The environment for the rally to continue is strong, says New York Life Investment's Lauren Goodwin

On closing bell, let's bring in Lauren Goodwood of New York Life Investments and Eric Wallerstein of Yard Danny Research. Good to have you both. Lauren, let me just turn your attention for a moment to NVIDIA as well. Like what do you feel is is really at stake tomorrow, not only for the overall tech trade, but the market at large given the magnitude of the rally we've had back led by tech, everything's at stake is the answer. I mean not just on the upside in the sense that this earnings environment has been really constructive and important part of the rally so far, but also on the potential downside. I mean if we look back to the 2000s, it didn't take a big downward turn in earnings to pop the bubble. It took Cisco reporting closer to 50% growth instead of 60% growth to do it. So these numbers matter a lot if we can pretend that you know we we don't have to care about it in NVIDIA, which isn't the case. The environment for the rally to continue that is, is quite strong. We've had a good earning season. We have a Fed that's that's hell bent on being dovish and we have a employment environment that's still very strong. Until any of those factors reverse, which I don't see a reason for that to be the case in the next couple of months. This is a tactical all systems go for the for that bull market, wow, all systems go. So Eric, the the everything rally as as we're calling it continues. Yeah, listen forward earnings definitely are supporting stocks and as Lizanne mentioned, rising profit margins for the S&P 500, the broadening out with the equal weight index and even you know, SMID caps is just kind of starting. You know, small caps are still under pressure from higher rates. But we see no reason with a tight labor market, rising real incomes and just more spending that corporate profits have to fall anytime soon. Interesting. So it's going to be an earnings driven story because you guys are looking, you know you you tend to look out further than most and put out some reasonably lofty targets, I think is fair to say including one that you put out, you guys put out something big earlier in the week. Remind me what that was? I think it was like Dow, it was like Dow 60,000 or something like that. Yeah. So listen, for the next few years we have 5400 which we're nearly at for the S&P 500 this year and then we're at 6000 for next year and then finishing up 2026 at 6500. And again that's earnings driven. You know this whole roaring 2020 scenario right now is our highest probability outcome. We attribute like a 60% likelihood of that. There are some other risks. You know we have a 20% scenario of a, you know, a melt up in the stock market and if the Fed kind of preliminarily cuts, we could see that melt UPS are fine. You just have to know when to get out and then there's that 20% scenario where there's another revival and inflation. But for now, we see productivity growth really being a strong driver of real incomes and for the next several years driving the market higher. You don't think what we're currently experiencing is a quote UN quote melt up. It's supported by earnings and real income. So I wouldn't say that you know, valuations could be a little frothy at 20, but there's no reason that that's too expensive for the large caps, especially with you know what mega cap, what the mega Cap 8 have done including NVIDIA. I mean it may not be you know, expensive for the mega caps, but you know 20 1/2 as a multiple to some seems a little expensive. Yeah, look, I mean Lizanne was right, valuations aren't a great market timing tool. But one of the things we've noticed recently, the past couple of weeks, the equity risk premium has moved negative, which doesn't tell you anything for the next couple of months. As I mentioned, we do think that the case for for equity is strong at the moment. But when it does tell you really consistently over a longer term basis, think even 10 years out that the trade off between equity and bonds doesn't quite make sense anymore. And so that supports one of our highest conviction views which you and I have talked about a lot, which is taking some of the gains we've seen in equity, activating it in high yield where you still get the benefit of the bull market we're seeing, but some higher income stream. In the meantime, what about taking some of the gains you've gotten in cash and and use your word activating it into equities? I mean that's what some are banking on to get you to that next leg. We're actually moving cash into short duration fixed income for a couple of reasons. One is that you still have we think an interesting risk reward profile similar to the benefit that you would see just putting money to work in equity or other asset classes. But the real reason is that regardless of the the path or the exact timeline that the Fed is trying to take is very clear that their next move is going to be a cut. And so investors that have benefited from higher rates in cash in the last couple of years aren't going to benefit from those same rates moving forward. And so if you look at the maturity wall and fixed income that's coming in the next couple of years, a two to three-year short duration fixed income play is a really nice way to lock in that higher income stream for the next couple of years.

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