An Economic Update from Point72's Dean Maki
41:44 Share

This episode is brought to you by OutSystems, the AI-powered application generation platform that combines the speed of Gen AI with the power and completeness of the market-leading low-code platform. Visit OutSystems.com to learn more. This is Barron's Live. Each week, we bring you live conversations from our newsrooms about what's moving the market right now.

On this podcast, we take you inside those conversations, the stories, the ideas, and the stocks to watch so you can invest smarter. Now, let's dial in.

Hello, everyone, and welcome to Barron's Live, our daily webcast, excuse me, our weekly webcast and podcast. I'm Lauren Rublin, Senior Managing Editor of Barron's. Thanks for joining us today for a discussion of the economy and the markets. My guests are Barron's Deputy Editor Ben Levison and Dean Mackey, Chief Economist at Point72, the investment firm run by the Head Fund Manager, Steve Cohn.

It is a huge week for corporate earnings, a huge one for economic data as well.

The data include the advance estimate of third quarter GDP, the personal consumption expenditures report, and of course, the October jobs report, which will be released Friday morning. It's the last jobs report before the November 5th election and the last before the Fed's next policy meeting on November 6th and 7th. We'll get to all of that and a whole lot more. But first, I want to welcome Dean and Ben. It is great to have you on Barron's Live. Thanks, Lauren. Thanks, Lauren.

So, Dean, let me start by asking you, why does Point72 have a chief economist? Well, there's a few different reasons. The biggest single reason is that we provide impartial and real-time analysis to our investors. And so we're able to, when the employment report comes across,

My job is to tell people what it means as quickly as possible and then to dig into it and send around a more detailed note. And the nice thing about having an economist here is that the investors can ask us questions directly. If they were relying on a Wall Street firm, they would have to be one of many, many, many clients asking questions. But we're here just to serve our investors.

Got it. That makes sense. So now let's look at the economy. Barron's published its latest big money poll of professional investors this past weekend. And we found that 59% of poll respondents said they expect a soft landing for the U.S. economy. 25% expect no landing and only 16% forecast a recession. So I'm wondering how you would have answered the question and where you see yourself on the recession to no landing spectrum.

Yeah, so the easy part of that is, I would say we don't see a recession as likely anytime soon. And we have not, by the way, over the last several years, expected a recession in the U.S.,

I think the no landing versus soft landing, it really depends on how one defines that. We don't see a sharp slowdown in real GDP growth as likely, which sounds more like no landing. The only thing is that we do think that inflation has come down significantly. And, you know, that's, I think, what a lot of people mean by a soft landing. So bottom line, we think growth will be fine. Inflation will be coming down, but not all the way to the Fed's target.

So what are you expecting for growth as you look at the whole of this year and next year, if you want to give a GDP forecast? Yeah, so we're looking for 3% growth in the third quarter. And then from then on, we see growth running at about a 2.5% pace. So still a very precipitous

pretty robust growth outlook, and it is above almost all other forecasts out there. But I do think in many ways, the risk is actually to the high side of our 2.5%. If I look back, we've grown at 3% over the year ending the second quarter. We grew at 3% in Q2. Looks like we're going to grow at 3% in Q3.

So it's not obvious why we would need to slow down at all from that with the Fed cutting rates, because we've grown at that pace with the funds rate at five and a quarter to five and a half. So if the Fed's cutting, it may be the case that we just continue running at that kind of a pace. So the strong economy has surprised so many people. As you say, you are more optimistic than most people on the street.

What do you think has accounted for the economy's continued and surprising strength? One of the main factors that I think a lot of economists didn't really factor in is that there's been a lot of catch-up hiring in the private services sector. The private services sector is 84% of U.S. employment, and especially looking back a year or two ago,

My view was that there was going to be hundreds of thousands of jobs created within the private service sector just to get back up to where we were pre-COVID.

And that was a very important piece because that told me that even if the Fed raised rates 525 basis points and housing and manufacturing slowed as a result of that, on the employment side, this private service sector job gains were going to dominate. And I do think that's what's happened. And that very strong hiring pace has given households income to spend and that that

that has allowed consumer spending to grow at a solid pace. So it's kind of a virtuous circle where we've had strong hiring, giving households income, they spend the money and that provides more fuel for hiring.

