Hello, Reader.
I have something special in store for you today.
Last week, I sat down with InvestorPlace Editor in Chief Luis Hernandez and Senior Investment Analysts Louis Navellier and Luke Lango for a midyear Omnia Roundtable. Omnia is the most exclusive membership level InvestorPlace offers. It gives you full lifetime access to every single one of InvestorPlace’s premium subscription services… and many other extra benefits not available to regular subscribers.
One of those benefits is the Omnia Roundtable. We hold these Roundtables a few times a year when Louis, Luke, and I are together at the InvestorPlace offices.
While they are typically reserved for Omnia members, we wanted to share our latest one with you today. During our midyear Omnia Roundtable, we talk about what happened in the market so far in 2024… and what we each believe investors can expect for the rest of the year.
During the Roundtable, we cover…
- The U.S. economy and inflation
- Artificial intelligence
- The Federal Reserve
- Why Bitcoin stalled out
And much more!
You can watch the full midyear Omnia Roundtable by clicking the play button above, or you can read the full transcript below
I hope you enjoy the discussion.
Regards,
Eric Fry
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Luis Hernandez: Hi, I’m Luis Hernandez, Editor-in-Chief of InvestorPlace, and I want to welcome you to our midyear Omnia Roundtable. If you’re new to Omnia, these Roundtable events occur a few times a year when we are lucky enough to have Eric Fry, Luke Lango, and Louis Navellier together with us in our Baltimore offices. We all had expectations for how the market would play out in 2024, and now that we’re about halfway through the year, it’s a chance to assess how things are going and what our experts believe will occur the rest of the year.
Everyone could agree, for instance, that the artificial intelligence megatrend would continue to march forward, but many people also predicted a much more accommodated policy from the Federal Reserve. If you recall, at the beginning of the year, traders were predicting as many as seven cuts from the Fed in 2024, but progress on inflation stalled and the Fed’s warnings of “higher for longer” have come true.
At the beginning of the year, if I told you we’d get no cuts from the Fed, but still reach all-time highs in the stock market, I’m not sure how many people would’ve bought that story. We had the much-anticipated Bitcoin halving, but that too has stalled and with it; all the altcoins many people were eagerly watching and waiting for seemed to be going nowhere fast.
Meanwhile, the trend of election years being positive for the market has continued, but everyone is concerned about the deep political divide in our country right now and what it could mean for the markets as 2024 draws to a close. And the global political stage has only gotten more chaotic. War in the Middle East has only added to the anxiety felt by the ongoing conflict in Ukraine. But nothing seems to be able to stop the exponential progress of tech.
I’m here with our three expert analysts to talk about what has happened in the market so far in 2024 and what investors can expect for the rest of the year. I hope you enjoy the discussion. Guys, always great to sit down with you and talk about the markets. Appreciate all three of you being here. It’s always a special time for us.
As we sit here, the S&P 500 is about 14% for the year, but the equal weight is probably closer to 4%, so it’s not really been a very broad market uptrend in the way that a lot of people think that it is. Do we think that this market is going to continue to be narrow, or do we think that the gains are going to start to broaden? I’ll start with Eric.
Eric Fry: Yeah, I think they will definitely broaden out. When you talk about that disconnect between the headline average and the equal-weighted average, you’re talking mostly about the big names like Nvidia pulling the market higher and many of the mid-tier and smaller stocks not doing a whole lot of anything. So I think you will see the leadership pivot from some of the larger names to some of the mid-tier names.
So I would expect as the year advances here, you probably won’t see massive upside in the headline S&P number, but I think there’s still a ton of potential in certain pockets of the market, which I guess we’ll talk about here in a second. So yeah, in general, I’m expecting there’ll be sectors of the market that will do well, overall market probably turning sideways for a while.
Luis Hernandez: Is that your reading on the situation, Louis?
Louis Navellier: Yeah. Well, I had a lot of luck in small caps in May. June’s the annual Russell Realignment, so we’re pretty excited about that because some of our stocks are going from the Russell 2000, the Russell 1000, and they’ll get more institutional buying pressure as a result.
But I think the main thing is we test how our Portfolio Grader is doing, and when we tested at the end of the last quarterly earnings announcement season, you really got to be in the top 60% of the stocks are the best fundamentals, and if you have a D or an F fundamentally the stocks just collapse.
