저자: TomLee · 외국인
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AI 수요와 실적 개선이 시장을 견인하며 조정은 매수 기회. 정부 셧다운으로 데이터 공백이 있으나 경기 모멘텀 유지, 연준 금리인하 사이클과 4분기 계절성이 상승 요인. 소매투자자 매수 지속, 기관 4분기 배분 확대 예상. S&P500은 최소 7,000 도달 가능성 제시. 엔비디아는 선행PER 약 27배로 과열이 아니라고 주장.
다듬은 글
Great to see you, Scott. So, what what do you make of just how the market's trading today? We've had a nice run. Um, it's given a little bit back. Maybe some concerns are out there about the strength of the economy, the labor market, some other stuff. What do you see? Well, I I think markets are uh trying to balance a few things because we are navigating a little blind because of the government shutdown, but we also know that the the real powerful driver of the equity market and the economy has been AI, which is not affected by this slowdown.
So I I think stocks are in this sort of zigzag pattern, but given we're in that seasonal period from October to year end, and you know, we think the stock the S&P can get to at least 7,000. Uh it has been, you know, and we've seen it this week, these pullbacks get bought. So we could be weak today and I think we could rally tomorrow.
And in general, I'd still be bullish into your end. Are we are we whistling past the graveyard, Tom, on on anything that that could be concerning to you? I see a a story right in front of me from Axios mentioning a Moody's analysis. 22 states are in recession or close to it. There was that Carlilele independent survey the other day showing the labor market is much worse than expected.
You know, gold's been going up. Some suggest that's d-risking from from the US. um AI bubble. You mentioned the shutdown. Are we are we complacent towards any significant risks that we might be missing? Well, I I do think markets are less skeptical than they were in April and even in August and September and we can see this in both positioning and AI.
So, I think it is fair to say that the markets have priced in more good news. So, like the things you flagged can be worrisome, but what I'd point out is that I think the AI story is actually strengthening, Scott. From from our conversations with both companies and investors, it actually seems like the payback for AI, you know, whether it's applications or services or companies actual ROI actually has improved in the last quarter or so.
So I think that's what's helping actually create demand for spending. So I think we may be underestimating the sort of profit creation coming from AI and I think that's why there's still legs to that story. But you on balance we, you know, the data is mixed and we don't really know because we don't have government data.
Yeah. You um you gave our producers this line that you still think it's the quote most hated rally. And I've asked you about this every time you you've been on with me. I feel like now that's a little bit far-fetched to suggest that this is still uh the most hated rally. I don't find anybody who comes on certainly not on the the programs that I do that is overly negative about anything.
The prevailing view even from those who were cautious before like the stock the stock market's going higher now. It may end poorly way down the road but it's going higher. So how can you suggest that it's still so hated? Well, you know, there's this thing where people can make like a backhanded compliment, like they might say something positive about the market, but they're really bearish because when I hear people say, "Oh, well, this reminds me of 1999 or uh, you know, they're ringing the bell on the top of AI stocks, they are maybe acknowledging that the market is strong, but then they're trying to mark the end of of that rally." And I think, you know, for me who who was an analyst in the '9s, you know, people forget that Cisco in September 98 was at a almost a 60 PE when the Fed made its first cut in 9 months and then its PE went to 200.
Nvidia is that stock today and it's trading at around 27 times forward earnings. I mean, it's got a lower PE than Walmart and Costco, which are like 35 to almost 50 times. So I I just think a lot of good news has been accepted by markets but I don't think it's necessarily priced in into markets. Tom Lee about what sentiment is this market.
I mean that is another thing Tom that investors are watching just this interaction between the United States and and Argentina. It just brings up geopolitical issues, the fragility of some uh other nations and certainly their maybe financial stability which we are keeping a close eye on. The market doesn't seem to be too overly concerned about that.
In terms of how investors really feel about what's happening here, I thought it was notable that JP Morgan's retail radar um paper today said that investors were accelerating their purchases in stocks. This goes back to what I was asking you about. Is it really such a hated rally if retail is is leaning in even more?
$7 billion this week in purchases. That's well above the two-month average of 5.3. Do you want to address that? Well, um, as you know, retail is really the cohort that saved the market in April because they were buying that dip. Um the other three cohorts in the market are of course institutional and then there's international and then what I'd call uh family office and you know super high net worth.
Uh of those three I think institutions have been reluctant and now are allocating in the fourth quarter because you know there's beta and and this has not been a great year for for many stock pickers. So this is this fourth quarter is their chance to catch up on the international as you know m much of the flows were out of the US and into non US stocks and and that's beginning to reverse and then on the high net worth I I think there is still a a stubbornness about being skeptical of stocks and and that's why I think there's still what we call the most hated V-shaped rally.
The retail has not hated this rally. They've been they have been buying since April. you just said that you you think flows uh into international markets is is starting to to cease or at least slow down because the the calls on the street that we've gone over over the last few days have been anything but suggesting that that's going to take place.
