This stock market rally is just getting started

The Street

B. Riley Wealth's Chief Market Strategist Art Hogan explains why today’s highs might only be the beginning of a bigger rally.

Transcript

00:00So, Art, the S&P 500 is at or near record highs.

00:04Are you a believer or skeptic of this rally?

00:08I'm certainly a believer.

00:09I think the reason we got here is pretty intuitive.

00:13We started this year in markets and were quite defensive.

00:17In general, people wanted to sort of get out of risk assets.

00:20They were selling things like technology, communication services, and consumer discretionary,

00:25and buying things that were very defensive, like utilities and healthcare and consumer staples.

00:30And that was all because the front end of this new administration's policy rollout

00:34was really the tough medicine, if you will.

00:37We had immigration and closed borders, and we rolled out a very chaotic trade war.

00:42And that really encompassed investors' attention all the way through the beginning of the second quarter.

00:48Once we got past this April 2nd Liberation Day and got over the hump of some worst-case scenario,

00:54predictions on tariffs, investors are starting to get a little more comfortable

00:58that some of the good policies might flow through.

01:01And what does that mean?

01:02Certainly, tariffs are not as high as we thought they would be back in April 2nd.

01:06But other things like passing a bill through Congress to continue the corporate tax rate that we have.

01:11And the other is the possibility of less regulation.

01:15And some of those things, the taxes and the less regulation,

01:19would serve as an offset to obviously higher prices because of tariffs

01:22and slower GDP growth because of less immigrations and a shrinking labor force.

01:28So to me, I think we've kind of crossed over the Rubicon on some of the worst-case scenarios.

01:32And now market participants can start looking at things and say,

01:35well, lower corporate tax is probably good.

01:37The Fed cutting rates at the end of the year, probably a good thing.

01:40And certainly, we'll start to feel the effects of less regulation.

01:43We're starting to see that in some of the big banks already.

01:46But is that all priced in with the S&P 500 at record highs?

01:50Is this as good as it gets?

01:51Or can the market ultimately move higher?

01:54You know, it's interesting.

01:55Every time a market comes to an all-time high after having spent some time selling off,

02:00people get concerned that this is as good as it gets.

02:02And if we didn't have all-time highs,

02:04the S&P 500 would be back where it was when I started working at 800.

02:08So, you know, this is not as good as it gets.

02:10I think we've got some good news in front of us,

02:11not the least of which is we're likely increasing everybody's productivity

02:15because of artificial intelligence.

02:17We're likely seeing a lot of smart investment going on

02:21and data center and infrastructure build out.

02:23And that's why it would be industrials are one of the best performing sectors.

02:26I think that's very healthy.

02:27We'll likely see more publicly traded companies than we have right now.

02:31So if we went back 15 years, there was 8,000 publicly traded companies.

02:35Right now, there's only 4,400.

02:36So the fact that we're seeing IPOs come to market

02:38and having a warm reception, I think, is a positive.

02:42I think the most important positive is earnings are growing

02:44and estimates are actually going up.

02:46Last week, fact set showed that S&P 500 estimates

02:49for this quarter of the earnings reporting season just went up.

02:53So beginning of the year, second quarter earnings look like

02:55they might be about 14% year over year for the second quarter.

02:58That went down as low as 7.5%.

03:00We're back up to 10% now.

03:02So that's a good sign.

03:03Earnings heading in the right direction

03:04and a lot of excitement around artificial intelligence

03:07is certainly going to continue to be a tailwind here.

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