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Speaker 3: All right, let's talk a little bit here about the
Speaker 3: outlook for equities, particularly as a lot of people look
Speaker 3: at this bullmarket and wonder whether it can continue into
Speaker 3: twenty twenty five. Price targets are coming in for the
Speaker 3: new year, and we should point out price targets for
Speaker 3: the past year, well, they were light. John Sofas though
Speaker 3: he was always bullish, and he had a good eye
Speaker 3: on what he saw and what he thought we would
Speaker 3: get in twenty twenty four. And now he's out with
Speaker 3: his note for twenty twenty five, seeing that the bullmarket
Speaker 3: has more room to run, writing that the pivot to
Speaker 3: easier monetary policy we believe supports our vue that the
Speaker 3: market for US equities is still mid cycle, and he
Speaker 3: says that the technology led double digit gains of the
Speaker 3: large cap stocks over the first three quarters of twenty
Speaker 3: twenty four, likely to broaden out to other sectors, styles,
Speaker 3: and market caps in twenty twenty five. Please say that
Speaker 3: John joins us right now here on the big program,
Speaker 3: kicking us off here on this December thirty first. Happy
Speaker 3: new year to you, John, and let's talk about those
Speaker 3: forecasts going forward. What supports some of these targets I'm
Speaker 3: seeing targets come in now, including yours, into the sixes,
Speaker 3: into the seven thousands for the S and P five hundred.
Speaker 3: Is this all earnings driven or are we going to
Speaker 3: see some multiple expansion as a part of that as well.
Speaker 4: Great to be on surveillance this morning with you, and
Speaker 4: happy new year to you and the whole Bloomberg team
Speaker 4: as well. I must say that with US it's a combination.
Speaker 4: It's always you want to see revenue growth.
Speaker 5: You want to see earnings grow of that's what matters
Speaker 5: most of the market.
Speaker 4: But I think overall there's room for multiple expansion to
Speaker 4: play a role in here the private investor over the
Speaker 4: years I've been in this business for forty one years
Speaker 4: has changed a lot over the years, and with what
Speaker 4: has taken effect in terms of retirement planning over the
Speaker 4: course of the last forty years in which we've seen
Speaker 4: to find benefit pension.
Speaker 5: Plans go by the wayside social security.
Speaker 4: The amount of income that it can provide or what
Speaker 4: percentage it provides an individual of income during retirement means
Speaker 4: people have to invest more. So we think many private
Speaker 4: investors today, instead of investing in five stocks for the
Speaker 4: actionable idea of the day, are investing much like institutions
Speaker 4: would for intermediate to longer term goals, and we think
Speaker 4: that supports higher multiples. While on the other hand, we
Speaker 4: think the effects of technology on all eleven sectors that
Speaker 4: has been shown since the financial crisis crisis right up
Speaker 4: to date through the pandemic and now with AI in
Speaker 4: the process, offers a lot of opportunity here we'll see
Speaker 4: equities move higher.
Speaker 3: We'll expand a little bit here on that theme of AI.
Speaker 3: That was a big part of the trade that we
Speaker 3: saw in the market, certainly in the first half of
Speaker 3: the year. A lot of questions though towards the second
Speaker 3: half of the year about when we start to see
Speaker 3: the material gains from that on the bottom line, on
Speaker 3: the top line for that matter as well. We see
Speaker 3: that in twenty twenty five, John, I.
Speaker 5: Think what we'll begin to see it more and more
Speaker 5: this year.
Speaker 4: It's been primarily the amount of investment that has been
Speaker 4: made in AI, both from within the technology sector itself
Speaker 4: but in the other sectors by managements that want to
Speaker 4: remain very vibrant and effective in attracting investors' attention in
Speaker 4: terms of creating greater efficiencies for revenue and earnings grows
Speaker 4: and on the other and we think it's the consumer
Speaker 4: is going to be a big part of the upgrade
Speaker 4: that began.
Speaker 5: This year and.
Speaker 4: Likely will gain some traction in twenty twenty five and
Speaker 4: on forward.
Speaker 5: But all this stuff takes a bit of time.
