Talking Markets with Bank of America’s Joe Quinlan
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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 weekly webcast and podcast. I'm Lauren Rublin, Senior Managing Editor at Barron's. Thanks for joining us today for a look at the economy and the markets.

Stocks are mostly on the rise again today. The S&P 500 topped 6,000 this morning. Meanwhile, Bitcoin has topped 80,000. Where do we go from here? For that, I will be turning to today's guests, Barron's Deputy Editor Ben Levison and Joe Quinlan, Managing Director and Head of Market Strategy for the Chief Investment Office at Bank of America. Welcome, Ben and Joe. Happy Monday to both of you. Thanks, Lauren. Thanks for having us.

Oh, such a pleasure. Joe, I will start with you today. The market has ripped higher since the election ended last week. Peacefully, we should note, with Donald Trump's victory. Analysts have been busy raising their targets for the S&P 500. I believe Ed Yardeni came out with a target of 10,000 by the end of the decade, though I think the market may hit that by the end of the week at the rate it's going. So putting aside all those forecasts, I'm going to talk a little bit about the S&P 500.

I'm asking you, what is driving the latest rally in your view? And what is the investment setup heading into 2025? Well, Lauren, I think the biggest thing is the markets are just exhaling. You know, the U.S. has an extraordinarily long, you know,

election cycle. So once it's over, everyone exhales. As you said, it was clear and concise who the winner was. And when it comes to deregulation, corporate tax cuts, the markets got what it wanted in terms of the setup for Washington. So and remember,

Overlaying this is a good economy. This economy, U.S. economy, continues to defy expectations. I don't hear anyone talking recession anymore. That's been scrubbed from our vocabulary for now. But this economy is firing on all cylinders when you look at consumption, capital expenditures, lower interest rates.

You've got the fifth, so stimulus still working its way through. We're pulling ahead from the rest of the world easily, not just Europe, but also the emerging markets and China, I would note as well. So a lot of things working for the markets right now, and we expect that to continue into 2025. The economy continues to show that good growth with employment, decent earnings growth as well.

Earnings are coming in better than expected for Q3, probably for Q4 as well. The setup for next year with the lower corporate taxes out there in front of us already being discounted. I would say, Lauren, to wrap up this part, I'm a little concerned. As you said, we're ripping, and I'm just concerned that maybe we're pulling into 2024 the returns from 2025. So we'll see how that plays out.

I know when no one's talking about a recession and the market's going crazy, you have to start to think like a contrarian. It doesn't mean that's the right approach, but I'm glad you mentioned that. I'm curious what the mood of your clients is and the kinds of questions they're asking you.

Well, we have a client, we have a lot of clients in money market funds, and they've been comfortable sitting there. I won't call it an excuse, but one reason why they were sitting there for most of this year is because of the election uncertainty. Well, now that's behind us. And so we are seeing more constructive conversations with our clients about, okay, let's

put some of this money to work. And then it's that age-old fear, well, I missed the move up in the market. And as you know, you can't time the market. So we are starting to see, and I think we're going to become more prevalent, that $6 trillion plus in money market funds is going to slowly but surely come out, go into, I think, the larger cap names here,

in the U.S., small cap. It'll filter into the bond market as well because people want that stable return. But that's the most significant thing I've seen in the last week or so is that question mark with our clients about, okay, now there's really no reason not to be sitting in cash, particularly with the Fed cutting rates as well. So you're going to get less return and you're going to get a better overall turn putting the money into equities and or longer duration fixed income.

Interesting. I want to turn to Ben for a moment. Ben, many people have said the markets are rallying because of Trump's pro-growth agenda. You have been disputing that analysis in the office early and often. We might as well continue that conversation here. Why do you disagree with that thesis and what are you thinking instead?

Well, I think that this is just, you know, the markets rally is really response to getting the election over with with a clear winner. You know, heading into Tuesday night, I know in the newsroom, at least there was almost impossible to find anyone who thought that we'd have a winner on Wednesday morning. And in fact, we did. And if you looked at what happened with both volatility and the bond in the stock market, they both had surged into the election itself. And then they, you know, volatility got crushed.

after the results came in. And I think a lot of that has to do, that is what drove the market higher. I look at the historical reaction to elections and I see that, you know, going back to when Biden won, you know, the market, the S&P 500 gained 4.2% in the first three days after Biden won the election. I don't think we ever heard anyone saying, talking about his pro-growth agenda being the reason for that.

