Here's Our Midyear Outlook 2026 (FvF Ep. 196)

In this mid-year outlook episode of Facts vs Feelings, Ryan Detrick, Chief Market Strategist at Carson Group, and Sonu Varghese, Chief Macro Strategist at Carson Group, revisit their 2026 forecast and explain why they've raised their S&P 500 target from 12-15% to 15-18% for the year, while holding bonds steady at 3-5%. They walk through how AI capex has become a macroeconomic story as much as a market one, contributing roughly 90 basis points per quarter to real GDP growth, and why hyperscaler spending plans for 2026 and 2027 keep getting revised sharply higher.

The conversation covers the labor market's quiet resilience, why business creation data suggests confidence rather than desperation, an inflation picture that isn't going away despite market expectations for Fed rate hikes, and a sector rotation story where former "value" stocks like Micron have become momentum plays almost overnight. Ryan and Sonu also dig into earnings estimate revisions, midterm-year volatility patterns, diversifiers like gold and managed futures, and swap stories from their World Cup travels before previewing next week's guest.

[Key Takeaways]

• Carson raised its 2026 S&P 500 target from 12-15% to 15-18% at the midpoint of the year, with the index already up 11% total return year-to-date; bonds remain forecast at 3-5%.
• AI-related hardware and software investment (excluding data centers) has contributed about 45% of real GDP growth over the last five quarters, roughly 90 basis points per quarter.
• Hyperscaler capex estimates keep climbing: the five largest tech spenders were projected to spend $470 billion in 2026 back in November; that figure is now $740 billion, with 2027 estimates rising from $530 billion to nearly $900 billion.
• S&P 500 2026 EPS estimates have risen from $308 to $339 a share (up 10%) since the start of the year, with 2027 estimates up 12%, led by technology, energy, and materials.
• The labor market shows underlying strength despite headline softness, with unemployment at 4.2%, average payroll growth around 110,000 a month, and falling continuing claims.
• Inflation remains sticky due to incomplete tariff pass-through, reshoring-related cost increases, and rising computer/software prices, a reversal from the deflationary tech trends of the 1990s.

Jump to:

0:00 - Welcome And The Midyear Setup

1:45 - Why We Raised The Stock Target

5:38 - AI Spending Shows Up In GDP

9:44 - The Consumer Looks Better Than Feels

14:20 - Business Creation As A Confidence Signal

17:08 - The Real Leaders Inside “Tech”

18:53 - Earnings Keep Getting Revised Higher

27:03 - The Inflation Problem Isn’t Gone

31:06 - The Fed Pause Versus Hike Pricing

35:00 - Second-Half Equity Playbook And Rotation

42:19 - Volatility, Breadth, And Midterm Patterns

49:06 - Bonds, Oil Headlines, Gold, Diversifiers

52:55 - World Cup Travel Notes And Wrap-Up

57:08 - Disclosures

Connect with Ryan:

• LinkedIn: https://www.linkedin.com/in/ryandetrick/

• X: https://x.com/RyanDetrick

Connect with Sonu:

• LinkedIn: https://www.linkedin.com/in/sonu-varghese-phd/

• X: https://x.com/sonusvarghese?lang=en

Questions about the show? We’d love to hear from you! factsvsfeelings@carsongroup.com

Transcript

Copy Transcript Copied

SPEAKER_00 0:02

Welcome to the Facts versus Feelings Podcast. I'm your host, Ryan Dieter, and I'm joined by my co-host, Sonovarke. Cutting through the noise, with Ryan Dieter, Chief Market Strategist, and Sonovarky, our Chief Macro Strategist, taking out the board and helping investors focus on what really matters. And here's our mid-year outlook for 2026. So I know we made it to the middle of the year. It's been a wild year so far. Let's get into it. We'll do small talk because I know you want to talk about all your travels watching a lot of soccer out there, but we'll get into the case.

SPEAKER_01 0:46

This is the only place I can talk about it because I don't think my wife wants to hear that.

