Stocks (^DJI, ^IXIC, ^GSPC) closed in positive territory on Wednesday, with the S&P 500 achieving its 37th record close. Allspring senior equity portfolio manager Margie Patel, joins to discuss market outlooks.
Patel expresses optimism about the upcoming earnings season, anticipating that revenue and earnings will drive further gains. She describes it as “a continuation of the strengths of particularly the large-cap stocks in the market.” Patel expects tech leaders to maintain their outperformance, viewing it as “a long-term trend.” However, she also highlights potential opportunities in sectors such as industrials and telecommunications.
Addressing concerns about the possibility of repositioning away from tech-focused stocks like Nvidia (NVDA) and Broadcom (AVGO), Patel states, “The problem is I don’t know of another area to redeploy that has such a relatively clear, sustainable growth path to continue to have higher earnings in other sectors. That’s why we stick with the tech names, the semi names. They’ve been fabulous names and I think they’ll continue to be very, very good names. There simply aren’t other places to go that have that type of growth.”
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This post was written by Angel Smith
Video Transcript
Another day, another record close for the S and P and NASDAQ, the S and P 500 notching its 37th record close of the year so far for more on the markets, we’re bringing in Marg Patel, senior equity portfolio manager at all.
Spring Margie, it’s good to see you.
Um, so let’s talk about the earnings season.
Uh, listen, big banks on Deck Friday.
What do you expect, Marg for this earnings season?
Is it, it, is it gonna be another catalyst for the market?
Well, I think it’s going to be another, um, earnings season where the market does better because I think earnings will surprise on the upside once again.
Um, the GDP is growing, said maybe 1.5% but we think revenues of companies in the S and P will be up, say 4% earnings will be up 8 to 10% as a for the last few quarters.
So again, we think it’s a continuation of the strength of this, particularly the large cap stocks in the market.
Well, and that’s been the case.
Of course, we’ve talked a lot about that, Margie.
Um, and how once again today for example, we’re seeing large caps, uh tech account for a lot of the gains that we’re seeing.
Um, but what do you make of what we’ll see on the earnings front as we go forward from here?
Well, I think we’ll see more of the same.
I think those tech leaders particularly will continue to show very, very strong earnings.
I think that’s a long term trend that they’re in.
And I think we’ll see some of the other companies say in communications, some companies and industrials that are in those industrial sectors that have secular growth will also be up very strongly.
And unfortunately, the majority of names will just sort of slosh around because they really don’t have the dynamics to have those big earnings increases.
So more of the same.
Uh so it’s gonna be a tough year, a tough quarter for see value investors.
And Margie though, just look at some of the, the names you like.
Um, some of these A I plays Margie and Via and Broadcom.
Um Do you want to book some profits there, Margie after the runs they’ve had and maybe redeploy that and, and other other names, other areas.
Well, the problem is, I don’t know another area to redeploy that has such a, a relatively clear sustainable growth path to continue to have higher earnings in other sectors.
So that’s why we stick with the, with the tech names, the semi names.
Uh They’ve been fabulous names and I think they’ll continue to be very, very good names.
Uh There simply aren’t other places to go.
They have that, that type of growth and many of those stocks also have dividends.
So they really make a pretty attractive package when you’re talking to your clients right now, Margie.
Um, what are you hearing in terms of risk appetite?
Because, you know, obviously those names are the big growth names.
Traditionally, they do come with a little bit more uncertainty, a little bit more risk are our clients, our investors just saying that’s fine with me right now.
Well, I think a lot of investors got left behind because when the fed began to raise rates back in 2022 the uh a lot of people thought, well, the best thing to do would be much more conservative, get the value names out of high price growth names and the so called safe things like treasures.
And of course, that turned out to be exactly the wrong strategy.
Those sectors are left behind and the gross part of the markets are really shot ahead.
Why?
Because they had the fundamentals.
So I don’t see anything really changing here over the next few quarters and say you should just stick with the same things that have worked pretty much for the last year or so.
Mark, we’ve talked earnings le let’s talk, uh, the economy as well.
We do have AC P I print it’s coming tomorrow.
Margie, how important is that for the market.
Uh, well, I’ve never really made money trying to predict how the fed will react to AC P I number.
But I think that the issue for the Fed is that they, uh, are disappointed that inflation has not come down the way they would have thought it should have come down, it hasn’t obliged them.
And yet on the other hand, there are some signs here and there that economic growth for many companies is slowing down.
So I think there are betook in between.
Um, I don’t care whether it’s a good number or a bad number.
I think as the fed changes rates, it’ll be by a quarter of a point that really isn’t fundamentally going to change the economic outlook or the outlook, I think for large cap tech stocks really?
And do you think that uh especially given what we heard from Jay Powell and his testimony before Congress, do you think the markets and the fed are finally on the same page in terms of how many cuts we’re gonna get this year and the timing of those cuts?
Well, I think that uh Chairman Powell has shown he’s uh pretty much like the rest of us investors, uh more or less watching the market to tell him, tell him what to do.
And uh I think we might see just one cut.
Uh Typically they lag behind the data and the data says inflation is high, the economy is pretty good.
So I’d expect to see just one cup.
And then I think really, as we get close to the election, I think they really are going to want to do anything.
They’d like to just be even key.
So I’m just looking for one cup, but they always could do two cups maybe one later in the fall.
All right.
Stay tuned.
We’ll see what they do.
Margie.
Good to see you.
Thanks for joining us.
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