And the market's now gone up 3.7% under Trump. So I think a lot of this just has to do with that uncertainty being removed. It's not to say that there aren't areas of the market which are doing extremely well because of Trump's victory. You look at banks, I mean,

incredibly well. Look at Tesla. I don't think you can point to anything besides Trump's win for Tesla's massive gain following the election. And those pro-growth policies, hopefully we'll get those tax cuts and things without the tariffs that do too much damage. But I still think a lot of the policy side of things is up in the air. So I think this is really just the election is over. We can all exhale and get on with just the business of America being business.

As Joe mentioned, certainty, and that's one thing investors do. Certainty is a wonderful thing. Right, and we don't get it often. So, Joe, I wanted to ask you about the dollar, which has been rising really since mid-October. It's up sharply again today. What do you make of the dollar rally? What are the implications, and where do you think we head from here?

Well, Lauren, I mean, the dollar rally, it's emblematic of the rest of the world wanting to be part and parcel of this great U.S. story, the election, the earnings, the uncertainty behind us. So there's more dollars outside the United States than inside. And if you look at, say, just look at U.S. equities.

Foreigners own around 20% of U.S. equities, around 28% of marketable treasuries, 32% of the corporate bond market. And if you're sitting in Dubai or sitting in Asia or parts of Europe, you're seeing this great story unfold here in the United States. All systems go with the election behind us.

So I think the dollar gets a good bid because there's so much global demand for our securities. I don't see that changing. We could see some reallocation down the road, you know, protectionism, you know, kind of the tougher talk from a Trump administration could cause some, you know, sovereign wealth funds or individuals to hold off protectionism.

putting their money in the United States, but that hasn't just happened yet. So the key question is how strong does the dollar become where it starts to hurt the multinationals? And I kind of take that with a grain of salt because multinationals, whether in Europe, Asia, across the world,

They know how to hedge. They're very good at it. They know how to protect. They can keep their earnings over in different parts of the world. So I don't think we're anywhere near where the negative side of the stronger dollar. In fact, it's the positive because you've seen that incredible foreign demand for our securities. We're the leader. They want to be part of the story.

Those were some interesting statistics about foreign ownership, for sure. I wanted to ask you about Bitcoin. I mentioned that it has had a stupendous rally since the election. How is B of A thinking about Bitcoin and what are you advising clients who want Bitcoin exposure?

Well, you know, we're still cautious as a financial institute about Bitcoin in terms of the regulation, how we can, the transparency. So, but it's a big conversation with our clients. You know, digital currencies are out there. I don't think they're going away anytime soon. I don't think they're going to usurp transparency.

The dollar's role is a currency. So we're seeing a lot more discussions about gaining exposure. What does this asset class mean? What are the risks? So, you know, we're early in the conversation. I know the asset's been around for a while and it's getting a tremendous bid here. But, you know, our clients are asking about it and we're starting to do more work in terms of what does it actually mean in your portfolio? Where would it fit in your portfolio amongst your risk tolerance? Mm-hmm.

Well, we'll be watching for your research on that. I wanted to ask you about China. You've written quite a bit about China. And in a piece in June, you actually liken the U.S.-China relationship to an old Chinese expression, sleeping in the same bed but dreaming different dreams. I really like that expression. And I want to ask how you think this relationship will play out in coming years, especially in view of Trump's proposed tariffs, and how investors should be thinking about investing in China.

Well, the first thing, Lauren, is that investors need to realize that the United States and China are still very much joined at the hip, you know, financially, commercially, culturally, despite all the talk of the tariffs from Trump to first go around, the Biden administration being very tough. So we're still deeply embedded in each other's markets. We, the United States, depend on China for a lot of refined markets.

minerals and metals that go into our missiles, our EVs, our solar panels. So I'm concerned, watching very carefully how President-elect Trump deals with China vis-a-vis the tariffs, because we know China will respond. And we don't want anything to see tit for tat.

And already, remember too, Lauren, remember there was talk going back a couple years ago, China doesn't matter. U.S. companies can absorb a small percentage of their earnings. Well, that's not true. I mean, luxury brand companies,

the automobile technology, the Chinese consumer matters to our earnings, you know, when you go sector by sector, particularly company by company. So I'm keeping my fingers crossed that cooler heads can prevail between the two parties because so much is at stake. And don't fall for the false narrative that we've already unwound this relationship because it's not unwound, which means there's more downside if we're not careful how we handle it.