Speaker 4: But for investors who have patients, are diversified, know what
Speaker 4: they own, why they own it, and have right sized
Speaker 4: expectations about how different asset classes, different sectors cyclicals versus defensive, etc.
Speaker 5: Operate, this looks.
Speaker 4: Like a time of both opportunity and risk, and the
Speaker 4: main thing is to have some tolerance for fluctuation and
Speaker 4: a tolerance for risk that is realistic and right sized.
Speaker 1: John, how much of the bull case is dependent on
Speaker 1: capital flows from the rest of the world and the
Speaker 1: absence of kind of economic resilience in Europe or China.
Speaker 1: Do you see international investors bolstering the US market maybe
Speaker 1: more so than domestic.
Speaker 5: Gosh, you know, that's an awfully good question.
Speaker 4: I think over the years we've seen private investors from
Speaker 4: abroad increase their exposure to the US.
Speaker 5: A lot of that.
Speaker 4: Because of the influence of the technology sector, with the
Speaker 4: innovation that occurs here at the in the design stage
Speaker 4: of technology. But in addition to that, you know, the
Speaker 4: factor is in an uncertain world, the US strength of
Speaker 4: the US dollar also attracts foreign investors to invest in
Speaker 4: the US, while meantime central banks and sovereign wealth funds
Speaker 4: may actually stay at home. Many of those foreign funds,
Speaker 4: we think it's the individuals will continue to invest for
Speaker 4: diversification in the US. But John, you.
Speaker 1: Mentioned that point of the dollar, that it attracts international investors,
Speaker 1: doesn't it disincentivize bid so an investor in say Japan,
Speaker 1: hypothetically that maybe wanted that realm of safety or kind
Speaker 1: of innovative technology technological exposure. Maybe looks at the strength
Speaker 1: of the dollar in three months time, it says, actually,
Speaker 1: this isn't worth it.
Speaker 4: Well, actually, we would have to say that the strength
Speaker 4: of the dollar is relative. And I think where with
Speaker 4: the dollar strength where it is right now, for instance,
Speaker 4: it almost disincentivizes US investors from investing abroad because the
Speaker 4: foreign currencies are weak or versus the US dollar. On
Speaker 4: the other hand, for foreign investors where their currency is
Speaker 4: weak versus the US, investment in the US enhances dividends,
Speaker 4: enhances gains because investing in a stronger currency helps your
Speaker 4: performance if you're a foreign investor with a weaker currency
Speaker 4: when you reconcile your trades, or you don't get a
Speaker 4: loss in translation but gaining in translation.
Speaker 3: I am curious on here if you can talk a
Speaker 3: little bit here about how some of the policy decisions
Speaker 3: that we're expecting out of Washington could affect the performance
Speaker 3: of financial markets. And I want to start specifically on
Speaker 3: the teriff's side, because there are some concerns about the
Speaker 3: bottom line effects on corporations and obviously the inflationary effects
Speaker 3: on consumers.
Speaker 4: I have to say, Romaine that the greatest concern relating
Speaker 4: to tariffs, of course, is on the traditional sense of tariffs.
Speaker 4: Everybody can remember tariffs presaging the Great Depression at all.
Speaker 4: But the effect of tariffs during the first Trump administration
Speaker 4: and during the Biden administration, when he actually kept many
Speaker 4: of the Trump tariffs and even increased them, was not
Speaker 4: anywhere near as concern as might have been expected. We
Speaker 4: think the idea of some of the numbers that are
Speaker 4: thrown around by the President elect in terms of what
Speaker 4: might impose on tariffs, much of this, we would think
Speaker 4: is part of that art of the deal approach that
Speaker 4: the President elect takes when negotiating. But the other side
Speaker 4: of it is, if you consider the US economy versus
Speaker 4: producing economies, of all the goods that our consumers buy,
Speaker 4: both businesses consumers as well as individuals, we're buyers of
Speaker 4: size and so we're a very attractive place to sell
Speaker 4: your goods to, which might mean there's more wiggle room
Speaker 4: for countries that want to sell into our country or
Speaker 4: be export goods to us to win our import dollars.
Speaker 5: So to speak. And we think it'll be interesting to
Speaker 5: see how that works out.