So fundamentals are on right now. So first, have good fundamentals. Second, if you can get near the top 10% of stocks, you’ll do a lot better, okay? And the market did get more narrow when we went from the first to second quarter. And I think Bloomberg said it best, they called it the Magnificent 7 went to Magnificent 1 and 499 other stocks. So it’s been shocking how strong Nvidia’s been, but we have two stocks that have beaten Nvidia this year, and one was a small cap and one’s a mid-cap.
Luis Hernandez: Luke, going to stay narrow, go ahead and broaden out? I had a friend say to me the other day that the market seemed really expensive, the S&P seemed really expensive to him. And it was kind of like, “Well, but if you take out Nvidia, you take out a couple of the top ones, it’s really not, or at least it’s not as expensive as it might seem.”
Luke Lango: Right. Yeah, The market’s not expensive on an equal-weighted basis. It’s not expensive excluding the Mag 7. It is expensive when you include those. Do I think there’s a broadening coming out? Yes. I think there will be a massive broadening in the second half of the year. I think it’s all going to come down to the Fed.
The reason we have a narrow rally is because I’m one of the folks that believes that Wall Street and Main Street still mirror each other. I still do believe that. I believe the stock market is pretty reflective of the real-world economic growth prospects. And right now, if you look at the economy, it’s not good. I don’t care what the data says, it’s not good. People don’t feel good. People aren’t spending money. People are saving money. People are shaky on their job prospects. There’s layoffs. Jobless claims just hit a 10-month-high. Continuing jobless claims. Unemployment rate is starting to tick up. If you look at the household survey versus the establishment survey on the labor report, the household survey is reporting a massive job loss happening right now.
So I think there’s a lot of things going on where the economy’s just not good, unless you’re in the AI world. On Main Street, if your company is making AI stuff, selling AI stuff, somehow related to AI, things feel like you’re on cloud nine, you’re unstoppable.
If you’re not that, you think the economy’s crap right now. Just frankly, that’s how I view it. So I think the market’s very reflective of that. If you’re in the AI world or touching that AI stratosphere, then your stock is doing well. If you’re not, then your stock is struggling or going nowhere. I think it comes down to the Fed. We all thought that the Fed, as you said earlier, was going to cut interest rates seven times this year.
Definitely, they would cut by now. The fact that they haven’t, those high rates I think are really… I think the economy’s at the cliff. I really do believe we’re at the edge. And when you look at the housing market, I just went through this, the housing market is frozen. It is frozen solid. High rates and high prices cannot coexist forever. Housing is the backbone of the U.S. economy.
If you start to see housing prices start to roll over because of sustained high mortgage rates, the wealth effect’s going to kick in. People are going to really stop spending. The only reason some people start spending is, “I got a lot of equity in my home. My home value’s up 100% since I bought it,” or whatever. If that starts to roll over and they’re feeling shaky about their job and their income and all that stuff, then things could get really bad.
So that’s why we have this massive split between the tech stuff and the AI stuff and everyone else. To me, that gets merged, that gets fixed. That bridge gets built once the Fed eases policy. And I think that push is going to come to shove. That it’s easy for the Fed to say, “Higher for longer, higher for longer, higher for longer,” when everyone has jobs.
As soon as people start losing jobs, which the data is showing is going to start happening, that’s when they’re like, “Never mind about higher for longer.” I don’t care if inflation’s a 2.7% versus 2%, you don’t risk millions of people losing their jobs to get inflation down 0.2%, 0.3%, 0.5%. You don’t do that, and the Fed knows that. So I think there’s going to be a big shift coming in their policy, and that’s going to cause a big broadening in market strength. That’s my two cents at least.
Luis Hernandez: You guys have all had big winners in AI picking along those things. Eric, from a megatrends point of view, what do you see happening there in the near future?
Eric Fry: Well, as I know you know, I’ve recently carved out just a piece of that market and focused very hard on it, and that’s the healthcare area. So my colleagues here are much more knowledgeable and broad-based in their application of AI-focused investments. But in the healthcare space, I really do believe there’s a once-in-a-generation opportunity to invest in the companies that are utilizing AI platforms to accelerate drug discovery and development.
That is a large category of stocks, but once you really drill in the category, the category shrinks quite a bit of companies, whether they’re small caps that actually have a widget that can actually develop new therapies versus just talking about it, or the larger-cap healthcare names that are both actively acquiring smaller biotechs that have great drug pipelines and collaborating in different ways with companies that have AI platforms.
So you put those things together and we’re still at the very, very… We’re not even in the first inning really. We’re in the first out of a first inning. This has barely started in terms of actually bringing medicines through the clinical trials process to approval. There’s a handful that are in phase two trials. I don’t believe there’s anything in phase three. There’s nothing that’s out.