Right. I think that's a good point. And as I said, I love that Chinese expression. So I wanted to ask you, before I turn to Ben for a look at some companies reporting this week, I want to ask you about the investment landscape for the second half of the decade. It may seem premature to be talking about that, but it's going to be here soon enough.

So how are you beginning to think about that in terms of sectors, in terms of the U.S.-China relationship, in terms of the U.S. versus the rest of the world, and of course, our stock market? Well, Lauren, I mean,

I expect, I mean, the biggest question we ask ourselves, will the U.S. maintain this edge, the outperformance relative to the rest of the world? I'm talking U.S. equities. We've had a phenomenal first half of this decade. We've run away with it. We've crushed it, GDP, earnings. Can we sustain that? And I would say the short answer is yes, because I'm looking at the private sector, our technology companies. They're pushing us to the AI frontier. They're pushing into space.

They're pushing us into the nuclear renaissance, drone warfare, energy security, you name it. The U.S. private sector, and now if we get a little mixed with the public sector, right? The mixed economy is the best economy. If we can make this work with the animal spirits being unleashed by the election,

this is going to be a hugely powerful story. We're $30 trillion in output here in the United States. We're going to go to 35, 40 if we put the right policies in place. And that's how I'm thinking of it. And yes, we like China. We like some companies in Europe. But actually, I think the United States, you know, we're not only winning the marathon, but we're winning the 5K race as well, which is, as you know, even faster.

Does the debt issue worry you? We've been talking about that a lot on recent calls. Short answer is no, because right now gross public sector debt is percentage GDP. It's 100 percent. That's manageable. Uncle Sam has an ace up its sleeve called the private sector. Expand the pie, the denominator. We have to be careful about all the spending.

What are we getting? What's the return on investment for all the spending? And that's something I watch. I think we can afford it. But are we going to get the payoff in the second half of this decade to create that great economy? I think we're going to see evolve. And when you say spending there, is that government spending or is that is that private sector capex?

But if we spend $6.5 trillion a year, that's the federal government outlet, what are we actually getting? I mean, I know we've got to take Medicaid, Medicare, Social Security, pay the interest.

But, you know, all this, you know, infrastructure spending, how is that going to play out? How can we the biggest issue to how do you take this money, federal money and leverage it with the private sector? So if the federal government puts a buck down, the private sector puts five bucks down. That's the best way to drive growth. And that's to me is kind of what I'm watching out for. Got it. This episode is brought to you by OutSystems, the AI powered application generation platform for enterprises.

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All right. Now I want to turn to Ben and talk about those companies reporting this week. Then we'll get back to Joe and some of your investment ideas. So, Ben, we'll start with Home Depot. It reports tomorrow the stock has not kept pace with the S&P 500 this year and quarterly earnings look poised to come in a bit below a year ago. What is holding Home Depot down and what are you expecting from earnings?

I think it's two things. The first is just, you know, it's really dependent on the housing market. And, you know, housing stocks have done pretty well, but the housing market has been a really tough place. People, you know, they update their homes when they buy new houses. It's when they do a lot of the spending. And so I think that's been important.

part of it. And then the other part is just that the margins have not been going up the way that they had been. Part of that is just because you had this, you know, when inflation was really was running very hot, prices went up very quickly that helped margins. But now that's not happening so much anymore. And so that means that they had to find other way to drive those margins.

And so I think for some analysts, I was reading a report from CFRA, their worry is about those margins. They just don't think that they are going to be strong enough for Home Depot to be able to raise its annual earnings guidance, even if sales do come into the upside. And that's going to be the key thing there. But I think it's also one of those things where if we start to see a pickup in the housing market, that would be a great environment for Home Depot.

That would definitely be good for them. So Spotify is another company reporting tomorrow. The company has had a mammoth year. The stock is up over 100%. Why is Wall Street so exuberant and what should we expect from earnings? I mean, Spotify just keeps making money. I mean, if you want to talk about margins, you know, here's a company that is going to have a revenue of $4.3 billion this year. That's up from $3.6 billion.

But its earnings are expected to jump to $1.81 a share from $0.35 a share. That's just a massive increase in the money that they're taking home. Part of that's from they've raised prices.

and things like that. And the stock has done very well because of it. Again, you have to be careful when a stock has gone up as much as Spotify has that a little too much is priced in to the shares, that it's going to be hard for the company to deliver the goods when earnings comes around. And I think that's the big thing there.