SPEAKER_00 0:50

No, she's probably very sick of it. Um and even on our morning call, with our advisors sometimes have to kind of stick the game of giving them the info they want. But on this, this is our podcast. We can talk about whatever we want. But actually on YouTube, let's show our t-shirts. We've got uh you've got one, right?

SPEAKER_01 1:04

Oh, this is a special one. I have to start off like we did this as a the compound podcast. Uh we gave this as a gift to Josh, Michael Batnik, and the whole crew there. Yes. And it was a little cheeky by you, right? Do you want to tell the folks what you yeah?

SPEAKER_00 1:19

It says facts, it says facts versus feelings, and it says is my favorite podcast. So we handed that to the compound of friends, which is the largest podcast in our industry. It's kind of a joke. And the is my favorite, if you know the compound, the way they do it. They use like the subway letters to make the words, and we we did that. But I'm wearing a special facts versus feelings from one of our quarterly summits. We did a couple, well, I guess about a month or so ago over in Chicago. So we were in our special shirts, but Sonna, let's get into it. At the start of this year, as a lot of people probably know, we were pretty bullish. We said 12 to 15% of the SP 400 bonds to give you about three to five percent. So we thought stocks would once again do better than bonds. Been a wild run. We're gonna get into the weeds of it. Back in March, when everybody was on TV telling you how bad it was. A lot of bullish strategies were cutting their targets, sounding pretty bearish. We're going to use Sun who said, Wow, if he's now bearish, if he's just cut his target, I think his market's about the rip. And that is exactly what happened with one of the largest second quarter rallies ever. And now we have just upped our target for the SP 500 this year to between 15 and 18 percent, and we're leaving bonds at three to five percent. So we still see a lot of opportunity. Um, you know, let's just start high level because we want to talk about the economy and the Fed and the markets and bonds. But just big picture on that um upping of our target. Well, why'd we do that, you think?

SPEAKER_01 2:32

Yeah, so let's put this chart up. Uh, you know, part pony stocks and bonds are 2026 forecasts. When we came into the year, we should talk about the name as well. We'll get to that. But business first, right? 2026 forecast, we said 12 to 15 percent for stocks, three or five percent for bonds. Here we are, middle of the year, the SP 500, close to record highs, up 11% year to date, including dividends, so total return. And 12 to 15 percent is not very far from that. Like for the last six months, you're just predicting one percent, you know, total that kind of didn't make sense. So, yeah, look, momentum begets momentum, as we always like to say. And coming into the second half, we have quite a bit of momentum. We have this wave, this technology wave, this AI wave. We'll talk about how it's more than just a market story, it's also a macroeconomic story. Yeah, so we felt like we need to up our target, and now it's 15 to 18 percent for the full year. And for bonds, the bonds are flat year to date, but we think you know, second half could be hopefully slightly better on the inflation front, maybe. You know, I think right now markets are pricing in a whole bunch of rate hikes. We are in the cap, we could talk about it. How we don't think there will be rate hikes, at least right now. So we're still predicting three to five percent for bots.

SPEAKER_00 3:53

So a funny story about when you say, see, so we're I'm a market strategist, you're a strategist. I personally, and I've said this before, I don't like giving targets like SP 500, 7,000, 8,000. I like the percentages. I think most people, and it maybe it makes this a little different, honestly, because a lot of people just do 7,700. Like, what in the world does that even mean? I like the percentages.

SPEAKER_01 4:12

I don't know what it would be, actually.

