00:00Cameron Dawson of New Edge Wealth looking ahead to earnings writing with an acceleration in
00:03revenue growth, the surge in margins to new records and a big broadening of companies
00:07who are driving earnings. The big question for 26 is how much room is there for this
00:12normal margin expansion to go? Cameron joins us now for more. Cameron, good morning.
00:16Good morning.
00:17Normal. Let's get into that. Yeah, just frame how massive the margin story has been in the
00:21last 12 months.
00:22It has been incredibly surprising and we even would frame it as a miracle given the
00:28fact at how much you threw at corporations over the course of 2025 with tariffs, which
00:33we know were primarily borne by corporations. We had that Kiel Institute report that said
00:38that 96% of tariffs were borne by the U.S. consumer and corporations. So companies had to do a
00:44lot of blocking and tackling in order to just keep margins flat, but they actually expanded
00:48them in 25 by over 100 basis points. And that's without a concomitant acceleration in revenue
00:55growth, which is typically the relationship that we see. So when we boil it down, it comes
00:59down to productivity that is likely a function of a lot of investments that came out of the
01:04pandemic. And it's also a lot of labor productivity. There's a big dynamic where we have labor wage
01:10growth slowing to a material extent, which means that wages are not causing as much upward pressure
01:16on margins at the same time as workers aren't switching jobs as much. So the workers that you
01:20have are becoming more productive and thus you get the margin expansion. The last point
01:24is this probably doesn't have a lot to do with AI.
01:28Why not?
01:29Because AI is still in these test phases. AI is still in testing to see how much it could
01:36impact growth. This is not AI necessarily causing people to fire workers. It is supplementing workers.
01:42Maybe at the margin, it's causing some companies to not have to hire as many low end workers.
01:48You can see that with college age unemployment rising. But this is likely not an AI story of
01:54what we saw in 2025, which raises the question, is that what is baked into 26 estimates? 26 estimates
02:00have 200 basis points of margin expansion baked into the forecast for $310 a share. That to us
02:07looks like a productivity boom, another productivity miracle.
02:11Given how you're framing this, it sounds like you think there is pretty decent downside risk here
02:14into the year ahead.
02:15So let's think about the cadence of earnings growth through the year. 8% growth is expected
02:20for this quarter. It's coming about bang in line with that 8%. That's very different than the last
02:24two quarters of earnings season where you saw earnings growth come in about double what was
02:28expected going into the quarter. That 8% accelerates to 18% in the second quarter, 21% in the third
02:35quarter, and another high teens in the fourth quarter. So it's not a big thing to say that there is a high
02:41bar for earnings to jump over. It's not to say it's not achievable. There's a lot of parts of the
02:46economy that didn't experience great earnings growth over the last couple of years because
02:51of the concentration in just mag seven. But that is still an extraordinarily high bar for this market
02:56just to meet expectations, let alone beat them.
02:59Fair enough.
02:59Fair enough.
03:00Fair enough.
03:02Fair enough.
03:02Fair enough.
03:03Fair enough.
03:04Fair enough.
03:13Fair enough.
03:18Property- palm tree.
03:18At the bottom of the last one, $5.
03:20$9.
03:21The second one, $1.
03:22$6.
03:22All right.
03:23And that's interesting thing to say, is the small star, $20009, which is $2.
03:24And that's��� belief that the kilogram of July 8 could be the $19.
03:26So for a short time to mü ip.
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