I was reading Evercore's note. They think that actually Wall Street, they think that Wall Street got the third quarter numbers right, but they're worried about the fourth quarter. They don't think that Spotify is going to be able to raise those fourth quarter, the fourth quarter guidance that it had. And that could be a problem for them.

for the stock. But you lo this thing and it is just train and it's going stra the right, which is exact to see from a technical pr be very interesting to see can deliver and then the numbers. It seems like the skeptics at the moment bec chart performance. So that's

I want to talk about Cisco next. The company reports on Wednesday. As you mentioned to me this morning, Cisco has yet to reclaim its dot-com era high. And I wonder whether that is a warning for today's NVIDIAs and other high flyers, or is it just the Cisco thing? Yeah, I mean, it's a fascinating question because I think the bear case for

for Nvidia in particular has been that it will be a Cisco that you know once everybody sort of catches up to you know Cisco is the one who provided all the a lot of the hardware to make the internet go back in the 1990s and it was an incredible stock and then the bubble popped back in 2000 and Cisco as you said just has never gotten back to that top that it had before

And I think the warning has to be for NVIDIA that you need to do more than just be the one to supply the chips. Or you better keep ahead of everybody else in terms of those chips. Otherwise, you could meet the same fate if this becomes a bubble. But I think for Cisco, what's interesting is that the stock is slowly making its way back to those old highs. Right now, it trades for about...

Oh, it's at $58.63. The old high is back around $80 a share.

But it is slowly making its way back to those levels. And there's, I think, good reason for that. It's definitely benefiting from AI as products are being used for that. It actually may get some benefit from cybersecurity as that trade maybe starts to get more attention, just given all the threats that are out there.

And these earnings, it's interesting that JP Morgan decided to upgrade the stock before earnings came out, which I always think is a pretty daring thing to do. We always talk very carefully. Yeah, I mean, in the newsroom, we always talk very carefully about whether we want to do a pick right before earnings because it could go one way or the other. It could be great if you get it right. It could be very bad if you get it wrong. And their case isn't so much about the quarter, but just that they think that

that their AI is going to be driving a lot of demand for its products and that the stock still has some room for some multiple upside. And you can actually see it perhaps getting back to that $80 that it once did. It might take a little while, but it was an interesting call ahead of earnings.

I'll say. We will watch that one. Let's talk about Disney. It reports on Thursday, things are looking modestly better for the House of Mouse this year, but the big issue remains finding Bob Iger's successor as CEO. What can you tell us about that search and about the company's business?

Sure. I mean, what's been interesting about Disney is that, you know, we picked it, I think it was back in October of 2020, I want to say 2022 at this point, or was it, no, I guess 2023. That's right.

2023. And it had a great rally and then it pulled back. And I think what Disney's in the process of right now is really recalibrating. It spent too much on, it was spending way too much on its movies and television shows. I mean, television shows had budgets over 100 million, movies were well over 200 million. And it's really hard to generate an ROI on that kind of spending.

Same time, the parks have been weaker this year just because people, consumers getting pressured by higher prices and we're spending more on their necessities and on things like going to Disney World or Disneyland, though I did take my kids to Disneyland for the first time this summer. They loved it.

So did my wife, which surprised me. No surprise. But I think that's what we're seeing here is that we now have Jim Gorman from the former CEO of Morgan Stanley is the head of the search committee for, is really leading the search for Iger's replacement. And I think you're seeing a company that's also pulled back on spending and is thinking about the efficiency, how to get that ROI on their

on their movies and on their Disney Plus and things like that again. And so we've had this pullback. It didn't get back to where we recommend the stock, but it did pull back quite a bit before rallying again. And I think the stock, though, looks pretty good here. And if the earnings can start delivering and show that they are getting more efficient, I think there's a lot more upside.

That would be a great turn for Disney. Finally, let's have a look at Talon Energy. This stock fell after the government ruled against a nuclear power deal that the company had struck with Amazon, although that said, Talon stock is up more than 200% over the past 12 months. What's going on with Talon? What was the issue? And where do things go from here?

Sure. And I want to say Talon has actually made back all its losses from that announcement. What happened was, so Talon had agreed to this deal with Amazon where it was going to provide a certain amount of electricity and it was going to be off grid. And I think that was what caught FERC's attention. They don't want to have all this energy bypassing the grid because they think it will have a negative impact on consumers.