SPEAKER_00 4:14

Well, and that's what I'm getting at. Here's what I'm getting at. So I do a lot of media, right? I've got a face or radio, what can I say? And it wasn't that long ago, like maybe two weeks ago, I said something like 12 to 15 percent. And they're like, Well, what would that be on the SP 500? I'm like, I don't know. Blacking out. I'm like, blacking out. So, so actually, so I was I went to New York last week, did some uh uh shout out to Kelly and Soli. They had me on um Power Lunch, and then I also did with Morgan Brennan a very early show, the uh morning call, which is always a lot of fun. And before I went, I said, okay, if we go between 15 and 18 percent, what's the nice number? It's like 8,000. I mean, like, like about 8,000. The nice round number. So, so technically we could say 8,000. That's like 17 give or take. So I say maybe a little below 8,000 or so. Again, nice round number. I like that, but that's a funny little story there about uh targets. But again, the bottom line, we manage a lot of money, we manage billions of dollars. I did see Carson Group. We just cracked 62,000 families served, um, which is really cool. Almost 600 advisors all across the country, and we manage we're over 60 billion, right? Maybe 61 billion. Or is it are we 60 uh maybe depends on the day? Depends on the day. But we're we're we're up there, and obviously the market has helped, the trends have helped, but we've been overweight equities, right? So that's I hate to give targets because I uh the past life, it's like once you get to your 12% or whatever it is. Are you guys now bearish? Are you now bearish? No, no, we're not now bearish because we're at our target, but we are up on our target. But so we'll get into the the the fun stuff, I think, in a second with the markets and and the stock market. Let's start with the economy, right? The economy. Um, I guess I'll just ask you the hard-hitting question. We just hit a morning call with our advisors, and when you really peel back the onion, our economy is all about AI. I mean, it is what it is. If AI really falls apart, we're in trouble, right?

SPEAKER_01 5:51

Yeah, maybe. Maybe but but that's the thing. Maybe uh in a sense, this outlook was the easiest to sort of name. It's amazing how much we go back and forth between you, me, Barry, and Grant. Like, oh, what do you call the outlook? What will the theme be? True. This one's uh kind of like, you know what? It's still the same story. The foliar outlook was called riding the wave. What about just still riding the wave? We just added one word, simple enough. You know, all the colors in the outlook I should say look a little different, but you know, we've changed a palette, I guess. They do here, Carson. But look, the story continues. Like, obviously, as a market story, we'll come to that. How tech is you know up 30, 30 plus, right? Over the full year, and it's all come in the second quarter, you know, and then some we talk about momentum as well. But that's a macroeconomic story over the last five quarters, Ryan. And this excludes Q2, right? Through Q1, all of 2025 and Q1, real GDP growth is 2.1% anyway, slightly below trend, right? Real when you look at final demand, it's looks slightly better. It's about two and a half, 2.6%. That's what matters. That's household spending, business investment, and government spending. About 45% of that, that growth came from investment in AI-related hardware and software. It excludes data centers, by the way. So about 90 basis points is a contribution from these on average per quarter over the last five quarters, right? Wow. Out of 2.1% real GDP growth. Now, it doesn't quite translate to that because you and I talked about it with our advisors this morning. You showed an amazing chart which showed that we are now importing more from Taiwan than China.

SPEAKER_02 7:34

Yeah.

SPEAKER_01 7:35

That is an incredible. Maybe you can put this chart up. I mean, Ryan, you could, you know, Joey Paul said on his chart, fantastic chart, but that's an AI story. You're right, there's a lot of activity, and a lot of people say, you know what, we're importing this year. So yes, technically it doesn't count to domestic gross product. It's not domestic stuff, chips made in Taiwan or South Korea. Doesn't count to us up, but it tells you there's a lot of activity, right? There's a buzz, there's a hum, there's a wave. That's where you know the economy is seeing right now.

SPEAKER_00 8:02

Yeah, and that is amazing because listen, we've always bought a lot of stuff from China, right? It is what it is. And then after COVID, and different things take place, different policies. Now we're actually importing more. Um, like you said, from from uh Thailand there. Um it's Thailand, right? What which country? Thailand, Taiwan. Taiwan. So that didn't sound right. No, it's not Thailand. No, no, no, no, no. Thailand is a very important thing.

SPEAKER_01 8:21

You know what we import from Thai as you know, side note. So if you and I, if we visit Thailand, if an American tourist visits Thailand, that is counted as a Thai import. Whereas if a Thai visit, so this is for national accounting, national statistics, trade statistics. Whereas if a Thai, you know, somebody from Thailand visits the US, that's counted as a US export. So just a side note about you know countries and visiting and all these things are counted as national economy. So confusing economic statistics, yes.