Speaker 4: But we think most of the talk on the tariffs
Speaker 4: based on the cabinet and the experience of the cabinet,
Speaker 4: as well as the president's experience after having had four
Speaker 4: years in office prior to this. We think it'll be
Speaker 4: more of the bark, will be louder and much more
Speaker 4: create more fear than the actual bite. And we also
Speaker 4: think the negotiations will probably work out better because countries
Speaker 4: are going to look to want to keep the US
Speaker 4: as a major source of.
Speaker 5: Their exports.
Speaker 3: John great stuff as always always insightful all year long,
Speaker 3: and we expect that as well in twenty twenty five.
Speaker 3: Have a happy new year. John Stolf is there over
Speaker 3: at Oppenheimer Bloomberg survey showing that right now, the average
Speaker 3: the median price target right now for the S and
Speaker 3: P to end next year right around sixty six hundred.
Speaker 3: The highest estimate in that survey came from the man
Speaker 3: we were just talking to, seventy one hundred Chrety. We
Speaker 3: talk about this idea here of whether expectations heading into
Speaker 3: twenty twenty five are going to match up in the
Speaker 3: same way that we saw with those low to high
Speaker 3: expectations in twenty twenty two. We do want to turn
Speaker 3: our attention right now to the commodity space. And specifically
Speaker 3: energy oil markets. Well, they're pushing higher here in the
Speaker 3: last trading session of the year, this after we got
Speaker 3: a report that factory activity in China did expand for
Speaker 3: a third straight month. Pablo mulchinoff over at Raymond James.
Speaker 3: He's looking ahead to next year. He says that, well,
Speaker 3: they're forecasting oil prices to be largely range bound. However,
Speaker 3: the main energy story of twenty twenty five, which was
Speaker 3: also the main story of twenty twenty four, is set
Speaker 3: to be electricity rather than oil. Pablo joins us right
Speaker 3: now to talk a little bit more about that, and Pablo,
Speaker 3: let's talk about it here. I mean, if you had
Speaker 3: told me coming into this year that some of the
Speaker 3: biggest gains in the equity market would be utility and
Speaker 3: power companies, I would have said you're crazy. But here
Speaker 3: we are at the end of twenty twenty four talking
Speaker 3: about utilities and power companies that continue to continue to
Speaker 3: be the story next year.
Speaker 6: Yeah, and this is the derivative trade on AI. So
Speaker 6: the euphoria around AI touches what we might call the
Speaker 6: picks and shovels of the electric power industry. So the
Speaker 6: utility stocks, the equipment provider, So everything from you know,
Speaker 6: guest turbindes, wind turbines, solar panels, battery systems, and also
Speaker 6: the construction companies that are physically building all of this
Speaker 6: energy infrastructure to accommodate the boom in electric power consumption.
Speaker 3: Well, we talk about the building of this infrastructure, and
Speaker 3: you have obviously new infrastructure coming on here in the US,
Speaker 3: we have old infrastructure, old nuclear plants coming back online. Here.
Speaker 3: Is there enough out there, I guess if you will
Speaker 3: for these companies to draw on or are we going
Speaker 3: to be facing significant shortages in power given some of
Speaker 3: the demand needs out there that we know of, at
Speaker 3: least when it comes to all computing and AI.
Speaker 6: Well, our listeners do not need to worry about, you know,
Speaker 6: physically running out of electricity. You know at any point
Speaker 6: in the foreseeable future that that's not going to happen.
Speaker 6: What is true is that power prices are already trending up.
Speaker 6: In fact, they've been up since pre COVID by about
Speaker 6: twenty five percent, and we should expect power prices to
Speaker 6: continue moving higher in part because of the additional demand
Speaker 6: from the data center build out. And look, let's also
Speaker 6: keep in mind the geographic differences here, the bulk of
Speaker 6: the data center, or the largest portion of the data
Speaker 6: center buildout is happening around Washington, d C, Northern Virginia, Maryland,
Speaker 6: a little bit into Ohio. You know, there's not as
Speaker 6: much happening in the western half of the US. There's also,
Speaker 6: by the way, data center build out AI related in Europe,
Speaker 6: in parts of China.
Speaker 7: So this is a global story.