No drug that’s been developed from start to finish by an AI process has become a therapy yet, but they will. And there will be hundreds, there will be thousands, there will be all kinds of therapies that will emerge at an accelerated rate thanks to AI platforms. So I think it’s an incredibly exciting area.
Luis Hernandez: Louis, what space are you focusing on in AI right now? Or is there something that’s showing up in your system as being a growing trend there in the AI space?
Louis Navellier: Well, what AI is doing to our power grid is scary because we don’t have enough power. I go between Florida and Reno and in Reno, we have diesel generators every mile in our neighborhoods because the power grid can’t handle the air conditioning load, but they’re putting bigger and bigger server farms there all the time. And because we’re next to California, they only do solar and power walls and geothermal.
You can’t add a new natural gas power plant because the Biden administration passed this law recently that you have to sequester the carbon and that’s an eight-year permit. So energy is a nightmare in America now. And so the companies that are building the grids, better software are the place to be. So we love EMCOR, Eaton, Quanta Services. VRT is and other stock we like. Sorry, I just know the symbols more than names.
And then all the problems with the cybersecurity, which we’re talking about in another service. And then CrowdStrike, of course, that got added to the S&P and popped. So there’s a lot of exciting places to go. So I think all those people supporting the grid, building out the grid, but somehow, in America, we’re going to have to put more DC transmission grids in. We have them for hydroelectric, Pacific Northwest of California and Quebec to New York City.
But we could put all the solar we want in the desert, but we can’t get to Salt Lake City unless we put in a direct current grid because that crackling noise is the electricity leaving and alternating currents. And by the way, you saw in Texas when the transmission towers come down, they apparently have a power problem for a while. That’s another issue. So the more we can bury the grids or put them underground, the better they’re going to be.
Luis Hernandez: Okay, that’s great. So healthcare and then the energy stuff, it’s really interesting to follow that part of the AI story. Luke, we’ve all seen some small caps do well, especially in the AI space. Some have done well, but generally speaking, small caps have really lagged the rest of the market. What do you think is going to be the catalyst that’s going to make people start really paying attention and we can see small caps really start to take off again to at least match what’s going on in the broader market?
Luke Lango: The Fed.
Luis Hernandez: Yeah.
Luke Lango: The small caps are sensitive to rates. Nvidia doesn’t have to worry about it, Microsoft doesn’t have to worry about it because they have billions upon billions of dollars in their balance sheet. They don’t have debt, and if they do have debt, they’re servicing it based on billions upon billions of dollars in cashflow every year too. So their rate sensitivity is nothing. It doesn’t matter. The economy’s still chugging along, so they’re making their profits and they’re not having higher interest expense. Their profitability is unimpacted.
Small caps, that’s not the case. They don’t have billions upon billions in the balance sheet or else they would be a large cap, so they’re very rate sensitive. They get a lot of their funding from debt markets, so they’re exceptionally rate sensitive. They’re lagging because the Fed is keeping rates higher. As soon as that changes, as soon as we start to get rate cuts, we get that.
The parallel I like to draw to is ’98. In early 1998, we had the internet rally. It was happening, but it was very large-cap oriented. The headline index was leading, equal weight was lagging. Small caps were not doing well. Then we got the rate cuts in late ’98. In September 98 is when they started, I believe, and we had three into the end of the year. That’s what really ignited the internet boom. ’95, ’96, ’97, those are fine years for the internet stocks. What really set the fire on them was ’98 rate cuts and then back half of ’98, ’99, first half of 2000 is when you had that. That’s when, if you look at the Nasdaq chart, that’s when the straight-line action started. That’s when you had the parabolic stuff.
So, I think we get a similar setup here, and I think it’s going to be small caps doing a furious catch-up rally on the back of those cuts. So long as those cuts aren’t in response to a recession. If the Fed waits too long and things really start to crack and then they’re retroactively or responding to that with rate cuts as opposed to being proactive about it, then we have a problem. If they’re proactive in their cuts, then we get the broadening. Small caps have a catch-up rally, we get a ’98, ’99 style melt up in ’25, ’26.
Luis Hernandez: Okay. Louis, you’ve been hammering on the Fed recently. You think they should have cut already, I think. And you’ve been saying that they should cut in… If you were on the Fed, you’d cut in July and you’d cut in September.