SPEAKER_00 8:53

You know, what's not confusing though, we talked about this a little bit. So the economy, the AI wave is still alive and well. You know, just last week we heard from Micron. The report came out that by uh 2035 they're gonna invest $250 billion in the United States. It was about $200 billion. So the stock popped on that news. And then Meta, which has been a big laggard. We'll talk more about sectors and stuff in a second, but Meta has been the big laggard, communication service has been the big laggard. Um, they said, hey, we're we're gonna continue to spend, but one of the knocks on Meta has been they've been just spending and having nothing to show for it, right? Well, they kind of said, listen, we're gonna sell some assets, we're gonna do some different things, we're gonna actually make our own uh chip by September. And the stock was up 15% last week. So this wave continues. It's like just pick a day when some other company is saying we're gonna spend a bunch of money. Earnings season's coming up, we'll talk about earnings, it's probably gonna continue. Um, but that's the AI story. The consumer, we need the consumer, right? Because if I mean AI can't keep going like this forever, and listen, this wave is real, it might go for several more years. It might go on for well, it very well might, but we we need consumer strength, and I guess out of let's see here, A through F. How would you rate the consumer uh the first half of this year, Sonic? A through F.

SPEAKER_01 10:04

So yeah, I would say A minus. Right, maybe B plus. Really? That's strong. Okay. I think that's I think I've been in the camp. We can share this chart showing it's got a bunch of you know labor market indicators. You know, when you talk about the economy, obviously you have to talk about the consumer, because the consumer makes up 70% of the economy. And when you talk about the consumer, obviously you have to talk about the labor market. Now, when you came into this year, I was in the camp. I mean, we talked about it. That I think the labor market is better than the headline payroll numbers are telling us. Now, over last year, average payroll growth was negative, it was positive 10,000 per month. That was nothing. It was like clearly there was a problem. The unemployment rate rose to about four and a half percent by four. But since then it was coming down. Even before, as we were writing our outlook, we could see like, you know, there's light at the end of the tunnel. Things are picking back up. This is back in November and December and January, the time our you know, full-year outlook came up. Now, year to date, yeah, last month was a bit of a disappointment, payrolls-wise, but we are averaging 110,000 jobs a month, right?

SPEAKER_00 11:13

And we were we were about 120 all last year, right?

SPEAKER_01 11:16

Approximately so the full year total. This is 110 average over the last few months. The unemployment rate has fallen to 4.2%. That's historically low. Now, the layoff rate is also really low. Every week we get initial claims, continuing claims. Same story. Layoffs are low. Hiring is not that great, but the other side of it is, you know, we don't have a lot of labor supply. Right? There are less people fewer people to hire. So yeah, I think that's where, you know, that that that's why the hiring rate, the gross hiring rate, is you know not fantastic, but people are still finding jobs. Last thing, if people weren't finding jobs, it was really difficult to find a job, continuing claims would be going higher.

unknown 12:01

Okay.

SPEAKER_01 12:01

Because what a continuing claims measure, it's measures, okay. You know, initially you're when you're laid off, you file a claim for unemployment benefits. That's counted as an initial claim. But the following week, third week, fourth week, if you continue looking for a job, the government says, Oh, now you're counted as, you know, that's a continuing claim. You're continuing to claim unemployment insurance benefits. That's not going up relative to last year, it's going down. Well, right? So that's a story.