If only it could go on forever, right? Right, exactly. So what does all this imply in terms of Fed policy? We're keenly focused on the Fed here, and we've had what people are calling a jumbo 50 basis point or half percentage point interest rate cut in September. What do you expect from the November and December meetings, and what do you see ahead?

So we expect the Fed to cut by 25 basis points both in November and December.

You know, after the Fed went 50 in September, I think it's unlikely that they would suddenly pause if they felt 50 was needed back then. But we don't think that the economy is in a position where it needs consecutive 50 basis point rate cuts. That would just be easing way too fast for the economy that we have. So we think that the Fed's going to keep going at a 25 per meeting pace through the middle of next year.

But again, if it turns out that growth is even stronger than we're expecting, the Fed may end up stopping a little bit earlier than that. So I think the risk to the Fed now is that they, our view is they cut to three and a quarter to three and a half. It's quite possible if growth remains very solid, they stop somewhere in the 4% range. So how do we square that with the fact that inflation has not come down to their 2% target? I think the Fed has...

is basically assuming that it will come down over time. There has been a lot of progress, to be clear. On the Fed's preferred measure, we've gone from the 5% to 6% range all the way down to 2.7% is the most recent reading.

You know, in my view, the Fed wouldn't need to be cutting at all right now. I think the economy would keep growing just fine without Fed rate cuts, but they do want to take out insurance, it appears, so that, you know, they lower rates into more of a neutral stance.

I think the risk to doing that relatively quickly is that inflation just kind of gets stuck in the two and a half to two and three quarters percent range. So we don't think that inflation is going to take off in a serious way from here. That's not the risk of the Fed easing. The risk of the Fed easing is just that inflation gets stuck above target. And we can live with that.

You know, we used to in the in the 1990s, for example, the Fed followed something called opportunistic disinflation. And they would say, well, inflation is a little bit above where we want it, but we don't want to cause a recession. So we'll just wait till the next recession comes around and then we'll we'll get inflation down to where we want it.

I don't think the Fed would signal that now, but in many ways, I think they'll act in a similar way to that, where they won't be raising rates, even though inflation's above target, and they'll be cutting somewhat more. And they'll just be assuming that it will get to target over time. Mm-hmm.

We shall see. So I cannot resist asking you, what are the risks to your bullish economic forecast? And what are the risks for the Fed here? Yeah, so there's, in terms of downside risk to growth, I do think that the

there's two policy shifts that could slow real GDP growth. I think tariff increases have in the past slowed growth, and I think they would this time as well. And immigration restrictions, whether one agrees with them or not politically,

If immigration growth slows down, that does slow potential GDP growth in the U.S. One of the reasons why it appears that potential GDP growth picked up over the past couple of years was an increase in immigration flows. And so if we do slow that down, as already seems to be happening, then that means potential GDP growth in the U.S. will be lower.

Lauren, if you don't mind. Go ahead, by all means. When you have these outlooks, how do your co-workers use this when they're thinking about the types of moves that they're going to be making in the stock market, whether their sector or overall market or things like that?

You know, the nice thing from my position is I don't really need to know that. You know, my job is to just provide as clear an economic forecast and as clear economic explanations as I can. And then each investor does what they think is best with that. I think one example, though, is, you know, back a year and a half ago,

A year ago or so, when most economists were looking for recession, you know, most investors would have a playbook for recession are saying there's not it's unlikely there will be a recession, hopefully allowed investors to position better in their portfolios as a result of that.

All right, let's go on to looking at corporate earnings this week. Ben, I want to turn to you here. RBC calls it a mildly disappointing reporting season so far. Why is that?