Louis Navellier: Unfortunately, I gave up on Jerome Powell. What happened this last meeting, the dot plot was totally different than the dot plot a couple of meetings ago. It’s updated every other meeting, and so we went from three rate cuts to one, although they did forecast four next year. But what’s been happening is the bond vigilantes have taken over because Canada cut, the European Central Bank cut and ECB is supposed to cut two more times this year.
The carry trades are increasing where the foreigners come in, put their money in America, they get depreciation of the dollar, they get our higher rates, and all that money starts to shove our yields lower and the Fed can’t fight market rates. So basically, the tail’s wagging the dog and the Fed is probably going to be shamed to cut rates. I still think they should do it late July, but they’ll definitely do it September 18th. They usually cut going into the election anyway, and then right after the election, there’ll be another meeting that hopefully they’ll cut then too.
But the bond guys are in charge, and right now, bad news is good news. No one wants good economic news. You know what I mean? So you get horrible retail sales the last two months and the bond market rallies and the Fed has to cut so we can get the second stage of the market rally. And of course, the inflation problem is just Owners’ Equivalent Rent. And we throw that out and everything’s fine.
Luke Lango: Yeah, we’re at 1.8% if you exclude that. If you exclude shelter CPI, CPI is 1.8%. Problem solved.
Eric Fry: I want to jump in here because that is such an important point that I want to make sure that the people listening understand that point, so Luke.
Luke Lango: If you exclude shelter from CPI, it’s running at 1.8% and has been running below 2% for several months now.
Luis Hernandez: And the thing about it is Owners’ Equivalent Rent isn’t really affected by interest rates. It is if you’re a mortgage holder, but relatively speaking, if you’re renting, I don’t know how much that’s affected by interest rates.
Luke Lango: So, we made this new metric called controllable inflation that we follow, because traditionally it’s like, “Okay, the Fed doesn’t control food prices or energy prices.” So, core CPI or core PCE excludes food and energy, but increasingly, they don’t control housing prices either because they’re a unique supply demand dynamics in the housing market in which… The Fed jacked up rates like crazy and housing prices are still going up.
So clearly the Fed is not really impacting housing prices or rent prices all that much. So the controllable inflation in today’s world, in my opinion, is you got to exclude food, you got to exclude energy, and you have to exclude housing because data…
You got to exclude food, you got to exclude energy and you have to exclude housing because data is showing that mortgage rates are at 7%. Yes, I said high rates and high prices can’t coexist forever, but they’re coexisting right now. And so if you throw that stuff out, inflation has been below 2% for several months running. So it’s like why are you still here?
Louis Navellier: What’s bizarre is we were importing inflation from China, but then the Biden administration just hit them with all these tariffs. So we’ll see how that shows up in the wholesale level. But wholesale prices on goods are very soft. They fell 1.5% percent in the past month. Some of that was energy-related, but service costs are down because there’s no Owners’ Equivalent Rent in the PPI.
So there’s a lot of green shoots out there, but a lot of the people they’ve put on the Fed aren’t qualified so that’s another problem. And the new Fed spokesman is Austan Goolsbee from the Chicago Fed, and of course Neel Kashari from the Minneapolis Fed. Those are basically the new spokesmen and they’re overpowering Jerome Powell right now. So he lost control of the Federal Reserve Board and it just creates some uncertainty.
So let’s hope they follow market rates. In the meantime, we’ve got a very strong dollar. We got these monumental elections in Europe that will decide whether the EU is going to stay together or not. You know what I mean?
Eric Fry: We have an election here too, right?
Louis Navellier: Yeah, apparently.
Eric Fry: I heard about it.
Louis Navellier: And they both like deficits and they both like tariffs. So one’s pro-war, well, the other one, we’ll see what he says, if he can get it out, that is. It is going to be interesting. It’s going to be very interesting what happens. Elections are normally good for the market because they promise us everything, you know what I mean? And usually consumer confidence comes up. And we did have a good reading from the conference board the other day, but it was the first increase in last five months.
Luke Lango: The expectations index decreased on that though.
Louis Navellier: That’s correct.
Luke Lango: Which is important to note.
Louis Navellier: Present situation was up, expectations were down. Yeah, that’s a very good point. But elections are normally good, and then normally we rally going into the elections and then we might have some regret for about a week or so, and then we get in the holiday mood and then we don’t care anymore.
Luis Hernandez: There you go. Let’s talk about another asset that might be affected by interest rates, which is cryptos. You wrote very presciently, I think that people shouldn’t expect that right after the happening, things were going to take off, because that has not been the pattern historically. And I think a lot of people thought that, they thought that the halving would happen and then things would take off. And so you were very clear about that’s probably not what’s going to happen because it hasn’t happened historically, but it has seemed to stall out. At least Bitcoin has.