SPEAKER_00 12:28

Yeah. So I mean, listen, if the labor market continues to improve, I think that's a positive sign, obviously, for the economy. We know consumer confidence has been very, very low. We've talked repeatedly, there's different factors playing in. Yes, there's social media. There's, you know, I think a lot of it is political. Um, then you look at retail sales and consumption, like the last two months annualized. What was consumption? Six or seven percent? Eight eight percent the last two quarters or last or the last two months. Last two months. So, you know, people say one thing, they do another. You and I travel, you and I get to do a lot together, and uh, you know, everywhere looks pretty crowded to me. I mean, Delta, not by the way, I mentioned Facebook, sorry, Meta, alert, no recommend any stocks we talk about. This no recommendations across the board. Delta said, listen, demand is strong. I mean, and in the past, Delta had said something along the lines of the front of the plane was really strong, the back of the plane was struggling. Maybe it wasn't Delta, but the airline industry in general had gave that theme. Well, Delta said just last week, they said, listen, the whole plane looks pretty good. So it is what it is. Um, those are those are positives. Go ahead, go ahead.

SPEAKER_01 13:25

Before the World Cup, everyone's like, you know, ticket prices are crazy, and admittedly, they have been crazy, much higher. It'd be like stadiums that are going to be empty. They're all sold out.

SPEAKER_02 13:35

Oh, yeah.

SPEAKER_01 13:36

They're all sold out. The Norwegians are here doing the row, and you know, the Argentinians are tearing the place apart, the English are going crazy. The everyone's well, the Scottish drank all the beer, right? Yeah, the Scottish drank all the beer. So, yeah, like everyone's spending, like, and it's not like Americans are not part of this, too. I think there's more excitement in America, amongst Americans about soccer, what's happening at the World Cup, and things like that. So it's just you know, amazing to see, but gets back to the point that it's spending, yeah.

SPEAKER_00 14:07

So we are. Um, so along those lines of is the economy strong, is the economy bad? I mean, listen, we don't think it's bad. We it could always get better. It's not bad. But one thing just came out last week. This is kind of what's cool about our podcast. It's real time. So this was not in the outlook, but it's real time data. The census does this, and we you've talked about this before. I want you to chime in how we talked about this back in 23. But the census looks at how many businesses were created, right? On an annualized basis in June, like 531,000 jobs, not jobs, wrong word, businesses were created in June. That was up 1.1% from a year before. That's one of the highest levels ever. I mean, Sony, it's just hard for me to think everything is horrible if people were not confident enough to start a business. You better trust the economy, you better trust your situation, you better trust who you're trying to sell to, or you're not gonna start a business. Now, maybe the the the bear would say, or the gloom and doomer to well, it's because no one can get a job, so you have to start a business. Listen, maybe there's a tad of truth to that. I still don't think that's the whole story. I think if you're starting, your confidence to start a business is real. You think the next six months its economy is probably gonna be pretty good. Um, talk to me about that. Cause I know we've we've pointed this one out before, right?

SPEAKER_01 15:09

Yeah, you mentioned something interesting that you know, people say, Oh, the job market is hard, so you have to start a new business. Well, you're not starting a new business is not that easy.

SPEAKER_00 15:19

No, no, it's not.

SPEAKER_01 15:20

Right, you know, and by the way, the census measures something called high propensity business applications, too. This is something we talked about two years ago and you know, three years ago. Three years ago, three years ago. Three years ago. That wasn't the chart was in our outlook at the time, 2023 outlook, saying this was applications have taken a massive step up relative to the 2010-2019 period. What happened after the great financial crisis? There was no demand. So no, a lot of people didn't start new businesses at the same rate they were over the prior 20 years, but that changed after 2021, 2022. And that gets you, you're not gonna start, you know, like selling cookies unless you think people are gonna buy it. And I know this gets back to what you were talking about, but like oh, a lot of people is driving driving Ubers now. Well, that is you have if you're driving an Uber, that means you have people to transport from A to B. Yeah, people are traveling. That that's a sign of demand. I mean, yes, like yeah, sure, you can start driving in Uber, but it's not gonna pay anything if there aren't people traveling if the economy sucks. Right? Wow, it you know, by the way, that's that's a proper word.

SPEAKER_00 16:32

The economy sucks.

SPEAKER_01 16:34

But that's not the case now.

