The Insider Report: Powell Delivers – Should We Be Careful What We Wish For?

Market Overview

Stocks started off quietly last week until Powell's remarks at Jackson Hole, which all but confirmed rate cuts. Stocks exploded higher and the Dow hit a record. It finished up 1.53% on the week while the S&P 500 was only up 0.27%. The Nasdaq actually finished down 0.58% as tech lagged on the rally – is this a warning sign? Crypto surged higher along with metals as the Dollar tumbled lower. Now we'll see whether this rally has legs truly or if we're in a blowoff phase before a reversal back lower.

Stocks I Like

Kanzhun (Ticker: BZ) – 31% Return Potential

What's Happening

• Kanzhun Limited (BZ) is a leading Chinese technology company focused on online recruitment services, utilizing its AI-powered BOSS Zhipin mobile app to connect job seekers and employers, enhancing recruitment efficiency and offering investors exposure to the digital human resources sector with innovative, technology-driven solutions.
• The company's most recent quarterly report showed revenue of $1.92 billion and earnings of $769.9 million.
• This valuation on BZ is up there. P/E is at 37.70, Price-to-Sales is at 8.98, and EV to EBITDA is at 36.98.
• From a technical perspective, BZ recently broke out from a cup and handle formation. This is a strong signal that an acceleration to the upside is underway.

Why It's Happening

• SMEs, especially firms with fewer than 20 employees, are the fastest-growing customer segment, contributing roughly 20% of total revenue. This focus on the SME market, which is typically underpenetrated but highly dynamic, presents a scalable and lucrative growth avenue for Kanzhun as it tailors services to meet diverse enterprise needs.
• Kanzhun continues to leverage cutting-edge AI to enhance its BOSS Zhipin platform, driving better matching efficiency between job seekers and employers. AI personalization not only improves user experience but also lowers operating costs, directly supporting profit margin expansion and competitive differentiation.
• Kanzhun has increased and extended its share repurchase program authorization to $250 million through August 2026, up from the previous $150 million. This significant capital return program highlights management's confidence in the stock's valuation and is likely to create upward pressure on shares by reducing share count and boosting earnings per share.
• Verified monthly active users expanded 16.5% year-over-year to 63.6 million, while total paid enterprise customers increased 10.2% to 6.5 million over trailing twelve months. This robust user engagement and client acquisition across diverse industries underline the company's strong market penetration and long-term revenue visibility.
• The company achieved an adjusted operating margin of 41.9%, up 7.5 percentage points year-over-year, aided by a 3% decline in cost of revenue and a 23% reduction in sales and marketing expenses. Such margin expansion indicates Kanzhun's ability to grow without excessive spending, positioning it uniquely to drive sustained profit growth and generate shareholder returns.
• Kanzhun Limited reported solid Q2 results with revenue reaching $293.5 million, marking a 9.7% year-over-year increase. 
• Analyst Ratings:
  • Barclays: Overweight
  • Bernstein: Market Perform
  • Citigroup: Buy

My Action Plan (31% Return Potential)

• I am bullish on BZ above $18.00-$18.50. My upside target is $30.00-$32.00.

Resideo Technologies (Ticker: REZI) – 18% Return Potential

What's Happening

• Resideo Technologies, Inc. (REZI) is a global provider of smart home and security solutions, leveraging advanced technology to deliver comfort, energy management, and safety products, offering investors exposure to the residential technology sector with innovative, connected home solutions.
• The company's latest quarterly results showed revenue of $1.94 billion and earnings of $99 million.
• Valuation is steep in this stock. Price-to-Sales is at 0.64 and Book Value is 14.33.
• From a technical viewpoint, we have a bull flag pattern setting up here. This is setting the stage for another powerful rally higher after a brief period of sideways action. It's looking very strong here.

