BlackRock's Koesterich Sees Upside in Stocks to Year End

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00:00Russ Kostrick of BlackRock writing, we expect the economy to remain resilient.

00:03Fiscal tailwinds, monetary easing, AI momentum and favorable seasonals should support stocks

00:09into year end. Russ joins us now for more. Russ, good morning, sir. Is there anything

00:12about the credit risk, the credit issues of the past few weeks that undermines that argument?

00:18You more, Jonathan, I think you've got to be aware of the credit markets. Just to be clear,

00:21if you look at the broader aggregates, we really haven't seen anything that is that

00:26disruptive in credit markets. And we went through a similar incident back in March

00:30of 2023 with the regional banks, as you'll remember. So I do think you always want to be

00:36aware of the credit markets. But as you mentioned in the introduction, there are three factors right

00:41now that are a tailwind. The economy has been resilient. You've seen economic estimates come

00:45back, earnings estimates with that. The Fed is cutting into strength and the AI momentum in the

00:51near term looks pretty solid. So as you think about the next call of three to six months,

00:56in the absence of any new news, I do think that takes the market higher.

01:00So, Russ, as you noted back in 23, there was a concern over regional banks, but largely,

01:05almost exclusively over interest rate risk. Here we are two years later focused on credit risk and

01:10the risk that maybe the cycle is turning. Russ, is there something else that you would look for

01:15that suggests that maybe there's no evidence of that at all, that these are idiosyncratic issues,

01:19that if you look more broadly, things still look pretty good?

01:22Yeah. Well, I think there are a couple of issues. The first is you have to acknowledge that some of

01:26the stress you've seen so far has happened with companies that are more geared to lower income

01:32consumers. And there is stress with lower income consumers. We've seen that for some time.

01:36That's been occurring since rates were going up over the last one to two years. So that is a pocket

01:41of stress. However, if I look at the broader economy, if I look at the wealth effect, if I look at where

01:47the labor market is, if I look at where disposable income is, do I see an economy that is evidencing

01:53the type of stress that would get you really worried about credit markets? Probably not. Again,

01:58pockets of concern, places you want to be aware of. But in aggregate, you still have a very resilient

02:04and robust economy, which should be supportive of not only the credit market, but also the stock market.