Well, based on their numbers, it's a decent earnings season. I think growth right now is about, we're heading towards around 4.4% earnings growth. But when you look at the numbers, it's something, the number of beats, 76% of the companies are beating earnings. So that's down from 80% last quarter and 58% are beating on sales and that's down from 61%. So you're seeing

a little bit. I mean, it's good, but it's not quite as good as it has been. And the other side of it is that they were looking through the companies in the Russell 1000 to see how they performed after beating earnings. And they're actually underperforming the broader market when they've released numbers. And that to them points to earnings that are entering season that is slightly disappointing. It's not terrible by any means.

but it's not as good as it has been. And so, you know, we're seeing right now is that, you know, 2024 looks like we're going to have $2.42 in aggregate earnings and then 275 for 2025. And, you know, that's pretty good. But there's also been some revisions lower in that. So, you know, I think everybody's looking with a little bit of caution there.

Dean, when you look at corporate earnings, I know you don't have a particular forecast, but how do you assess them from an economic perspective? So one of the things that I think has been quite important to the expansion over the past couple of years is that corporate profit margins, and in economist term, I define that as corporate profits divided by corporate value added or corporate GDP is one of the ways of phrasing that. Those have been close to record highs.

And that's been a very important signal because typically when we go into a recession, it's because corporate profit margins are deteriorating in a significant way. And that's when corporations start cutting employees. They start cutting expenses, cutting capital spending. They don't do that when corporate profit margins are close to record highs.

And so that's been a very important part of the economy's resilience over the past several years. And when I look at what's happening on the corporate profit side, while it does appear the growth rate is slower than it has been at times in the past, it seems like it's growing ballpark in line with GDP. And that means margins are staying relatively high. And that to me is a pretty clear signal that corporations are not at this point going to pull the trigger on large scale job cuts.

And it may have something to do with why the stock market is staying pretty high. Yeah, I mean, that's clearly equities are a function of corporate profits. So definitely there's a relationship there. For sure. And there's actually been a couple of strategists recently who've pointed out the link between these profit margins being at records, but also two valuations. When you have higher margins, you can support higher valuations.

And one of the things that tends to happen is that, you know, valuations aren't, generally speaking, the reason the stock market suddenly falls. It usually is that, you know, valuations can keep going up during an expansion. And then that's a reason why during a recession that market might fall more. But from my understanding, it's rarely the case that valuations themselves suddenly cause a market downturn.

That's correct. There has to be some sort of a catalyst to lead to a rethink. This episode is brought to you by OutSystems, the AI-powered application generation platform for enterprises. Unlike simple GenAI code suggesters, OutSystems lets you generate modern, governable enterprise apps in minutes, then automates the whole DevSecOps lifecycle from a prompt. The generative software cycle is here. Learn more at OutSystems.com.

Ben, it is a monster week for tech earnings. Alphabet, Amazon, Apple, Meta, and Microsoft are all reporting that is five of the magnificent seven. Will their results be magnificent this time around? I'm glad we were talking about margins because I think a lot of the focus on these earnings that we're going to get from Alphabet, Meta, Microsoft, Apple, and Amazon, a lot of it will be focused on margins. For Alphabet and Meta,

A lot of it's going to be about the impact of AI on the core business. DA Davidson put out a really nice report today where, you know, looking at these big five and what's going on there, they say in Google's case, people are looking at the search business. And if there's any disappointment there because of the capex spending or because they're actually losing search traffic to other sites,

That's going to be a that'll be a difficulty for the stock. You know, the expectations aren't high. The company that the stock has dropped 1% over the last three months is up 18% this year. So it's actually underperformed the market a little bit this year.

But it's still growing. It's supposed to report a profit of $1.84. That'd be up from $1.55. But that's what's going to be in focus is this search business and can it continue to grow in the way it has and be as profitable the way it has. The other thing to pay attention there, obviously, is to the government's case against Alphabet.

and particularly the possibility that it gets broken up. Davidson actually thinks that if Alphabet actually is open about the possibility of breaking up the business, and this is the important part, and that it could release value by doing so, that would be bullish for the stock. Meta's a little bit different. Meta has actually gone up 23% during the last three months. It's up 62% this year. And it's been arguing that AI has made its core product better.

And so investors are going to want to see that that is the case, that it's helping margins, it's helping earnings, it's helping that ad business that they have. They're expected to report a profit of $5.21 versus earnings of $4.39 the year before. All right. What do you see for Microsoft? Well, Microsoft, all the attention is on margin. They're spending a lot of money.