Why It's Happening

• ​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​Resideo announced plans to spin off its ADI Global Distribution business in the second half of 2026, a strategic move anticipated to unlock shareholder value through a sum-of-the-parts valuation. The separation will allow clearer market focus and potential multiple expansion for both entities.
• Resideo agreed to a one-time payment of $1.59 billion in Q3 2025 to terminate the indemnification agreement with Honeywell, removing a major structural overhang on earnings. This decisive move greatly simplifies Resideo's financial profile, providing a clear path to enhanced profitability and reduced cash flow volatility moving forward.
• Resideo's rollout of the Honeywell Home FocusPRO thermostat line and new First Alert smart alarm systems have generated strong traction with professional HVAC and security installers. These innovative product introductions help the company capture replacement demand and broaden its addressable market in the smart home and building sectors.
• CEO Jay Geldmacher emphasized Resideo's "exceptional" Q2 performance, affirming management's commitment to innovation, margin expansion, and capital discipline. The company is well-positioned to capitalize on favorable trends in connected home technology and professional installer channels, underpinning long-term value creation.
• Gross margin expanded to 29.3% in Q2 2025, a 120 basis point increase compared to the prior year. This consistent margin improvement underscores Resideo's pricing power and cost efficiency in an inflationary environment, enhancing profitability outlooks amidst market uncertainties.
• Resideo delivered a record net revenue of $1.94 billion in Q2 2025, representing a robust 22% increase year-over-year and well above the high end of management’s outlook. This standout revenue growth reflects strong demand across its Products & Solutions and ADI Global Distribution segments, signaling solid momentum in its core markets that bodes well for sustained top-line expansion.
• Analyst Ratings:
  • Morgan Stanley: Overweight
  • JP Morgan: Neutral

My Action Plan (18% Return Potential)

• I am bullish on REZI above $26.00-$27.00. My upside target is $40.00-$42.00.

Avidity Biosciences (Ticker: RNA) – 51% Return Potential

What's Happening

• Avidity Biosciences, Inc. (RNA) is a biopharmaceutical company pioneering RNA therapeutics through its proprietary Antibody Oligonucleotide Conjugates (AOC) platform, combining monoclonal antibodies with oligonucleotide therapies to target rare genetic diseases, offering investors exposure to innovative treatments for previously untreatable conditions.
• The company's latest quarterly report showed revenue of $3.85 million and a loss of $157.31 million.
• Valuation in RNA is notably steep. Price-to-Sales is at 529.67 and Book Value is just 9.27.
• From a charting perspective, it seems to be a week filled with bull flags. We have the flag pole already established in RNA and are now flagging. Another powerful surge higher is in the works after it finishes digesting the near-term gains.

Why It's Happening

• ​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​Resideo announced plans to spin off its ADI Global Distribution business in the second half of 2026, a strategic move anticipated to unlock shareholder value through a sum-of-the-parts valuation. The separation will allow clearer market focus and potential multiple expansion for both entities.
• Resideo agreed to a one-time payment of $1.59 billion in Q3 2025 to terminate the indemnification agreement with Honeywell, removing a major structural overhang on earnings. This decisive move greatly simplifies Resideo's financial profile, providing a clear path to enhanced profitability and reduced cash flow volatility moving forward.
• Resideo's rollout of the Honeywell Home FocusPRO thermostat line and new First Alert smart alarm systems have generated strong traction with professional HVAC and security installers. These innovative product introductions help the company capture replacement demand and broaden its addressable market in the smart home and building sectors.
• CEO Jay Geldmacher emphasized Resideo's "exceptional" Q2 performance, affirming management's commitment to innovation, margin expansion, and capital discipline. The company is well-positioned to capitalize on favorable trends in connected home technology and professional installer channels, underpinning long-term value creation.
• Gross margin expanded to 29.3% in Q2 2025, a 120 basis point increase compared to the prior year. This consistent margin improvement underscores Resideo's pricing power and cost efficiency in an inflationary environment, enhancing profitability outlooks amidst market uncertainties.
• Resideo delivered a record net revenue of $1.94 billion in Q2 2025, representing a robust 22% increase year-over-year and well above the high end of management’s outlook. This standout revenue growth reflects strong demand across its Products & Solutions and ADI Global Distribution segments, signaling solid momentum in its core markets that bodes well for sustained top-line expansion.
• Analyst Ratings:
  • Wells Fargo: Overweight
  • Barclays: Overweight
  • Cantor Fitzgerald: Overweight

My Action Plan (51% Return Potential)

• I am bullish on RNA above $37.00-$38.00. My upside target is $70.00-$72.00.

Market-Moving Catalysts for the Week Ahead

The Powell Pivot

At the Fed's Jackson Hole meeting, Chair Jerome Powell was warmer about interest rate cuts, as he noted low unemployment but restrictive monetary policy. He finally acknowledged the economy's outlook and risks may require policy adjustments.

Powell highlighted shifting risks to the Fed's goals of full employment and stable prices, driven by changes in tax, trade, and immigration policies, and signaled the Fed's readiness to adapt to new economic challenges. Regardless, I think he'll be gone come next year as the Fed Chair.

Markets expect a ~75% chance of a quarter-point rate cut in September, per the CME FedWatch tool. Amid inflation and valuation concerns, lower rate expectations have boosted small-cap and value stocks, as investors shift away from megacap tech, and into companies more reliant on lower interest rates.

A.I. Hype Over?