Luke Lango: Stalled out longer than you would expect, yeah. So based on historical patterns, the parabolic part of the rally, the post-halving rally should have started somewhere around the middle of June. That’s what historical patterns would suggest. Things have gotten worse since then. And again, I think this does come back to the Fed.
So what’s happening is that risk appetites are getting sapped and people, they’re okay to dabble in Bitcoin because it’s the mothership, right? It is their Mag 7, it’s the crypto’s version of the Mag 7, but they’re not taking bets on altcoins down the risk spectrum. They’re like, no, no way. Not until I get more visibility on the economy or visibility on the election or visibility where things are going over the next 12 months. Without that visibility, altcoins are getting whacked. I think over the past 30 days… I did this analysis before Bitcoin crashed from like 65,000 to 60,000, but before that, over the past 30 days, Bitcoin was down like 7%.
But something like 60 or 70 of the top 100 altcoins were down more than 30%. Altcoins are getting crushed by the weight of “higher for longer.” And I still believe, I have faith that the Fed is going to guide us in a manner where they’re going to ditch the “higher for longer.” We’re going to get rate cuts, and I think that’s going to unlock a massive rally in altcoins. But until that happens, until that visibility improves, respect the price action, respect the tape. It’s telling you don’t bet on these things until visibility improves. And that’s the stance that we’re taking now. It’s more of a defensive posture.
Something to watch for on Bitcoin is we broke below the 25-week moving average on Bitcoin, which is a very critical level in halving cycles. Breaking below that almost assures that we go and visit the 50-week, which is down around 47,000. So I would hate to see… The 25-week’s right around 60,000. We’re holding that level. We briefly dipped below at 59,000, and then we pop right back above it.
If we have a sustainable break below the 25-week, that would be a big cause for concern. The 50-week, if it doesn’t hold there, that’s the end of the cycle. Every time in previous cycles that the Bitcoin’s broken below the 50-week moving average, game over. Party’s over, it’s up.
Luis Hernandez: All right, well, that’s something we’ll all be watching.
Luke Lango: So we’re watching 25-week at 60K very closely and then 50-week at 47K very closely. Those are the levels that we’re watching super closely on Bitcoin. But again, I think it’s a Fed story. I really do. And then that gets back to the biggest risk that we’re facing right now is we’re all hoping the Fed wakes up. The recent commentary suggests they’re pretty asleep.
Luis Hernandez: I think that’s right.
Luke Lango: Was it Bowman, Michelle Bowman, who came out yesterday and said that, “No way we’re cutting rates this year. I’m open to hiking rates again.”
Louis Navellier: Yeah, they have people in the Fed that are totally unqualified.
Luke Lango: I’m just like, “Are you serious?” The only reason the economy’s staying up, the reason it’s not in a recession right now is because we’re looking forward to these rate cuts.
Luis Hernandez: That’s right.
Luke Lango: We’re patiently waiting like, come on, come on. If they don’t arrive, it is a look out below situation. I think it’s a scary situation if they don’t arrive.
Louis Navellier: And even Jerome Powell’s not an economist, he’s a lawyer.
Luke Lango: I didn’t know that.
Louis Navellier: I think they got him that job, they thought they needed somebody to speak, but he’s confused now.
Eric Fry: I’m going to pivot to the happy side of the story, which is that for four or five months at least, each successive rate cut expectation has been dashed by the Fed. So it’s been progressive disappointments on rate cuts throughout the first half of this year, and the market headline number is still near all-time highs. The Bitcoin price, it’s down-
Luke Lango: It’s still high from where it was.
Eric Fry: It’s not far from its all-time high. The gold price is not far from its all-time high. And that’s with serial disappointments. So to your point, I feel like all that has to happen is just not more disappointments. The Fed doesn’t have to be super aggressive on cutting rates. You just have to signal that it’s going to happen, clearly signal it.
Luis Hernandez: Well, let’s talk a little bit, you mentioned gold. Commodities and things like gold and lithium are things you’ve written about quite a bit this year as well. How do you feel how that market is shaping up?
Eric Fry: To clarify, I haven’t written about lithium much because I’m not bullish on lithium, but I have written about gold. I’ve written very recently about platinum, and I’ve written quite a bit about crude oil. Luke was mentioning earlier about how there’s AI and everything else, and that’s pretty much true across the broad stock market.
