Markets can perform well without Nvidia in the lead: Strategist

let's welcome in art Hogan he is the chief Market strategist at B Riley wealth art is always good to see you uh let's may start at kind of broader question art you know Julie was pointing out today you look at the S SPX S&P 500 we're basically flat today art but what a run it's up about 15% so far this year art I'm just interested do you think that kind of does that rally continue in the second half art or or no You' you'd expect us to take kind of a breather here I think today is a perfect example I think you guys set the up really well I think it's a perfect example of a lot of folks being concerned that Nvidia and arguably Nvidia Microsoft and Apple were such a big part of the 15% that the S&P 500's higher this year on a year-to DAT basis and what would happen if one of those really fell out of bed now not that 10% uh down on a stock that's up 140% year to date uh minus that 10 um is is a big fall but you're seeing you know basically 3 or 4 days where Nvidia has not been leading the charge and the Market's done very well I think that continues throughout the second half of this year I think what we're going to see is as you if you look at the Cadence of earnings growth the the percentage that the other 497 stocks S&P 500 are going to be adding becomes much larger so I think you're going to see the market broaden out and likely see things like energy which we're seeing today financials which we're seeing today utilities to a certain extent and likely Industrials pick you know to your point J pick up the Baton a bit and start pulling their weight in terms of what happens in the back half of this year and I think that puts us in a healthier place I think the concentration at the top obviously has people nervous and if in fact we work our way through the second quarter earners reporting season and see other sectors shine which we did in the first quarter you know we saw the sectors other than technology actually do very well I think this Market can can really pick itself up in the back half and not necessarily need to be driven by Tech and communication Services art does that then imply also that you're pretty optimistic about growth right because obviously the tech increases that we've seen have been boosted by this AI narrative but for everything else to do well like it just kind of has to be a general growth narrative no yeah I I would agree with that jul I think when you look at the estimates for the second quarter GDP growth uh according to Atlanta fed GDP now it's it's north of 3% uh we'll get another revision to the first quarter later this week I suspect that goes higher not lower I think we're going to be on Pace to not necessarily have that sort of three and a half% GDP growth that we had in the back half of last year but something like two and a half percent which is certainly above mean and likely enough to be driving profits so if you look at the again if you look at the earnings estimates for the next three quarters including the second quarter they gradually work their way higher and as we all know that you know the the consensus tends to be a bit low so I think we continue to see both the economy and earnings grow out uh outside of consensus estimates uh into the end of the calendar year another Catalyst potential Catalyst are we're watching this week uh pce is on Deck fed's preferred inflation gauge what are you expecting uh to hear there or and what are you what are you expecting from the FED for for the remainder of the year yeah I'll tell you this the PC is a little easier to calculate Because by the time we get both the CPI and the PPI we know what pieces of that goes into that PC reading so um as opposed to the 2.7 at the core level we like to see that go down to 2.6 and oddly enough that's where the FED had actually factored us exiting 24 so we'll be seeing a 2.6 print on core likely this week that that 2.6 is going to be close enough for government work for the for the FED to actually feel comfortable enough in September for their first rate cut and I think that is likely going to be the start of feeling a bit better about where we are in the in the monetary rate cycle we're we're going to be kind of last to the party as it as as that goes because the as we know the ECB already made that move the Bank of Canada the bank of England leaned into it and likely goes at their next meeting so by the time September rolls around we will likely see the FED cut for the first time and that probably takes a little pressure off the dollar too the Dollar's been unidirectionally higher since the FED seems to be dragging their heels to the raid cut party I want to just push on one angle there you know the FED it it seemed like for there was a moment in time there it was just fed all day every day fed fed fed and it feels like it maybe it's pulled back a little a little bit on that I mean am I imagine things are or or is the market maybe our investors coming around to the idea maybe maybe the we're not as dependent as the FED as we thought we were six months ago or 12 months ago oh absolutely such a good point yeah so the FED pivoted they leaned into being done with rate hikes at the end of last year and gradually and so we entered this year thinking maybe we get five or six rate cuts and they'd start as early as March and that dissipated pretty rapidly through the first quarter and yet the market continued to Rally so investors have really shown that given the choice between uh early and often rate cuts and better economic data and earnings they choose the latter and I think that's a very intuitive choice to be making so I think Market participants have certainly leaned into the direction we'd rather the FED not have to cut but if they do cut they can take their time doing it if September is the first time they do it that going to be great as opposed to where we were when we started this calendar year which was assuming they we're going to be cutting a whole lot more and the good news is they didn't have to because the the economy continues to chug along at above mean Pace well of course we always have monetary policy on our minds but uh lately we also have fisal policy on our minds right as we talked about we're going to be hearing from Janet Yellen a little bit later in the show we've got the debate coming up later this week um do you have clients asking you about the situation in Washington are you seeing a more of a drum beat for that and what are you watching in terms of how it might affect the markets now I would tell you when it comes out to fiscal policy the hardest time to talk about that is an election year because neither side of the AIS is going to actually ever say anything about cutting spending and we need to do both obviously we're in a place where our debt is too high and uh and it's a function of two things we need to collect more revenues and we certainly need to spend less and you know so fortunately or unfortunately we're not going to resolve any of that but after September 30th we're going to have to start coming to you know some sort of agreement on what next year's budget looks like for the fiscal year and clearly there's going to be no new spending and there's likely going to be a push to re re rein in some spending but that you know there's two sides to this sword right and the other side obviously is we need to find some Revenue generation whether it's better economic activity or you know simplifying a tax code Etc so you know i' be listening to people that are willing to talk about both sides of that equation unfortunately in a national election nobody wants to talk about counting spending well and we're probably not going to hear it on Thursday night from the two presidential candidates most likely because that's not going to get the many votes um but you know what would you in that debate what would you like to hear come up or what are you going to be listening for in terms of any kind of Direction on economic policy or tariffs or what do you think could be most important yeah I would like to have a clear and concise argument made for why tariffs actually work because I don't believe that they do I think at the end of the day that's the it's the and user or the consumer that pays that tariff so I just think it's bad policy I certainly understand how that worked 100 years ago but in the global economy that we live in you know that those costs are passed along to um the end user or the consumer and that that's inflationary it's higher costs there's there's not a real benefit to it so I think that's one piece of the puzzle I think it you know it'd be a great uh part brick in the platform for both of these candidates to remove and say that's probably not the right way to go about this you could certainly protect American indust without you know costing consumers more money and that's that's one thing I'd like to see uh get rid of but I certainly would like to hear you know a real uh serious conversation about what is the best way to both find ways to cut spending right and what are the best ways to generate more revenue and and what ways would make that sense and I think that the from the Democratic side they really talked about you know putting more people to work at the IRS because there's a lot of people at the upper end of the economic scale that tend to pay less in taxes and perhaps get away with that but the I think simplifying this tax code be would go a long way towards saying okay we probably raise more revenues and make things more fair if we simplify the tax code again election year politics you're likely not going to hear either one of those things come up on Thursday you never know art Hope Springs Eternal here when it comes to the American um election system and political system thanks a lot it's great to see you good to see you

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Length: 8min 24sec (504 seconds)

Published: Tue Jun 25 2024