👉 The Investing Week Ahead: 4 of the Mag 7 Report

Here’s an episode that dozens of you had asked about — so we made it!

Amazon Web Services (AWS) continues its impressive growth trajectory into Q2 — boosted by new product releases and great market sentiment towards cloud computing. AWS's commercial momentum is strong — particularly in AI and machine learning — with its Bedrock platform becoming one of the fastest-growing services.

The AI segment alone is projected to generate tens of billions in sales in the coming years.

Amazon's retail segment is set for double-digit growth, driven by strong consumer demand and positive Prime membership trends. The company's ability to deliver about 8 billion Same-Day and One-Day units in 2024 — up from 7 billion in 2023 —highlights its efficiency and appeal. This growth in delivery speed is boosting purchase frequency and consideration among consumers, naturally expanding Amazon's market share in both B2C and B2B segments.

Microsoft will release its quarterly earnings on Tuesday after the bell. Analysts expect more than +9% growth in EPS and around +15% growth in its top line. The company has recently been in the international spotlight due to CrowdStrike’s global IT blackout.  This year, Microsoft is the second-weakest performer (after Tesla) within the Mag 7.

Microsoft's Azure business is seeing rapid growth — fueled by large enterprise deals for AI training and inference workloads. As AI demand rises, Azure is benefiting — with the cloud platform maintaining around +30% growth for three consecutive quarters and expectations of hitting +31% this quarter. Exclusive access to OpenAI has boosted Azure to the front of the cloud race — contributing 7 points to growth last quarter.

Despite supply constraints, Azure's growth outlook remains strong, with expectations of continued acceleration. Notably, over 50% of workloads are still on-premises — indicating substantial non-AI growth potential. Azure's comprehensive software and operating system solutions give Microsoft a unique edge over competitors in the cloud market.

SIGGRAPH, a leading conference in computer graphics, has been instrumental in showcasing groundbreaking research and innovations since 1974. If any groundbreaking news is going to come this week from something other than earnings calls — it very well could be this.

The yen's previous weakness had inflated import prices and reduced consumption, increasing political pressure on the BOJ to act. Market expectations for a July rate hike have risen, with overnight index swap rates indicating a 40% chance, up from 25% post-June meeting. The BOJ's policy-setting meeting is scheduled for July 30-31, where a potential +0.15% increase is anticipated.

What We’re Watching:

The Federal Reserve is expected to maintain its key interest rate at a 23-year high of 5.25-5.5% during the July 30-31 meeting but may indicate a potential rate cut in September.

With the unemployment rate rising to a two-year high of 4.1% and inflation slowing to just 0.5% above the Fed's 2% target, some economists believe waiting until September for a rate cut could be too late. Market predictions for a rate cut have increased, with the CME FedWatch Tool (above) giving a nearly 90% chance of a rate cut in September.

Fed Chair Jerome Powell has highlighted the risks of cutting rates too late or too little — which could weaken economic activity and employment. Policymakers face a critical decision as they balance the cooling inflation against a weakening labor market, with the potential for two or three quarter-point rate cuts by year-end.

The US economy added 206K jobs in June 2024, slightly below a downwardly revised 218K in May.  The July jobs report is expected to show 175,000 nonfarm payroll jobs were added to the US economy.

“The 180K increase to payrolls we expect in July would still be a respectable gain, but would underscore that, directionally, the jobs market is deteriorating” 

— Jay Bryson, Wells Fargo Economics

In June 2024, the unemployment rate in the United States increased to 4.1%  – marking the highest level since November 2021.  The number of unemployed people grew by 162,000, reaching a total of 6.811 million.

"By a range of measures, including the unemployment rate, quit rate, level of temporary help workers and small business hiring plans, the labor market is not only softer than a year or two ago, but weaker compared to its pre-pandemic state." 

— Jay Bryson, Wells Fargo Economics