Speaker 6: By nor did Virginia has the largest portion, so naturally
Speaker 6: that's where the infrastructure needs to move forward at the
Speaker 6: fastest pace pavel.
Speaker 1: When I first learned about how utility grids worked, I
Speaker 1: was pretty surprised to learn that you can use both
Speaker 1: oil and natural gas, and sometimes natural gas can be
Speaker 1: cheaper in utility grids as well. There's a big conversation
Speaker 1: in the US right now about exporting a lot of
Speaker 1: extra natural gas and energy to Europe. But if you
Speaker 1: see this AI data center buildout in the US, do
Speaker 1: those flows get redirected?
Speaker 6: Natural gas going to Europe will be limited not so
Speaker 6: much by the ability of American gas for NEWS to
Speaker 6: pump as much as they want, but rather by Europe's need.
Speaker 7: To import LNG.
Speaker 6: And here's why I say that since Russian invaded Ukraine
Speaker 6: three years ago, Europe's consumption of natural gas is down
Speaker 6: by fifteen percent. I'm not talking about down fifteen percent
Speaker 6: from Russia. I mean that's practically at zero. By overall,
Speaker 6: Europe is using fifteen percent less natural gas.
Speaker 7: So guess what that means?
Speaker 6: Less need for natural gas from any source you know, US, Katar,
Speaker 6: Norway and Azerbaijan and so forth. So that's really where
Speaker 6: the constraint is going to come from.
Speaker 1: So there's no necessarily relationship between the natural gas needs
Speaker 1: of Europe or the natural gas needs of other folks
Speaker 1: in the United States versus say, the AI build out.
Speaker 6: We have plenty of natural gas in North America to both.
Speaker 6: So natural gas will certainly play a role, particularly in
Speaker 6: the eastern half of the US to support the data
Speaker 6: center boom. Now in the western half of the contraries,
Speaker 6: I said, AI is less of a factor. But keep
Speaker 6: in mind we also need to replace cold planks that
Speaker 6: are being retired, and this is why we're going to
Speaker 6: be following an all of the above strategy for the
Speaker 6: electricity mix natural gas, wind, solar, and in certain cases,
Speaker 6: but also long lead times nuclear as well.
Speaker 3: I am curious though, Pavel, do you think that at
Speaker 3: least here in the US, that government policies coming out
Speaker 3: of this new administration will be supportive of some of
Speaker 3: those renewable energy initiatives like wind, nuclear, et cetera.
Speaker 6: Number one thing we need to understand about government policy
Speaker 6: as it relates to electric power is that it is
Speaker 6: preductinently at the state.
Speaker 7: Level rather than the federal level.
Speaker 6: Electric utilities are regulated by state level utility commissions. There
Speaker 6: is a little bit of a role played by FERK
Speaker 6: and the Department of Energy in Washington, but number one
Speaker 6: is the state level regulation.
Speaker 7: So here's an interesting fact for some of your listeners.
Speaker 6: Twenty nine states have a renewable portfolio mandate for electric utilities, including,
Speaker 6: by the way, some red states like Texas, Missouri, and Montana.
Speaker 3: Yeah, and abition to see whether that holds and how
Speaker 3: that interplay between those states and the federal government goes forward.
Speaker 3: I do want to ask you a much more straightforward
Speaker 3: question about the oil market, and particularly about the mobility
Speaker 3: of oil. Obviously, there are a lot of concerns about
Speaker 3: geopolitical issues and the disruption flows of oil. You have
Speaker 3: the wars obviously going on in the Middle East, and
Speaker 3: elsewhere that have also disrupted the flow of oil. Do
Speaker 3: you see any sort of right sizing in that next
Speaker 3: year or are these sort of I guess issues that
Speaker 3: are going to just remain lingering for a good portion
Speaker 3: of the year.
Speaker 6: For the past twelve months, we have had two major
Speaker 6: wars Russia Ukraine and of course.
Speaker 7: What's happening in the Middle East.
Speaker 6: Despite that, oil prices have barely moved since January twenty
Speaker 6: twenty four. Or why because we also have to take
Speaker 6: into account what's going on with demand, and demand has
Speaker 6: been weaker than expected, in large part because of China.
