00:00Feels a little bit tricky, especially ahead of the big tech earnings, which everyone has been saying this is the thing that's going to keep the equity market afloat.
00:08You're a little bit more skeptical that the earnings are as big of a driver as others.
00:12Yeah, and it's not that we don't think earnings are bad, right?
00:15Like earnings are a very solid foundation here.
00:17And in fact, if you look at the bottom up consensus, it's nudged up for next year from 305 to 306 because of a little bit of rounding.
00:24So, you know, they're technically headed in the right direction.
00:27But we like to look at earnings sentiment.
00:29This is something I've been looking at for 25 years, my entire career as a strategist.
00:32And it's a good way to normalize earnings data between indexes, sectors, industries.
00:37Are you taking numbers up or not?
00:39Like that's really all it's asking.
00:40And what we were seeing is that we had hit typical, you know, kind of highs outside of the recovery on a major crisis in August.
00:48Right. And that was kind of in the mid 60s for the S&P 500.
00:52So like two thirds of your revisions were still to the upside.
00:54That has fallen down to about 52 percent in our latest update.
00:58If you look underneath the surface, the tech sector is sitting up at typical highs on that indicator.
01:04Every other sector has decelerated.
01:05Things like industrials and materials have actually fallen into negative revision territory.
01:10The Russell 2000 has actually fallen into negative revision territory.
01:13So it's just a way of saying, look, we had a tremendous amount of earnings enthusiasm and optimism in that last reporting season.
01:20It got about as good as it tends to get.
01:22And now it's coming back down to earth.
01:25It's going to be, I think, make or break in terms of what the tech companies do this week.
01:28The tech sector has been doing an enormous amount of heavy lifting.
01:31We have, by the way, an amazing function on the Bloomberg terminal, EEG.
01:36I know you look at a 12 month rolling average of earnings revisions, right, the next 12 months.
01:41But if you look at EEG, you can see the past few quarters.
01:45Joe, can you pull it up?
01:46And here you see, you know, Q2, we jumped up, obviously, right before earnings.
01:52Q3, we also are coming up right in the last few trading sessions.
01:57But Q4 doesn't look that great so far, and it's clearly slowing down.
02:03I'm curious about the rest of the S&P versus the tech, right?
02:06Because I heard you telling Nathan Hager this morning on Bloomberg Radio that the rest, like the 490, right, is valued at 18 plus times forward earnings, which is pretty heady stuff.
02:18Yeah, look, everybody's trying to say we're in this AI bubble.
02:21I think we have a valuation problem in the NASDAQ 100.
02:24I think we have it in the S&P cap weighted.
02:26I think we have it in the S&P top 10 names, which is, you know, MAG7 plus a couple extras.
02:30You're trading at the ceilings that have marked kind of the last 10 years, not necessarily at tech bubble highs.
02:36But when we look at the rest of the market, so S&P, X, the top 10 names, you're trading basically at levels that have marked the peak every single time except for 2021.
02:46So I don't think that this is necessarily that we've got this AI bubble and the market has to correct.
02:51I think we've got an overvaluation problem everywhere, including these AI related names that are also sitting at peak earnings revisions.
02:59Peak valuation, peak earnings revisions makes me very nervous.
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