00:00 Speaker A
The earnings growth you mentioned here. Strong earnings growth. The S&P 493, you point out here, Ross, earnings up 12% year over year. What should we make of some of the the improving trends, Ross, you highlight? You point out healthcare, energy, banks. What should we make of that as investors?
00:27 Ross
I think it’s a good thing, right? I mean, if market concentration has been the big worry for most of this bull market, you you like to see a broadening or at least a some rotational action when Big Tech isn’t pulling its weight. We’re seeing that a little bit. Now, obviously, from a headline perspective, it’s tricky because tech is such a big weight that it can’t really pull you out of a a tail spin, but we like to see the strength from healthcare, energy and financials, you know, pulling their weight.
01:00 Ross
And even if you zoom out, you know, from a global sense, you know, the US is not the only market that’s been working. This is a global bull market in almost every sense of the word. So, the broadening in terms of earning earnings, the broadening in terms of price action, it might take a little while to work it out. It’s not like the S&P equal weight has been in leadership by any means. Um, but it’s it’s encouraging nonetheless that this is not just AI, not just Big Tech. Um, and again, that broad earnings growth.
01:34 Ross
I mean the the S&P equal weight is trading probably as of right now below its its long-term, you know, next 12 months price to earnings ratio. So, you know, it’s it it doesn’t look expensive. It doesn’t look bubbly to me.
01:52 Speaker A
As for the Fed Ross, uh you say a higher for longer rate environment here to stay. If that’s true, Ross, what what are the what are the sectors, the asset classes that you would say, okay, those would be your winners and and the losers?
02:16 Ross
Well, I think winners when you’re thinking about something cyclical like interest rates, you’re looking at companies that one, companies in sectors that don’t have to tap capital markets all that much, that do have a lot of cash on their balance sheets. I mean, up until recently you would have said, well, Big Tech, you know, the these behements are a natural winner from a higher for longer rate environment. Um, losers would definitely be, you know, both the yield proxies, things like staples, which have really, you know, outside of today failed to catch a bid across the last couple of years.
02:51 Ross
And then the more rate sensitive sectors. I think about small caps which have a lot of floating rate debt on their balance sheet. I think about the housing sector which has just been desperate to break out and you see signs of life and then you get mortgage rates popping back up. Um, so so there there’s more, I would say losers than winners from a higher for longer rate environment, especially as we kind of come off a decade where zero interest rate policy was the norm. So, um, we still like Big Tech, we still like the secular winners that have to do with the AI trade.
03:31 Ross
I think there’s plenty of things to like, but that higher for longer rate environment is a bit of a wake-up call, uh especially compared to the last decade.