It's really amazing once you reach the point of understanding how sentiment follows price, not the other way around. Just a few weeks ago, it was the end of the economic world because A.I. was going to replace everyone's jobs due to achieving artificial general intelligence (AGI).

Then a couple weeks later, just days off the highs, it was about how ChatGPT's newest features were a dud, and now, after stocks experienced a very mild correction (if we can even call it that), there are people saying the A.I. bubble is over.

Let me tell you one thing – I'm taking the opposite side of that call. I think there is still plenty of room to run higher in the A.I. trade, and the fact that people are panicking over a 5% downswing is utterly irresponsible. Sure seems like they're trading way too large for their own accounts.

Sector & Industry Strength

Powell definitely delivered the goods on Friday and kept the bull market alive and well in the stock market. We're still seeing leadership come from all the right sectors. Technology (XLK) is the best-performer since April 7's low, and as long as that remains the case, this market is bullish.

We still see all the defensive sectors in the bottom-half of the performance pack. Utilities (XLU) are stuck below materials (XLB), which is an encouraging sign. Industrials (XLI) is in second place, and the rebound in consumer discretionary (XLY) is a notable bullish signal.

I'm watching the healthcare (XLV) sector here, mainly because I see some opportunity in biotech. Keep an eye on real estate (XLRE) as well with the prospect of rate cuts coming in just a few weeks too.

Editor's Note: Rotation into some defensive areas – part of breadth expansion or a warning sign?

Tackling Two Heavy Hitters (Sector ETF: XLV/XLK) 

It's time to take a look at the two biggest sectors in the S&P 500 – technology (XLK) and healthcare (XLV). Although they're the largest, they fall into very different categories. Tech is growth oriented, but healthcare tends to be more defensive.

Technology has been making this market over the past few years, while healthcare has been one of the worst-performing sectors in the past few years. However, let's not lose sight of its importance and other notable sectors it covers.

I'm thinking especially about biotech within the healthcare space, since it has a nice overlap with technology too. In the meantime, we'll have to keep an eye on this downtrend in this ratio and the downward sloping trendline. If the ratio closes above there, we are looking at a healthcare run that could shock many.

It's China Time (Sector ETF: FXI/SPY) 

I want to take some time this week to just double down on my call for Chinese stocks to significantly outperform the S&P into the foreseeable future. This ratio is looking at FXI, a large cap Chinese ETF, against the S&P 500 (SPY).

This ratio had been in a downtrend for a while, but ever since early-2024, FXI has stealthily been outperforming SPY. If you've been following alone, you've been privy to this fact, but all I hear about still is how the Chinese market is in trouble.

I'm keeping a close watch on this rounding bottom/saucer formation. If the ratio can break above the upper trendline of this pattern, get ready for a Chinese market mania. We are prepared and we are ready – don't be narrow minded on the U.S. being the only game in town.

Alright, Bond Bulls, Any Day Now (Sector ETF: BIL/TLT) 

When it comes to bonds, there is a reason why different time frames offer different interest rates. In a healthy bond environment, investors that tie up their money for longer periods of time are compensated for this by receiving a higher interest rate.

Problems start to arise when higher rates can be obtained with shorter-term bond investments, as it creates a liquidity drag in those longer-term bonds. The ratio here between short-term Treasury Bills (BIL) and long-term Treasury Bonds (TLT) is exhibiting this clearly.

For years now, BIL has outperformed TLT. Long-term bonds have performed terribly, but now, with rate cuts around the corner, bulls have the possibility to step up and unwind years' worth of damage. I am open-minded to a false-breakout from the triangle formation on this chart below.

My Take:

There's been a couple eyebrow raising data points on the inflation front lately, but honestly, the bond market doesn't seem very concerned. If inflation is going to stay contained for now, then I'm looking for this ratio to start dropping hard – and it could happen very fast too.

This means that long-term bonds could offer a nice TRADE. And I want to be very clear about that. I don't think a long-term bond rally would last more than several months or a year at best. This isn't about holding it to maturity but a last gasp from governments to try and shore up their finances before they lose control.

Cryptocurrency 

No need to complicate things – Ethereum is where all the action is in crypto run now. It remains the best-performing asset since the April 7 bottom, and it's key to all the exciting things happening in finance right now.

The trend remains in favor of the bulls with the series of higher-highs and higher-lows. Note how it successfully retested former-resistance-turned-support in the 4000-4200 zone last week and reinforced the uptrend. It's very bullish above there.

The next resistance zone to watch is in the 4800-5000 area, which is where the former all-time high resides. I am keep an initial upside target around 7000, although 8000 is still on the table too.

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