Speaker 6: So number one question for next year is not so
Speaker 6: much geopolitics, it's good old fashioned supplying demand. What's going
Speaker 6: on in China with the economy, and by the way,
Speaker 6: with electric vehicle sales. Half of China's auto sales are
Speaker 6: now electric. That's a big deal. We're also watching the dollar,
Speaker 6: strengthening dollar as we have seen pressures commodity prices across
Speaker 6: the board, including oil.
Speaker 7: And the third thing we're watching is OPAK.
Speaker 6: Opak has been very disciplined since COVID with supply. At
Speaker 6: some point in twenty twenty five, OPAK will begin to
Speaker 6: unwind its production cuts, which means more barrels on the market,
Speaker 6: and that may put some pressure on the price of
Speaker 6: oil as well.
Speaker 3: All Right, Pablo Krits Pablo Mulchanov over at Raymond James
Speaker 3: a closer look here at the energy market the outlook
Speaker 3: for twenty twenty five. We begin this hour, though, with
Speaker 3: equity futures sitting on modest gains, stops hoping to snap
Speaker 3: a three day losing streak. Here on the final trading
Speaker 3: day of twenty twenty four, the SMP having a wonderful year,
Speaker 3: a blistering year, the index up about twenty four percent.
Speaker 3: Matt miskin O of John Hancock seen a limit though,
Speaker 3: to further gains, writing that it's going to be hard
Speaker 3: for equities to stomach much more upside. While we still
Speaker 3: prefer US equities based on the better fundamentals, we recognize
Speaker 3: the magnitude of outperformance in twenty twenty four is not
Speaker 3: likely to be replicated. Matt joined us right now to
Speaker 3: talk a little bit more about that outlook. And Matt,
Speaker 3: maybe we don't see the same gains we saw in
Speaker 3: twenty twenty three and in twenty twenty four, but should
Speaker 3: we expect at least some meaningful gains in twenty twenty five.
Speaker 8: It's certainly possible romaine, but what we're seeing here is
Speaker 8: heavy is the crown really for US equity leadership and
Speaker 8: US economic leadership. Frankly, after certain stints like this where
Speaker 8: US economy is just blown past most global economies, the
Speaker 8: US stallar has strengthened a lot, so it's up about
Speaker 8: six percent in twenty twenty four. A stronger dollar makes
Speaker 8: US less competitive on a global basis. It helps actually
Speaker 8: bring down inflation because we're buying stuff from abroad, but
Speaker 8: it is difficult to stomach for economic purposes. Then rates
Speaker 8: have been higher, so we have high quality bond yields
Speaker 8: ten ye yields higher on the year. That's a bit
Speaker 8: of a slowdown. And then there's massive expectations out of
Speaker 8: the US economy and markets into twenty twenty five. So
Speaker 8: the earnings estimates for twenty twenty five for the S
Speaker 8: and P five hundred are still about fifteen percent, so
Speaker 8: there's a lot of optimism. One of the biggest assets
Speaker 8: the S and P five hundred and US large cap
Speaker 8: stocks have had over the last several years has been
Speaker 8: conservative and more kind of bearish sentiment the sentiment dial
Speaker 8: has been turned up significantly to end twenty twenty four.
Speaker 8: We think that's becoming a bit of a liability as
Speaker 8: we walk into next year.
Speaker 3: Well, that's what I am confused about here. We talk
Speaker 3: about how crowded some of these trades are. We talk
Speaker 3: about the lack of hedging that we're seeing in the
Speaker 3: equity space, and the idea that you have valuations at
Speaker 3: least to some of these companies that at least by
Speaker 3: historical standards, would be stretched. I know there are some
Speaker 3: people that want to reinterpret history, But what do you
Speaker 3: do in that situation? Do you reallocate, do you stand
Speaker 3: by your conviction that maybe some of those stocks can
Speaker 3: go high or what?
Speaker 8: Yeah, momentum is not a fundamental factor, and momentum was
Speaker 8: the number one way to outperform, the only way to outperform,
Speaker 8: frankly in twenty twenty four. So what is momentum. It
Speaker 8: means you look at the best performing stocks of the
Speaker 8: last six to twelve months and you allocate.