I mean, there's been, you know, a number of upgrades of not only emerging markets and we just showed the EM, the ETF that tracks it and it's straight up to the right and, you know, other developed markets like Europe as well. I think there's still a fair amount of optimism as the US performance trails that of of those areas.
Yeah, Scott. I mean, it's uh I I think that when we look at the balance of flows, as you know, the US has outperformed non US for more than a decade. Uh and we are seeing a little bit of catch-up here. But one of the things that I've been finding as I've been visiting with international investors and um next week I'm actually in Latin America visiting clients
is that investors are buying non US because of valuation but the E part of the non US isn't really as attractive because the US earnings growth is getting a big tailwind from AI and the leadership from not only just AI stocks but also US financials and so I think think the earning story is what's causing some of these who've who made non US as a factor bet realizing that you got to still have a lot of E to support this move.
And so I I think that that's why you're going to see that as a tailwind into 2026. I'll come back to you in in another moment. I do want to highlight the fact that this Sunday marks three years since the start of the bull market. Dom Chu is here with more on that. Hey Dom. All right. So, Scott, along the lines of what you and Tom are chatting about right now, that kind of V-shaped recovery that we saw around the tariff announcements earlier this spring has led to new record highs, of course.
But in the context of the three-year bull market that we've seen, even the Dow, the lagard is up about 58%. The S&P is up 87% by the way, that translates into roughly 27 trillion in market cap over a three-year span. And the NASDAQ composite more than doubling 120% gain there. So, this move here, even since the volatility of the spring, has been major.
Now, with regard to the sectors that have led the way higher in that three-year bull run, no surprise here. It's the most important ones. It's technology up 180%, communication services up about 160%, and even industrials up 80%. Those mark the three best performing sectors. Now, the lagards when it comes to that have been some of the, you know, less likely ones and even smaller ones.
Real estate, healthcare, and energy have been the real lagards even though they are still in the grain in this bull market. And the stocks that have been real headliners, the three best performing stocks in that three-year span in the current S&P have been applovening. Yes, it just made it in this past fall in September.
Is up 3,300%. Palunteer celebrated its one-year anniversary in the S&P just this past September. It's up 2,200%. And Nvidia, we'll put a star up here because it is the existing legacy member of these three. It's up 1565%. So, if you want to talk about the key stock, no surprise stock, Scott, it's been Nvidia has been for years, especially in this three-year bull run.
I'll send things back over to you, Scott. All right, a nice look at that, Dom. Thanks so much. That's Dom Chu. Let's now bring in High Tower Stephanie Link. Truist Keith Learner. Stephanie's a CNBC contributor. Tom Lee, of course, as you see, is still in the conversation, too. Keith, I go to you first because this plays right off your note that you put out today that I cited on the halftime report.
Yes, we turn three, but we're not we're not too old in this cycle. You don't think we can actually go up from here? Yeah. Well, first uh great to be with you as always. Well, the first thing we look at, Scott, is the historical context as a starting point in our analysis. And what we find is, you know, going back to the 1950s, there's been about 10 bull markets.
Uh seven of them have lasted uh beyond three years. And once you turn three and you look a year forward, all of them has shown gains a year later. So again, that's not a huge sample, but it does say that, you know, that this bull market likely has more room. The other thing as we're thinking about this is uh you know, earnings uh earnings are the north star of this bull market.
A lot of different narratives as far as the economy, inflation, but what's continued to surprise to the upside is is earnings. So that's going to be a key given expectations are higher, valuations are higher, but as we look at the weight of the evidence in our work, we, you know, our work says that there's still upside as we think about the next year.
Okay, Steph, what do you think? I mean, Tom Lee's big calls that you could go higher than 7,000 between now and the end of the year. Keith at Truis puts out the note today says, "Yeah, we're three, but we got potential good upside ahead." Yeah, I think we have upside in the fourth quarter. I don't know if it's 7,000 or above, but it's higher definitely.
Seasonally, it it points to the a good time in the market uh for activity uh and perform outperformance. But more importantly, Scott, we have economic momentum. The Fed is about to embark in a cutting cycle. I don't know how many times they're going to cut, but they're cutting earnings, as Keith just mentioned, running double digits.
We have $7 trillion of cash in money markets on the sidelines. It's not all coming in, but it's a nice tailwind. You have the credit spreads are the tightest since 1998. And you have deregulation which has just begun. And so I think you are you have seen a great market right almost all-time highs really close to it.
You don't you're not getting a lot of pullbacks and I think you're not getting a lot of pullbacks because only 30% of portfolio managers are outperforming their benchmarks. So they are going to chase and they should chase because the fundamentals are strong and AI is not in a bubble in my opinion because you are seeing productivity improvements and you're seeing at the same time lower costs that is very powerful combination.
So I think you're in the early innings and that is helping our economy growing at 3.8%. The the critique of that is that you you have probably a slowing economy to some degree. I I mentioned you know this Moody survey today. Uh there's others who think the labor market is much weaker than what we're we're accepting uh and is only going one one direction from here.