And what they need to do is show that Azure, which is their cloud business, that that can grow at about 35% under their new accounting rules and that the CapEx isn't eating into their margins. If that happens,

It should mean good things for Microsoft, especially because it really has underperformed. It's gained only 0.7% over the last three months and is up 14% this year. And there is a lot of worry here about those margins and how much it's spending on AI.

And the big issue though, is that, you know, people are worried that, Davidson calls it that there's this drunken bar fight is what they call the great data center build out. And they think that if, you know, this could be a real problem for Microsoft, that the spending continues kind of unabated because it could be, it really is not as, in as strong a position as Amazon's web services.

Amazon, too, has been kind of mixed over the last three months. It's up 2.9%, which is kind of meh. And again, it's all about margins. People are skeptical that the margins are going to be able to increase. I think a lot of it is going to have to come from the retail side of the business.

But that also, you know, it could be that because AWS is just has a larger scale and that Amazon uses own chips that the margins can hold up better there than they do over at Microsoft.

And then finally, of course, we have Apple. And Apple is a very different beast. It's up 6.2% during the last three months, 20% year to date. And really, this is all about what they can bring, AI brings to the iPhone and the other products. There probably has no sign of an upgrade cycle starting yet in the phones because the AI products are really just being released, I think, today.

But that's people are going to be listening to hear what is, you know, Apple, how they think that this is going to impact the sales. And are they going to be able to drive growth in the in their iPhones in a way that we haven't seen in a long time? So that's going to be the big thing to watch right there. It'll be interesting to see if people like the AI features.

I find them annoying sometimes on the phone I have. Yeah, I mean, I'm kind of old school. I like to just look things up. But, you know, if people do look at these features and say, I got to have them, they're going to buy those phones. That's going to be great for Apple.

Right, for sure. All right. Speaking of companies that are not engaged in a drunken bar fight, let's look at McDonald's. It is engaged in a fight against E. coli. It looks like some onions were to blame. But the company reports on Tuesday what's in store for earnings.

Well, that's the thing is that earnings probably aren't going to matter much. They're supposed to grow earnings from $3.21 to from $3.19. But right now, everyone's focused on the E. coli outbreak in the quarter pounders. You know, we've learned that it's not from the patties, the ham or the beef patties themselves, probably from the onions.

And if they can identify the issues, remove them quickly, it's very possible that the stock can get back to rallying. They had done a good job of trying to target their lower income customers.

consumer by offering value meals and things like that because that group has really been under pressure. But right now, it really is about the E. coli outbreak and how much that is going to ding the efforts to get the company growing again.

All right. Starbucks also reports on Wednesday. And the company named Brian Nickell, its CEO, earlier this year, he worked his magic on Chipotle for many years, and he has a big job ahead turning Starbucks around. There are many problems at the company. What are we going to learn about those efforts from third quarter earnings?

Well, third quarter earnings, they've actually already given those numbers. They put those out a week earlier. They pulled their guidance. And the stock actually, I think, finished the day higher

when that happened, which I think was for two reasons. One is they raised the dividend despite the big cut in, it was despite the fact that the earnings really did come in below estimates by quite a bit and that there's no guidance anymore. But that dividend probably made people feel good. And there's a lot of optimism about Nicol and his ability to turn the company around.

You know, Wedbush put out a note saying that, you know, everyone's be listening for kind of the plans to get the stock growing again, what the new benchmarks are going to be. But they just think that there has been, you know, too much optimism about nickel, that, you know, the stock is up 31 percent in the last three months. And they just think that there's too much work to be done and that, you know, that this is that it has been expressing a little too much optimism right now.

Must be very nice. You take over a company and or you you become CEO and the stock is up 31 percent. That's quite a vote of confidence. It's amazing. You know, I mean, he's a great CEO. Yes.

For sure. All right. Coming back to Dean, as everybody on this call knows, and perhaps everyone in the world, we have an election in the U.S. in less than two weeks. We are nonpartisan here at Barron's, Dean, and I want to ask you in a nonpartisan way to get your read on what fiscal policy might look like under a possible second Trump term and under a possible Harris term.

