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00:00 Speaker A
Chuck, it is it is good to see you. I actually want to start more broadly, Chuck, uh, because you describe the current setup here. You say, it is almost ideal, you say, Chuck, almost ideal for equities. Walk me through that. What what makes this backdrop so constructive?
00:21 Chuck
Well, to start with, the economy continues to roll despite all of the uh nervousness about uh tariffs and about everything else. Um, the economic expansion continues at a very solid pace. Uh, real growth is quite strong. Uh, we see that in GDP and uh the estimate is over 5% uh according to the latest Atlanta Fed estimate. Uh so the economy is doing well because the economy is doing well, we see that reflected in corporate earnings. Corporate earnings continue to grow at a pretty rapid clip. Uh the companies are reporting and they continue to beat estimates. So that’s another good new bit of new good news. Uh, a third piece is interest rates and inflation. Uh, we don’t see any uptick in inflation. We see a slight bit lower. Um, the trend is your friend, even if it’s not at the Fed’s 2% target, uh but it’s not rising and as a result, interest rates are unlikely to go up. The Fed is under pressure to lower rates. Uh that’s another big positive. So there’s really not much out there other than the the usual turmoil around uh uh geopolitics around the world. Uh other than that, I think everything domestically looks really good.
01:21 Speaker A
What about valuations, Chuck? How much of the positives that you’re describing has been priced in here?
01:32 Chuck
Well, you really have to look at the the companies. Uh, I’m not a great fan of looking at the uh PE multiple for the S&P 500, which is clearly distorted by uh seven or 10 companies that have extremely high PEs but are growing extremely rapidly. Uh, the rest of the market uh trades at a much lower PE and there are lots and lots of great values there and the companies are making money, growing their dividends. Uh, so I think you have to look at it individual company by company. And we’ve seen it started to broaden out a bit. So the uh the Mag 7 is not performing as well over the last year as the rest of the market, as the S&P unloved, disliked, ignored, uh S&P 493. So, I’m very positive on that part of the market and even on the Mag 7, some of them are still attractive. You just have to expect very solid growth in the corporate profits.