What happened with Talon though is that there's a limit that you can go up to on that wattage and their Amazon is going to take that much. They said that they're going to stick with the deal. It's just have to be able to go over that level. And so Talon has bounced back. The stock is up

223%, I think, year to date is what that number should be. It's up 67% in the last three months over this. And there's reasons for this. Their sales are actually not up a lot year over year, 522 million versus 516, but they're actually expected to make money now, 26 cents a share.

after losing $1.30 last year for this quarter. But this FERC decision, this regulatory decision, has really called into question some of these kinds of deals that have boosted other stocks, including Constellation Energy.

And Constellation actually hasn't made back its losses in part because these kind of deals were a much bigger part of the thesis for that stock. People still think there are going to be lawsuits and going to be things like that to try to determine how this will all play out because there really is a new kind of regulatory future here.

My biggest concern with all these stocks is just how much they've gone up this year. And there's one firm, BWS Financial, that actually dropped coverage of Talon Energy. I think it was last week. They basically stepped away and they said, look, we recommended buying this stock at the beginning of the year. We said it was undervalued and nobody on Wall Street was covering it.

Now the stock is soared. People are starting to cover it. They just said, you know what, we don't need to do this. We don't need to cover this anymore. And they pulled their rating and they walked away. And I think with these stocks, you know, they have become a little bit juiced by what's been happening. And so you do have to be careful with them. They're more volatile. I think in particular with Constellation, we have to see how that regulatory climate plays out and whether these deals are going to be allowed to go forward.

Do people think there might be a change with the change of administration or is it too soon to know? I think it's too soon to know. You know, it's one where I think the fear and I don't know if anyone's ever made this comparison before, but like remember with co-location on the stock exchanges and there was all this talk about how, you know, people who co-located got the better prices on the trades. I think in this situation here is there's just a worry that if they co-locate

companies are taking the energy without having to go to the grid for it, what's it going to do to everybody else? Especially if they're paying better prices, will the generators or the utilities prefer to send it to an Amazon rather than letting it go to everybody else out there that, you know,

that needs it, you know, all the regular people. And so I think this is just a new area that with this demand and energy that's coming, it really needs to be thought through. And I think that's what's going on. And I suspect that it's not going to be dependent on the administration, but it will on who the administration is. But just thinking through how is this going to impact the way that we buy and sell energy in the U.S.?

It's going to be a lot of thinking about that in coming years as energy demand rises, and we will definitely cover that. Thanks, Ben. I wanted to get back to Joe before we go to listener questions and ask you, Joe, about how your comments earlier about the market and America's strength are playing into your notions of portfolio construction. You mentioned to me last week that you

You like hard power, hard assets and hard hats. I presume that translates into particular sectors and types of investments. Can you tell us a little more about that?

Sure. I mean, well, Lauren, I mean, think of it this way. I mean, right now, given all these geopolitical hotspots around the world, global defense spending is less than 3% of overall global GDP. It's way too low for the world we live in. So we like defense, but not just U.S. companies, but look at Europe, look at Japan, some of these defense leaders. You know, if Donald Trump wants to

of rattle our allies by saying you got to pay up pay more i see a lot more defense spending growth faster growth coming out of europe and japan than say the us in of itself we like the drone drone warfare silicon valley's getting involved tech companies uh that that's another play as well and then ukraine remember suppose there's a ceasefire for some you know miraculous reason next year

That would be great, but it's still going to take another five years to replenish all the stockpiles that we've blown off munitions in the last two or three years. And one something we're watching too, hard assets. We could be 2025, a big story next year, could be the rebuilding of Ukraine if there is a pause or if there's any type of a ramp to peace. So we like the hard assets, the infrastructure as well. Hard hats.

Yes, that's about the grid building out here in the U.S. Our grid needs an upgrade. It's not even in the 20th century, let alone the 21st century. So we've got a lot of work to do there, a lot of money being spent. And the private sector, as I said, they're just taking off. I mean, it's remarkable tech companies are becoming now utilities or drivers of transmission and distribution lines. They're not waiting. So a lot of opportunity there.

All right. I wanted to ask you about real estate. We talked about real estate as well last week. What are your thoughts there? I think, you know, post the election, I'm becoming much more confident a lot of this commercial real estate will be moving, be moved in 2025, 26. The animal spirits are back. Cost of capital is coming down, albeit, you know, slowly at different parts of the curve. But, you know, what we saw...