But out here in the little corner of the market where no one really looks, you have the energy markets, you have the commodity markets, and the oil market’s been doing pretty well, and the oil stocks, at least on a relative basis have been doing really well. You have some stocks in the metals area, both base and precious, that have not done well at all for the last couple of years, but are starting to do well in the last three or four months. And the biggest part of that is this old supply-demand story.
You’re finally starting to see some supply deficits come into the crude market for the first time in a while, you’re seeing it in the platinum market for the first time in a while, copper market for the first time in a while. And also these things love interest rate cuts.
If you think the stock market likes interest rate cuts, the commodity markets really love them. So I think that they’re also waiting for that to happen, but the fact that they’re doing well, even with rates high suggests that there’s probably more strength there than most people give them credit for. So I think we’re going to see selectively higher prices in some commodity markets. Gold is one of them, but that’s a different story.
But that’s a different story. I’m very bullish on platinum in particular and also on crude oil.
Luke Lango: What I will say is I think part of the reason for the continued strength across a lot of markets goes back to what Louis said, which is the bond vigilantes. That yes, the Fed’s dot plot got cut from three cuts to one cut and the most recent dot plot. But since then, the 10-year Treasury is down from 4.5% to 4.2%. Bond market’s not buying it. Bond market’s saying no. If the bond market starts to buy it, then I think we have trouble. If the 10-year goes to 5%, we’re in trouble. I think that’s a big trouble point for all assets.
Louis Navellier: So, back to your small cap question, half the S&P’s revenues are outside of America and so when we have a strong dollar, it really does help the smaller-cap stocks. The multinationals have this currency headwind unfortunately, but when you also have a strong dollar, you get low commodity prices. So other than maybe copper, because all the hybrid vehicles need all that copper too.
So I’m optimistic, I think, I don’t know if inflation will get to the Fed’s 2% level, but it’s still trending lower and we have a PCE report out shortly that’s going to help. And then I think the Fed will panic and realize the bond market got ahead of them and they’ll have to cut.
Luis Hernandez: Can we talk just a little bit, we’re about three weeks away from the start of the next earning season. What do you think is the outlook for earnings for the rest of the year, Louis?
Louis Navellier: Well, this is the last earning season where we have easier year-over-year comparisons. So the forecasted earnings are still up about 8% when we look out the next three quarters. But this will have the biggest surprises with the second-quarter earnings.
And then after that we do need the Fed to cut to give the market a little more turbo boost, rally in the elections. But yeah, it’s lock and load. So I’m looking forward to the second half of July. I get into August, I hate August, I’m sorry. I want to close it, but that said, it rallies in presidential election years.
So the weak point for the market seasonally is August and the first half of September. So there is a six-week period there. If we just go sideways, we’ll be fine, but then the second half of September is quarter-end window dressing and all kinds of stuff. And then October we’ll get another round of earnings. Of course we’ll have all the excitement over the election because change will be coming, and by then we’ll have tons of change in Europe. So it’s a very interesting environment. But yeah, we don’t have an earnings problem at all.
Luke Lango: On the earnings question, and going back to the broadening question as well, the Mag 7 reported earnings growth of like 80% on average in the first quarter. The other 493 companies in the S&P 500 reported minus 0.1% earnings growth. There was a huge gap, basically 90% versus zero. Over the next four quarters, that gap is expected to narrow.
Mag 7 is supposed to report decelerating earnings growth to about 18%, 17% by the fourth quarter of this year. The other 493 are expected to go from zero up to about 12%, 13% by the end of the year. So for the big boys that have been outperforming, they’re going to see decelerating earnings growth over the next four quarters. The rest of the market’s going to see accelerating earnings growth over the next four quarters.
So, I think one thing to explain the performance gap between Mag 7 and everybody else is an earnings performance gap. Louis’s a big believer in this, I am too, as go profits, so go stocks. The reason those stocks have been doing well is because that’s where the earnings growth is. If the estimates are right, then the earnings growth is going to broaden out significantly over the next four quarters and the rest of the market, the other 493, the smalls and mids, should play catch up on that accelerating earnings growth outlook for everybody else. So that was an interesting chart I saw from Bloomberg. I was like, “whoa, that’s really, really interesting.”
Luis Hernandez: Okay, that’s great. Thanks for your insights guys. You’ve given us a lot to think about as always, and we look forward to seeing how it all plays out.
I hope you enjoyed your midyear Roundtable. Thanks for your attention.