What do you think? Yeah, so the reason that's a difficult question is that we then have to know what does the rest of government look like, because that will affect whatever fiscal plans are put in place. So some of the analysis that's been done, you know, by the University of Pennsylvania, Wharton School, et cetera, you know, when they look at

just the peer plans, notwithstanding whether they can actually be implemented or not, they do suggest that their calculations are the deficit goes up more under a Trump administration than under a Harris administration. And that's because of the extension of the tax cuts and things like that.

You know, whether that turns out to be true or not depends a lot on what the Senate and the House look like. And so I don't think we can, it's not a zero one, you know, Harris gets this and Trump gets that. It's we have to know what the rest of the government looks like. All right. What about tariffs and their impact? We know that both want to put tariffs on imports. How should investors think about that?

Well, I mean, the standard way that economists think about tariffs are they tend to increase costs and lower growth. And that's, you know, virtually all economic analysis says that. And so it depends on the magnitude. And there may be cases where, you know,

It's worth that cost to growth to do that if it's a national security concern or something like that. But that is the overall impact of tariffs is to slow growth and to at least temporarily raise inflation because those price increases do tend to get passed along to consumers. And we did see in 2018, 2019, we did see the US manufacturing sector start to contract

after tariffs went into place, in part because of the retaliation on the US by foreign governments and also because global growth slowed down in part because of that trade war. So I think that is a generally accepted way of thinking about it among economists.

All right. I wanted to ask you about the deficit. You mentioned that earlier. And there are some people are terribly concerned about, many people are terribly concerned about the size of the U.S. debt and the size of the deficit. There were some murmurings last week that the bond vigilantes have woken up. Other people say it's not a problem until it becomes one. And that could be a very long time from now. What's your perspective on it?

Yeah, so ever since I've been doing this job, the U.S. deficit has been a concern of many people in the markets, etc. And it becomes a market concern

every once in a while. So, for example, a year ago at this time, the deficit and the fiscal outlook became a big concern and Treasury yields went up. And then the next month, people stopped worrying about that. And so it does seem to be a sporadic concern of markets. The big picture way to think about it that I do is it really depends on when investors decide that the US fiscal situation is not sustainable.

If that day were to come when investors decide that, then we start to see a very significant rise in treasury yields that raises the cost of government funding. And we've seen that in, for example, many emerging markets. There were concerns about that in Europe about a decade ago. We haven't really seen that concern fully play out in the US at this point. It may at some point, but it

from my point of view, there's no way to really time when that concern might come to the fore and become the driving force of the treasury market. And so no way to trade around that either? I mean, certainly I wouldn't be able to trade that concern and make a lot of money trying to do that. It's just too, the timing of it is just too uncertain. But it sounds like you think that there will come a point when it actually does happen.

Well, the thing we know is that the long term, well, the thing we think we know is that the long term U.S. fiscal situation is not sustainable. And so at some point, either we're going to have to raise revenues or decrease spending. But when that day comes, that becomes critical, is far less certain. Yeah.

We actually had a question from Rick who asks, what will massive tariffs do to inflation and how would you lower this massive debt? Yeah. So in terms of tariffs, the key question is, you know, how many tariffs are put in place, et cetera. I've seen some analysis that if the, you know, the Trump plans as the campaign announced them were put in place, that might raise inflation by a percentage point or so over the next year.

Now, the question becomes then, is that a one-time event or does that start affecting inflation expectations? Does it lead to further cost, pass-throughs, et cetera? And again, a big question is, does the administration actually put all those tariffs in place that they're talking about? So those are the key factors to consider as we follow what actually gets put in place. Mm-hmm.

I want to talk for a moment about non-U.S. economies. I know you look at them, obviously, you study them. I'm talking about Europe and China and Japan. Can you give us an update on how you see economic activity in those areas playing out?