I'll learn in the election, more law and order, you know, more cities getting serious about, you know, working with the folks that need help on our streets, kind of, you know, getting them into shelters off the streets out in front, not in front of the office buildings. I think that's going to be hugely positive because a lot of commercial real estate people I talk to say, you know, it's not about the cost of capital. It's the it's the it's the status of law and order.

And so if we can kind of work that social end of the aspect of cleaning up our cities, that's going to unlock, I think, more opportunity in commercial real estate. So we like REITs. I think there's upside there. I want to ask you before we go to listener questions, we've talked about the U.S., but do you see much upside for international markets? And if so, which ones look most attractive to you?

I think the biggest upside internationally would be that defense spending, defense spending in Europe, the European defense industry, Japan, Australia. Luxury brands will come back. You know, they've been beaten up here, beaten down a little bit on the China disappointment. But remember, luxury brand, there's consumers in the U.S.,

and Europe as well, Japan. So there's other places to buy luxury outside of China. So I think Mexico, if Mexico can work with the new administration, there's a lot of upside there as well, whether it's part of cement, whether it's consumer spending, some of these intermediate parts and component manufacturers. So I think Mexico, this is their opportunity to get once and for all just solidified into our industrial base

and make it work for the Mexican market in general. All right. I want to go to some listener questions, and we'll start with one from Larry about the gold market. Although, in fairness, a number of people have asked about gold on this call. Larry asks, what percentage of an average portfolio do you believe should be invested in gold and gold stocks?

That's a great question, Larry. I would like to broaden it and just say precious metals, we see a lot in our system. I'd say 2%, 3%, 4%, 5%. We have some people 10%, but that's using a broader brush, uranium, silver, much broader, including agricultural commodities. There's some gold bugs out there. I get it. There's a lot of demand for central banks, but to me,

I don't think I'd go more than say five, five, 10% would be kind of a sweet spot because you can get good returns with fixed income, equities, dividend players, and other parts of the credit market, private market as well. All right. Fair enough. As I said, there was a lot of interest in that. We had a question from Ben, not our Ben, but another, how should investors prepare for the potential inflation ramifications? If president Trump goes through with increasing tariffs on imports, any thoughts there? Uh,

Yeah, I mean, it goes back to the hard assets, you know, gold and other, you know, precious metals and minerals. I would be looking at more small caps as kind of a hedge and place to hide out. I'm looking for dividend players as well to give you that kind of, you know, give you that

steady stream of income. And then to me, we'll stay in that space. And then I still like the banks. So the inflation expectation has moved higher, no doubt. We don't think it's going to, but don't overestimate it. Don't in that sense. I think it's going to be capped at say five, five and a quarter, the 10 year yield, the market will pull back in and of itself. But

I wouldn't go all in on the inflation, but have these hedges in place. What do you think? This is not a question from listeners, but from me. What do you think any potential rise in inflation will mean for the Fed? How would the Fed react to that? Yeah, Lauren, I think that's one of the great known unknowns for next year because inflation

we've gotten two cuts from the Fed and we're expecting more of the markets, you know, four cuts next year, our team is looking for. That could be, you know, moved off to the sideline and or delayed or not come to total fruition. So I think that's something that's not completely discounted in the markets. I think Ben would agree with me or I'd like to hear Ben's comments, but I think that's kind of a, you know, that's that one we're watching very carefully because we might have to readjust expectations, uh,

not only broadly macro, but also beneath the surface when it comes to various assets and sectors. Yeah, I agree. Well, Ben, your name was invoked. What do you think?

No, it's one of those things where we've already started to see some perhaps rumblings of that. And if the economy is as strong as it looks to be and inflation isn't coming down as fast as people think, then I think the Fed will have to hold back. I also think that if growth is strong, the market can handle it too. I mean, just remember at the start of this year, everyone was expecting seven cuts and

You know, we've had two and the market's done better than fine. So I think trying to look at any one any one factor and describing that for, you know, why the market can or can't go up would be a mistake. If this growth is as strong as people seem to think it will be, I think the market could do just fine, even if the Fed doesn't cut as much as it's predicted to.

So we had a question from Mattie Yu that I'm going to put to you, Ben. Irrespective of what the market might do longer term, is the market overextended at this point?

It's getting there. You know, I think the easiest way to look at it is just to check the RSI, which is a relative strength indicator. And it sort of puts a number to how strong the rally has been. When something hits 80, it's overbought. When something hits 20, it's oversold. Right now, the S&P 500 is about is almost at 70.

