Being Bullish Has Paid Off: Dudley

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00:00We're coming off three years of double digit gains in the S&P. So being bullish has been the right

00:06thing and the right call to make over the last three years. You have been. Thank you. And I

00:11appreciate that. And look, it's hard. You're going into 2026 and you're saying, why should I be

00:16optimistic? I've got three years of double digit gains. But look at earnings expectations. Consensus

00:21numbers for earnings are 14 percent earnings growth. And going back, your valuations are

00:27probably fair to maybe on a little on the high side. And we acknowledge that. But the earnings

00:32growth is what drives markets. And we're seeing positive earnings growth. We've got double digit

00:37earnings growth for 2026. That will be supported by the interest rate cuts that we've already seen

00:42in the last three, four months of last year. So you've got a little bit of a tailwind there.

00:48And then finally, we've got breadth. And I have been talking about that. That did not work for us

00:53in 2025. You still had the concentration. But we've got breadth in the market and the concentration

01:00concerns that people keep talking about. I think I'm going to be diluted when we see this wall of

01:06IPOs that are going to come with some really big there's like five IPOs with over 40 billion dollars

01:12of market cap each, not collectively each. What do you need to see, though, in terms of companies that

01:18are already trading, right, coming out with earnings, the S&P 493? What do you need to see as proof that we

01:23really are getting a broadening out in, you know, earnings success from companies outside of the

01:30mag seven? I actually think they've already done it in the first three quarters of the year where

01:34we've had reports come in. It's nine percent earnings growth. So not quite double digits,

01:38the double digits earnings growth that we saw. And what does that compare to in terms of the mag seven?

01:43The mag seven is, yeah, they're in the high 20s. So look, they're not growing like AI, but these are

01:49more your traditional companies. They're more established companies. And you wouldn't expect

01:53them to be growing earnings, you know, in in those really high 20 percent ranges. But nine percent

01:59earnings growth in an economy that's growing two to three with inflation that is under control,

02:05but still a little bit of a risk to me is a very good setup for that broadening argument.

02:10As I said, it didn't quite work as well as we thought in 2025. But we think in 2026,

02:16you know, we have that layered in with at least consistent performance out of the AI.

02:21I think a lot of people struggle with this of what the economy is doing because of things

02:24like the ISM this morning. I'm just looking through some of the company comments. It's not

02:28been a great year. We've had some success with holding the line on costs, but real consumer spending

02:32is down and tariffs are ultimately to blame. Trough conditions continue saying that our company

02:38is struggling with customer orders and financials overall. Basically, every single comment here is

02:44not good. Morale is very low. We keep seeing this, Katrina. There are companies out there who are

02:49struggling and some of the ones in here blaming tariffs. Who's not to say that that becomes a

02:53bigger feature of the economy this year? So tariffs actually have a positive and negative effect to

02:58them. When tariffs go up, obviously, it's not great for those companies. But if tariffs get reversed,

03:03isn't that a positive for some of these companies that that, you know, headwind that they're talking

03:07about, you know, obeys? Secondly, look, the housing market is a big driver of a number of those

03:13machinery, equipment companies and everything. And the housing market has not been strong.

03:18So why would you expect the housing market to potentially get better, you know, over the course

03:23of 2026? First of all, our unemployment numbers, if you look at, you know, the unemployment claims

03:29numbers and the jobless claims have been very benign. So people are holding on to their jobs

03:34and they're getting reemployed. So that's the first kind of checkmark. Interest rates are down slightly.

03:39So that makes the mortgages more affordable. And then finally, time is also your friend. You don't

03:45get younger any day. And so, you know, people, household formation, creating families. And it's when we

03:52create those families. I live in New York City. And if anyone's lived here, you know, you squeeze into

03:56that apartment. At some point, you do need to get a bigger place or something. So I think that

04:01they're some of the drivers of the housing market. Just got 30 seconds here, but I want to ask your

04:05take on Venezuela because it's the huge news event, but doesn't seem to be impacting markets too much.

04:11I think it's not impacting markets because of the fact that, you know, oil would be the biggest

04:15commodity where you'd see impact. And in the short term, their infrastructure, transportation,

04:20their oil infrastructure is just not in a great state. So while at peak, they were three and a half

04:25million barrels, they're down to a million. You've got a long runway before you see that supply coming

04:30onto the market.

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