So the euro area has been quite sluggish in recent months. And we do see a danger that if there is a full-blown trade war, that could be an event that pushes Europe into a recessionary situation. So Europe is in a vulnerable state right now. It's in a slow growth situation, but still growing at this point. But we do see that as a source of vulnerability in the global economy. In terms of China,

China's announced some recent stimulus programs. The way we see that is it's kind of putting a floor under growth if they do implement the stimulus in the way that they're talking about it. So it's not as though they're going to raise growth way beyond their growth target as a result of stimulus. This is something that may help them achieve their growth targets, which that may

That's what they're trying to achieve, and they're not trying to grow faster than that. In terms of Japan, a couple of things to note there. We do think Japan has broken out of deflation, and that's a big event that took a long time to occur.

One thing that does seem to be universal across economies is that consumers are not excited about inflation anywhere. And they don't, you know, it was more of a concern about economists that Japan was in deflation, perhaps, than among the Japanese people themselves. But it has been a goal of the central bank to get Japan out of deflation. And we do think they've succeeded.

All right, let's go on to some more questions. We have a number of questions coming in. Stephen wants to know whether M2 money supply and velocity of M2 inputs are in your forecast.

So I don't tend to use money supply as a direct input. And, you know, there have been a lot of studies at the Fed and such that it has not been as predictive of inflation in general as it was, you know, perhaps 50 years ago or so. The one caveat I would give to that is that

The people that were most concerned about inflation during the pandemic were those that did focus on the money supply. And some of the people that caught that inflation wave the best were focused on those monetary aggregates. So I don't dismiss the message of the monetary aggregates at all.

But I would say it's not so clear that modest fluctuations up and down in the monetary aggregates are very predictive of short-term movements of inflation. If there is a strong relationship there, it's when they're massive, such as when we had in 2001, 2002. Fair enough.

All right. A question from Nick. What do you think about the neutral rate? Is it a useful concept to guide the Fed in 2025? And do you have a personal estimate for the neutral rate? That's the rate at which I guess we could say economic activity is neither contracting nor expanding.

Yeah, so I don't think the neutral rate is a great guide for making near-term policy decisions, because what the neutral rate is really trying to do is to say, out on the long-term horizon, what rate would keep the economy growing at a steady pace, would keep inflation under control? But the problem with using it for current monetary policy is that that's

there's all kinds of other things driving the economy around in the near term. So for example, that tailwind I talked about of catch up hiring from the pandemic, that meant growth was going to be fast almost whatever the rate was. That was a very important force. And if one wanted to really pin it down, one would have to say there's sort of a short-term neutral rate and a long-term neutral rate

But I think the problem is nobody really knows what that short-term rate is. So if I had to give an answer, I would say the long-run neutral rate might be 3%, maybe a little higher than that. But I don't think that's a very useful metric for making Fed policy right now. All right. I wonder how much longer the debate about the neutral rate will go on.

I think it will go on forever, to be honest. Forever. It's certainly captivated people lately. Question for Ben from Kevin, who notes that he has been investing in real estate and utility stocks. Do you expect the two and 10-year treasury yields to remain below 4%? I think the 10 rather is slightly above it now. And what are your thoughts on REITs and utilities?

I mean, both of them have done very well this year, and there were concerns with utilities, especially that they had gotten too extended, but they still look like they're doing like they're holding up. OK, I mean, I think the question there is this idea that it's finally you're going to get growth in the utility sector, this demand for

electricity grows. So I think part of it is that you have to pick your spots and not get too caught up in this idea that they are the new growth stocks, but it's still a pretty solid sector.

If you're looking just for dividends, there are probably other ways to play that would be better. Andrew Barry had written about this a week, I think, ago when he was looking at some of the stocks that were offering big dividends but were not utilities that had big runs lately. You can get a lot more dividends there.

All right. Now we have a question about gold. This is from Larry. And what do you make of gold continuing to hit over 40 new all-time highs this year in light of your lack of immediate concern about the deficit? Do you have any thoughts about that, Dean?

Yeah, I don't spend a lot of time trying to explain gold prices. You know, I think... You're probably wise. Yeah, I think, you know, one factor that does tend to push gold prices up is uncertainty. And if we're not in an uncertain time now, I don't know when we are, you know, eight days ahead of an election and not knowing which way things are going to break. So that, you know, that might be one factor pushing it up.

And perhaps some people think of gold as an anti-inflation hedge. There may be concerns out there still about inflation, and that may be another factor. But again, I'm not really an expert on what drives gold prices.