So it's pretty bought, but hasn't quite hit that overbought level of 80 that we often look at. But it's definitely been a strong rally. And I don't think anyone would be surprised if after this it takes a break for a few days. Historically, though, there are a couple of things. One number that I love is when you've had a rally of 20% or more through November 8th,

in a year, the stock market has almost always gone on to gain over the rest of the year. I think there have been two times out of almost 20, I believe, where the market has dropped over the remainder of the year. And it's been around 1%, 1.5% on those declines, where the gains, it almost always goes up. And the gains could be anywhere from 1.5% to 5% or 6% over the last few weeks of the year.

So I would say, you know, look for a pause, but I'm not sure we're in a bad overbought situation quite yet. The trend is your friend, as they say. So I want to turn to Joe again and switch gears and talk about treasuries. We have a question from Peter about the six month outlook for the 10 year treasury. Any thoughts there, Joe?

I mean, good question in the sense that we've already, you know, it's spending a lot of time explaining to clients like the Fed cuts the federal funds rate. Why do interest rates back up? And, you know, Ben touched on it, you know, better than expected growth, inflationary aspects of President Trump's policies.

So, I mean, our team is looking for treasuries right in this range, say $4.50, $4.75, maybe go up a little bit higher. Depends on our CPI print we get later, employment numbers as well. But I think we're normalizing cost of capital in that 4% to 5%.

That that's a nice place to be for the 10 year, 10 year yield. It's normalizing. It can promote growth. You can still get return in the fixed income market where you couldn't before with zero interest rates. You can help rebalance and really work the portfolio construction. It's more it's better that way. So I would say, you know, we're probably going to back up a little bit more here with 10 year yield, but I don't think we're blowing through 5%.

All right. That's encouraging. We had a question from Bill about what is Bank of America's forecast for 2025 S&P 500 earnings. Do you have that off the top of your head? You know, I don't. And my colleague, Savita, who makes that call, is working on her number as we speak. So it's going to be... I'm going to hazard a guess it's going to be generally higher than where we are. But, you know, just...

Remember, go back to 1945 S&P compounded total annual average returns over 11%. Just see the longer term. The S&P 500 is one of the greatest wealth-generating machines out there. Own it, don't time it, and just become embedded in it and just have that philosophy. Good advice. We had a question from TJ Master on future returns of the NASDAQ 100 versus the S&P 500. What are your thoughts there? Well,

Well, I'm kind of like what Ben said, you know, a pause is definitely needed. I think the NASDAQ's up almost about 30% for the year. So that doesn't mean we can't have another good year. And, you know, Will, the big question there is, you know, all this AI infrastructure build out,

will that bring, you know, will that support the earnings expectations and also broaden out into other parts of the market? I think the answer is yes, but it'll be in fits and starts. It won't be linear. There'll be pullbacks. There'll be disappointments. But I think the AI infrastructure is for real, but it hasn't hit the real economy yet. And it's supportive of not only the builders and the enablers, but also the users. Mm-hmm.

All right. We'll end with a question from Lee who says, Joe, from all your years spent evaluating security markets, what are two or three major lessons you've learned? I'm curious about your answer too. Great question. Be in the market. Don't try to time it. I see that all the time. Like,

I'm having that conversation with our clients right now about the $6 trillion plus sitting in money markets. We'll wait for a pullback. No. So be and stay in the market. That's number one. Number two, I am just bullish to the U.S. because I do travel around the world. I study other economies. And our risk-taking DNA on innovation, entrepreneurship is phenomenal.

second to none. There's no economy out there with our DNA when it comes to risk-taking and driving growth, new frontiers. So stay long to U.S. And then the third thing is, you know, be careful what you're paying for, you know, the cost of, you know, the cost of investing. Be smart about the cost of investing. All right. Well, good question and good answer. So with that, we have to end the call. But Joe, I want to thank you for joining us today. It was a lot of fun. Thank you for having me.

A pleasure. And Ben, thank you for joining us as always. Thanks Lauren. Next week on Barron's Live, Ben and I will be speaking with Ryan Kelly, Chief Investment Officer and Portfolio Manager at Hennessy Funds. Thank you to our listeners for tuning in today and we hope you'll join that conversation as well. Speak to you next week and until then everyone stay well and have a good week. This episode is brought to you by OutSystems, the AI powered application generation platform for enterprises.

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