50 percent chance of a rate hike, so it won't care if we get one?

**David Lefkowitz** (4:04)
So when I think about what the Fed's impact is on the markets, I think the question is, is what the Fed does, is it going to reduce our expectation for earnings growth or economic growth?
I think one rate hike, two rate hikes, I don't think you're going to see much of a change in how most investors and most analysts are thinking about earnings growth going forward. Certainly, I don't think we would be taking down our estimates in terms of earnings growth. So and to your point, Brian, yes, the bond market already is there, right? So I don't know if you're definitely going to see incremental headwinds from say the tenure going up if the Fed were to hike. So I think calibration hikes, I think that's manageable, could be some choppiness. If we're talking about really moving into restrictiveness, tightening the screws, that's a different story.