Speaker 7: The most of those. So basically, chasing performance was rewarded
Speaker 7: in twenty twenty four.
Speaker 8: But to your point, Romain, there's other things that drive
Speaker 8: stock markets, whether it's valuations, whether it's earnings, and that
Speaker 8: those parts of the market have been left behind this year,
Speaker 8: and there's a bit of a dog's of the Dow
Speaker 8: type formula where usually the worst performers can sometimes become
Speaker 8: the best performers in the subsequent year this year ending
Speaker 8: this year, the dogs of the Dow kind of mantra
Speaker 8: looks more realistic as a potential turnaround or catalyst into
Speaker 8: twenty twenty five because.
Speaker 7: We are so stretched on the valuations. We're at about.
Speaker 8: Twenty two times on four pe on the S and
Speaker 8: P five hundred, the highest in history at least the
Speaker 8: last thirty years has been twenty four not there's about
Speaker 8: nine percent upside we can get on valuations. Earnings estimate's
Speaker 8: already great. Dimmiting yields are the lowest in history. So
Speaker 8: to your point, it's hard to eke out gains in
Speaker 8: the more expensive stuff.
Speaker 7: The better value stuff come around.
Speaker 9: Yeah, sorry, why do you believe that In the essence
Speaker 9: of when you see sell offs happening, you're seeing a
Speaker 9: lot of babies thrown out with the bathwater here. And
Speaker 9: if you believe that maybe some of these underperformers can
Speaker 9: come back next year, how much of a risk is
Speaker 9: there that just risk appetite alone goes along with it.
Speaker 8: Yeah, that's the tie that lifts all boats and the
Speaker 8: risk appetite. But what we're seeing look is into next
Speaker 8: year there's just hard to get more valuation upside on
Speaker 8: the other parts. It's not necessarily call that they're bad
Speaker 8: companies that there are going to see this, you know,
Speaker 8: really bad performance. It's more just saying the multiples can
Speaker 8: expand in more like mid.
Speaker 7: Cap stocks and small cap stocks first.
Speaker 8: Large cap stocks internationally also has been really a tough
Speaker 8: performance year. European equities are only up about two percent
Speaker 8: and US dollar basis, they're very cheap still, so what
Speaker 8: we could see is just a rotation or even I
Speaker 8: would say downside protection because the valuations are so much
Speaker 8: more attractive. See, those are the types. We're just trying
Speaker 8: to manage risk the best we can. And frankly, the
Speaker 8: high flyers don't look good to us because of the
Speaker 8: valuations and part of the value space that's deep value,
Speaker 8: the earnings aren't is good. We're trying to apply quality
Speaker 8: at a reasonable price as our mantra into twenty twenty five.
Speaker 9: So then is the best way to hedge the equity market,
Speaker 9: in essence, the equity market, because if you're looking at
Speaker 9: the volatility in the bond market, is that really a
Speaker 9: place to go hide.
Speaker 8: We think it will be into twenty twenty five. Inflation
Speaker 8: is likely to come down. Inflation is the nemesis of
Speaker 8: that bond market inverse correlation. Really that hasn't been around
Speaker 8: for the last year or two. But inflation has come
Speaker 8: back a bit to end the year. We think that's
Speaker 8: more sentiment driven. Do you think that comes back down?
Speaker 8: It's twenty twenty five, and really it goes back to housing.
Speaker 8: I mean, we're going to get some housing price data today.
Speaker 8: We're really dialed into mortgage apps housing price data. Housing
Speaker 8: made up about sixty to seventy percent of the inflation
Speaker 8: narrative over the last several years. If that can slow
Speaker 8: down it into twenty twenty five, inflation comes down, bonds
Speaker 8: act like bonds again, and if that happens, a balanced
Speaker 8: portfolio really can look much better from a diversification benefit
Speaker 8: standpoint into next year.
Speaker 3: Matt, I want to go back to something you just said.
Speaker 3: It kind of startled me. One of the great things
Speaker 3: about having a Bloomberg termo in front of me is
Speaker 3: I can kind of check everything on the fly.
Speaker 7: About dogs of the Dow.
