00:00 Speaker A

So the market here, Doug, I'm looking at the SPX, the S&P 500. You're right near those all-time highs. As a long-time watcher of the markets, Doug, do you look at that and say, you know, we've come too far, too fast? We're looking extended here or no, you say this move makes sense and we're moving higher.

00:42 Doug

Uh the resilience has been very impressive. Um, and I know, you know, Mark's certainly aware of the fact that yesterday, the New York Stock Exchange daily advance decline line closed in another all-time high, which technical theory says that, well, then the external high or the high and like the down the S&P 500 should be at least a few months into the future, if not longer. I I do think the market's maybe a little bit narrower than like the advance decline line would suggest. I mean, it continues to be a top heavy market, which that's not unusual leading into an economic cycle peak, where the troops, as they say, begin to lag behind the generals. But it's another year here in which sort of the average stock is is lagging the S&P 500 pretty badly as happened in 2023 and 2024. Uh, but um again, when you're close to an all-time high and breadth is an all-time high, it's usually not a reason for uh short-term caution on either the economy or the stock market.

02:51 Speaker A

So you're talking technicals there, Doug. Let's also talk about the fundamentals, the upcoming earnings season. I'm just curious what your expectations are there. Doug, you know, we've gotten some reports. You saw FedEx and and General Mills today. They seem to certainly disappoint investors, but what are your expectations there?

03:21 Doug

I think overall, they've been pretty solid, and I, you know, I look at estimate revisions. They've picked back up. Uh, as a matter of fact, they sort of followed a pattern just like the stock market during the trade war. I mean, estimate revisions uh crashed during that, you know, six to eight-week down period for the markets back in uh March and early April. They've rebounded nicely. Um, I'm concerned about, you know, some of the the news coming out of the cyclicals, and it's partly the news itself, and then it's also how cyclical stocks uh are priced here. Uh, we we monitor just sort of a simple valuation relationship between the cyclical sectors of the market. It's just very broad, so we look at consumer discretionary, industrials, and materials. So we look at evaluation premium or discount, and more typically, it's a discount of those three sectors relative to consumer staples, healthcare, and utilities. And the valuation premium today on the cyclicals vis-a-vis the defenses defensives has never been higher. So in other words, you know, I don't know about the broad market, but within the market, there is certainly no bet from managers who have to be fully invested in stocks that a recession is coming anytime soon. And that and that bothers me. I mean, it tells me that, you know, if we have a further slowing from here, or even a mild recession, that the cyclical stocks could really get pounded just because of the valuation premium uh they they now command.