What do you make of gold's amazing run this year, Nick? Excuse me, not Nick, Ben. You know, I think that, you know, gold has actually been having a nice run for a while. I think it's just getting a lot more attention now. It did well when inflation was rising. It's done well now that inflation has been falling. I think one of the big things that has changed is the central bank buying that's going on.

that especially since the US froze Russian central bank assets with the invasion of Ukraine. I think a lot of central banks have looked for alternatives to the dollar. And gold might be the only one.

And I think that's probably provided a boost that maybe doesn't get talked about enough, along with all the other things that do get talked about, such as the uncertainty part of it. Because I think that's a huge part of it as well. As Dean mentioned, for sure. All right. Another question for you, Ben. We've had a couple of people ask about

whether you see a severe downturn in the stock market in the next three months or whether you think the market will rally into the end of the year. That's a tough question, but I'm going to put you on the spot and ask.

All else being, I'm going to assume that the election goes off without a hitch, because if it doesn't, then all bets are off. But, you know, the market historically does well after the election is over. It usually actually there's supposed to be some weakness ahead of the election. We really haven't seen that this year.

But that hasn't led to sell-offs afterward most of the time. So I think all those being equal, you do have solid economic growth. That's still happening. I mean, all the things that you would want to keep pushing stocks higher, we still have. And so, yeah, I think we can keep gaining into the end of the year. I just, with the market up, I think around 23%, that's the S&P 500. I think it's around there.

So far, I'm just not sure how much more games you get, but I also don't see it as being the kind of situation where you just want to rush out and sell.

Well, we've talked about relatively decent earnings and good profit margins. That'll do it. Yes, for sure. I want to close, Dean, by asking you about the jobs numbers coming out on Friday. The forecast, I gather, is for about 120,000 new payroll additions with the unemployment rate staying steady at 4.1%. Just curious what your predictions are and what you think investors ought to be watching for when that report is released. Okay.

Yeah, I haven't come out with my forecast yet, so I don't have a number to give. But I do think what we can say when we step back and look at this report is it's going to be very messy and it's going to be hard for the Fed to conclude much from it. Unless we got a massive upside surprise, if we printed 200K despite the effects of hurricanes and the negative effects of the strike, that would be news.

But if it's anywhere close to consensus expectations or even a fair amount below or above, I would attribute that more to the hurricane effects were larger or smaller than we thought rather than any underlying change in the economy itself. And that's why I think the Fed's not going to be particularly swayed by whatever comes out on Friday because

there's so much uncertainty around how much these hurricanes displaced employment and what the exact magnitude of that is that they're not going to, for example, pause because they think the hurricane effect was this and the underlying trend was a little stronger than they thought. That's just not going to happen. They're going to look at the report and most likely go ahead and cut 25 basis points.

Okay. So in other words, it's not going to be one of the most critical labor reports to come out. I think the only way it would be is if, again, it shocked to the high side, you know, for whatever reason, because then it would start to say, you know, okay, we had hurricanes and strikes and we still grew, you know, some large number. That would be truly surprising. And, you know, that might make the Fed start to think harder about things. But I don't think that's particularly likely.

No, I think it would make all of us start to think harder about them. So we will leave it there. We've got a lot of numbers coming this week. We'll be covering them. Dean, I want to thank you for joining Ben and me today. And I want to thank Ben, as always, for your words of wisdom.

Next week on Barron's Live, Ben and I will speak with Matt McLennan, a portfolio manager at First Eagle Investments in New York. Matt combs the world for value. He was a panelist at our international roundtable last November, and he is never at a loss for interesting investment ideas. Should be a good call. Thank you to our audience for tuning in today.

Hope you'll tune in again next week to listen to Ben, me, and Matt. Stay well, everyone, and have a good week. This episode is brought to you by OutSystems, the AI-powered application generation platform for enterprises. Unlike simple GenAI code suggesters, OutSystems lets you generate modern, governable enterprise apps in minutes, then automates the whole DevSecOps lifecycle from a prompt.

The generative software cycle is here. Learn more at outsystems.com.