It may not be a tremendous amount of layoffs at this point. It's like a no higher no fire uh economy, but but that's not necessarily uh all all that great. You're you're painting it as though we've got this momentum like we're about to ramp up on the economy when I I don't see I don't I mean maybe we slow maybe we slow to two and a half three that's still well above trend trend is one and a half% and that's because we have this manufacturing renaissance regarding and related to AI on the labor front yeah we're not getting data that's kind of upsetting however I'm looking at weekly jobless claims up until we were getting the data and it was perfectly fine
carile's data the other day was like junk The labor market's not in a great spot. Well, initial the report wasn't junk. What it said was initial claims are a leading indicator. Not non-farm payrolls, not ADP. So that's why I pay so much attention to the weekly claims. Now, we didn't get them in the last two weeks and that's disappointing.
However, Chicago Fed, they look at unemployment rate real time and it's running about 4.3%. So, it's very much intact. I'm not saying that we're going to accelerate from the 3.8% the Atlanta Fed tracker is tracking right now. But that Atlanta Fed tracker is usually not correct on what they say last quarter.
But you said at the beginning economic momentum. Yes. Yes. But I'm not saying we're going to go from 38 to five. I'm thinking that we're going to be above trend. And above trend is two. It could be two 2 and a half 3%. And all you need at 2% you're going to get double digit earnings especially if you have margin expansion which we are seeing which has surprised many many people.
And unless Keith, it's it's all coming from AI, of course, that the economy to Steph looks as good as it does, but it's all hanging on AI that it's carrying the whole thing. And if you have one slip up, then you could have a problem. Is there any truth to that? I I wouldn't say it's carrying the whole thing.
I think it's leadership. But we have to think about recently, we just over the last week, the Ecoeight S&P just made a new high. The Russell just made a new high. But the leadership is clearly still with tech. Every bull market has a defining theme. The the defining theme remains AI and tech. And we've been bullish most of this year on that area.
We continue to be positive on that. Even in a day like today where you're seeing a little bit of cracks below the surface, you're seeing Nvidia make, you know, a fresh high. You're seeing some some actually nibbling on the tech side as well. So tech will be super important. I do agree with Steph as well though that as we move into next year on the margin, we should probably get a bit more clarity and maybe a little bit improvement in the overall economy.
I don't think we need gang busters for for the stock market to do okay. But one, we'll have this one big beautiful bill. There'll be more spending because of that as we move further along on that. I think we will have some improved clarity on the terrorists. At least companies are used to it now. They're a little bit more numb to their adjusting as well.
And then we also, as we mentioned, have has has have uh the Fed cutting rates. So, put that all together. I think the backdrop is still positive. But I also want to say, I mean, are we not going to have some hiccups along the way? No, we probably will. We've gone a long time without any type of pullback.
So, I don't want, you know, investors to be complacent, but I think in our work, we're going to focus on that primary trend. That primary trend in our work suggests that we still ultimately move higher. And going into the fourth quarter, uh, you know, seasonals are positive. That's one factor. When you have momentum in the fourth quarter, heading into the fourth quarter, we actually have a better market than typical.
So, I would say stick with the trend. Three to five 5% pullbacks are an opportunity and we ultimately still see upside in this market led by tech. Here's a headline that plays right into Steph's uh forecast of how she sees things. U Microsoft forecast show data center crunch persists into 2026. It matches what Michael Dell said on overtime the other day on this network.
Yeah, we may get to an overbuild, but it's I don't see any signs of it yet. Th this is your a key part of your your outlook. It's huge. You need a lot more data centers and you need a lot more power to power the data centers which is why those power type plays are a big portion of what you what you want to do
and you have to upgrade the grid. So you have all of these industries that are being impacted that is very encouraging. It's not just tech that is spending. Industrial the sector industrials are going to spend almost $80 billion this year. Uh utilities are going to spend almost $200 billion this year.
All of it is related AI data center grid power and that is very very important. It's really widely distributed. And I would also say one thing it's not just AI that's driving the economy. the consumer has held up remarkably well and that is very important in certain areas in but it's 70 services is up is above the ISMs are above 50 for for the for the last two and a half years so services is 75% of consumption and consumer is 70% of the economy so I it's not just AI
Tom um wrap it up on this note uh the tech sector's forward PE today is 31 times as people talk about valuation and how much tech and AI that's meant to to where we are. The 20-year average is 17.9. So 31 versus 18. Is that okay? Yeah, I'm okay with that. Um because I I think visibility is much better.
You know, tech is not uh the pure cyclical group where you actually sell it at low PE and buy at high PE. This is a a group that you buy because there is visibility. And I do think that the PE expansion isn't going to just be tech going forward, Scott, because the ISM and you guys had this conversation just now has been below 50 for 31 months.
That is a big percentage of S&P earnings that can accelerate when confidence recovers and that is actually likely going to pivot as the Fed embarks on a cutting cycle. So I I think tech has been the leader. I do think market will broaden. So, uh, you know, as people stay reluctant, I think there's still a lot of upside into your end.
We'll make that the last word, Tom. Thanks, Keith. Thank you. And Steph, of course.
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