Speaker 3: They were dogs all year long here, I mean, I
Speaker 3: was just taking a look at the dogs coming into
Speaker 3: this year. We're talking about underperformance by about what twenty
Speaker 3: five percentage points relative to the S and P five hundred,
Speaker 3: just to use that as a comparison. And I'm looking
Speaker 3: at some of the ones that will probably be the
Speaker 3: dogs going into next year. I guess the ones with
Speaker 3: the highest dividend yields, like of Verizon, Chevron, am Jen
Speaker 3: and Johnson and Johnson to say the least. I mean,
Speaker 3: some of these names were the same dogs coming into
Speaker 3: this year. And I am curious as to whether this
Speaker 3: is also about sentiment and attention. If all the attention
Speaker 3: is on tech and AI and other things, like, why
Speaker 3: should I expect anyone to really embrace a healthcare stock
Speaker 3: or even just a consumer staple stock or a telecom stock.
Speaker 8: Yeah, so momentum, like I said, was the best performer,
Speaker 8: and all the other other factors did not work, so
Speaker 8: you had to chase performance. If this is not a
Speaker 8: year of a rotation, it's got to be the nineteen nineties.
Speaker 8: Oliver again, So there's only been three other times where
Speaker 8: there's been double digit or sorry, twenty five percent back
Speaker 8: to back games like we're looking at here. Potentially the
Speaker 8: only time it went three years in a row was
Speaker 8: in nineteen ninety nine. So we're gonna have to kind
Speaker 8: of bring out the popcorn and watch maybe some Jurassic
Speaker 8: Park or Friends, or we're gonna have to get our
Speaker 8: nineties culture back. But nineteen ninety nine. You gotta be
Speaker 8: careful what you wish for because if we do get
Speaker 8: that third year where it's another moment, sorry, oh, another
Speaker 8: moment go ahead some year, it's going to be tough
Speaker 8: because then you got to be careful what you wish for,
Speaker 8: because then we got the last decade after that, so
Speaker 8: we would start to peel back that momentum trade and
Speaker 8: rotate into higher quality but value parts of the market.
Speaker 3: I mean one thing though, too, about those comparison with
Speaker 3: the nineties, and a lot of people will make this comparison,
Speaker 3: which is the idea that in the nineties you were
Speaker 3: dealing with a lot of companies that just did not
Speaker 3: necessarily have the fundamentals to support those valuations. We talk
Speaker 3: about a market and I checked it this morning, seventy
Speaker 3: percent of the gains, the point gains in the S
Speaker 3: and P five hundred attributed pretty much now to about
Speaker 3: nine socks, basically the MAG seven and a couple on
Speaker 3: top of that. But all of these are names that
Speaker 3: are just cash monsters. In Vidia, Apple, Amazon, broc On, Meta, Tesla, Microsoft, Alphabet, JP, Morgan, Netflix,
Speaker 3: those are man I.
Speaker 8: Agree, No, we've been overweight tech. We've got that, but
Speaker 8: it's just hard to see the same kind of return
Speaker 8: stream that we've gotten out of them into next year.
Speaker 8: You know, you can only do outsize return. There is
Speaker 8: reversion of the mean over time usually with markets, and
Speaker 8: we're in the most concentrated market in history by a
Speaker 8: huge factor. So forty percent of the market is just
Speaker 8: in those top ten stocks. And I'm talking about the
Speaker 8: SMP five pointer. That's never happened before. It's never even
Speaker 8: been close to this high before. So reversion of the
Speaker 8: mean would suggest that at some point those trillion dollar
Speaker 8: megacap companies have already built in the valuation. So that
Speaker 8: was great cash flows. I'm not saying, look, we've got
Speaker 8: it in the portfolio. We've got a bit of an
Speaker 8: overweight relative to other parts of the market.
Speaker 7: Yeah, but going into next year chasing it doesn't make
Speaker 7: a lot of sense to us.
Speaker 8: Finding other opportunities cross a portfolio, other acid classes makes
Speaker 8: more sense.
Speaker 5: In our view.
Speaker 3: Matt Miskan over at John Hancock. Happy New Year to you.
Speaker 3: We'll catch up with you in twenty twenty five.
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