00:00Are we in the midst of a new bull market and earnings cycle, especially for many of the lagging areas
00:05of the index?
00:06That was your call in mid-November. Is that a call you still stick to?
00:11Yeah. Well, good afternoon. First of all, I would say yes.
00:14I mean, you know, the story we actually started writing about in May of last year, which is a mid
00:18-year update, was exactly that.
00:20I think our view still remains out of consensus around this idea that Liberation Day marked the end of what
00:28we call a rolling recession.
00:30So we're actually not only in a new earnings cycle, we're in a new economic cycle.
00:35And that's why we're seeing the broadening out now, because there have been many parts of the economy that have
00:41been sort of mired in a recession for the last three years or so.
00:44And they're just now starting to emerge. Areas like consumer goods, some of the financial sector, industrials, obviously,
00:51were just getting a boost from AI CapEx, but also getting a boost from, you know, basically underspending for the
00:57last several years.
00:58Parts of technology are still doing quite well. And so that broadening out is the real story.
01:03And we doubled down on that in November because the evidence was coming through.
01:07And, you know, in May, we didn't know. But now we know.
01:10I mean, the earnings growth for the median stock in the Russell 3000 is now running double-digit growth year
01:15over year.
01:16That's the first time we've seen that in four years. So it's happening.
01:19The question, you know, the question now is how long can it last?
01:22You know, what could derail that? And, you know, what do you pay for?
01:26I mean, those are always the questions. But the first part of your question is a resounding yes.
01:31We are in a new earnings and economic cycle, and the market has figured it out.
01:36Hey, Mike, it's been pretty remarkable to see that we've gotten this tremendous stock volatility at the single stock level,
01:42also at the sector level.
01:44But when you look at the S&P 500, it actually hasn't really done much this year.
01:48What is it going to take to break us out of this range?
01:50And what could be the catalyst to get us past that elusive 7,000 level that everyone's waiting for?
01:57Yeah, that seems to be the question. I mean, obviously, stock investors don't mean if you can make money in
02:01other areas, that's fine.
02:02I think that's the real main message is that the market is not going anywhere at the S&P level,
02:07but there are many sectors that are doing well.
02:09And that's the name of the game. Now, to your question, I think what's going to break us out ultimately
02:13are two things.
02:14Number one, there is some uncertainty around the AI CapEx cycle and the disruption that perhaps it could cause in
02:23the labor market and other areas.
02:24So I think we're in one of those testing periods now. We heard about that this week.
02:28We think that ultimately it's a little bit premature to kind of throw a cold blanket on the AI cycle.
02:34It's just getting going from our standpoint. And then secondarily, I think we have a new Fed chair nominee with
02:41Kevin Warsh.
02:42And the market always tests the new Fed chair, whoever it is, when they come into power or office.
02:49And so first we have to go through the, you know, the, you know, the, the confirmation hearings, and then
02:55we got to learn a little bit more about what he really intends to do.
02:57So that, you know, that could lead to this, you know, the market kind of struggling for another month or
03:02two.
03:03And then ultimately we think once he takes office, we think that'll, that'll be another catalyst for why the market
03:08can have a really good second half.
03:09And we stand by our $7,800 price target for the S&P by the end of this year.
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