SPEAKER_00 16:35

Yeah, we have like business Uber right through Carson, which is which is cool. I'll tell you. So I was in New York City last week running around doing stuff, and I push the button, just get the standard car. I'll tell you, like probably three out of every four times I got upgraded to Uber Black. So I don't I don't know how I'm not complaining. I think it's something to do with Carson, so thank you. I I don't know. Uh nothing beats that big Uber Black when it comes to kidship. It's free. You do it, you're supposed to. I think you're an employee, so I think you're supposed to. Um they said something out a while ago. I I don't know, it's like three cars, whatever. But it is so hard.

SPEAKER_01 17:04

I actually on that, you know, something maybe this ties into what we can talk about as well. Okay, that I don't know. I use Outlook for my emails, and Outlook search sucks. You know, and maybe this has to, you know, I don't know. I I'm I'm just joking here, but no, I I am not joking about the fact that Outlet search sucks, it does suck. But one big surprise over the last six months is how tech. Tech has done really well, and when most people think about tech, what do you think about the mag seven? Yeah. When you think about, you know, even the mag 7 and tech, you mostly think about software. Software sucked. The mag 7, the mags ETF, not a recommendation, was down 4% year to date after the first half. But there's this wave continuing, and the wave is your telecoms of the world and your uh your AI uh chip companies, right? I mean, I looked at the small cap uh Russell 2000 index. What drove returns over the first half? It was up about 21%, much better than the SP 500. I think, oh, that's fantastic. As it turns out, half of that return, Ryan, for the uh small cap Russell 2000 index came from AI-related names. Now I think, okay, AI is just tech. No, it's more than that. Small cap tech was up over 50% here today. Large cap tech was up 30%. So small cap tech, a story that these all data center, you know, infrastructure plays, even industrials up 100%, 200%, 300%. And it's that same AI wave story that's showing up in the economy, it's showing up in markets as well.

SPEAKER_00 18:39

Okay, well, good stuff. So we'll definitely dive more into um equity markets and sectors in a second. On the economy, where do you want to take this? Want to go inflation fed? Do you want to talk anything else? We've got earnings too. That kind of jives with the stock market discussion. What do you what do you want to take?

SPEAKER_01 18:54

Let's talk about the earnings because, like I said, this is uh this is also a macroeconomic story. And one thing to remember is you mentioned micron spend days of micron, yeah, spending 250 million and then meta announcing, oh, we're going to spend even more, but we're going to be able to do that. And make our own ships now.

SPEAKER_00 19:08

I mean, two things. They're two things they said. Yeah.

SPEAKER_01 19:11

And and all these companies are going to need, you know, data center contractors and cooling and power and all of that, right? So it's spreading across the economy.

SPEAKER_00 19:22

We need Ubers to take people from the airport to the hotel. Half joking, but not really. You're you're building these data centers in the middle of nowhere a lot of times, because that's the only place you're allowed to build it. So you need hotels and infrastructure and all that stuff that falls down from it.

SPEAKER_01 19:34

Yeah, so there's a lot happening here, and that's showing up in earnings. One thing to keep in mind, I have some certain, you know, easy heuristics. One heuristics is heuristic is that one person's spending or one company's investment is somebody else's revenue and profits. Yep. That's what we're seeing in EPS, right? When we started, let me see if we can pull up some numbers here. So when we started the year, uh, the expectation was the SP 500's 2026 EPS estimate would be was $308 a share. Today it's at $339 a share.

SPEAKER_00 20:12

It's up 10%. Now, let me just chime in. So that that's 14%. Because I literally looked at what we wrote in our outlook six months ago. And we said something like earnings was being 14% this year. We said, Yeah, we bet we can do that. Now it's expected to be 24% as of now. That's year over year, adding to what you said. So yeah, we did that, and it's probably only gonna go higher. Go ahead.

SPEAKER_01 20:29

And then you think, okay, maybe it's pulling forward from 2027.

SPEAKER_00 20:33

Okay.

SPEAKER_01 20:33

No, turns out 2027 is actually even better, right? It was already good, it's even better.

SPEAKER_00 20:38

Now, do we have a chart? Do we have a chart for this? Do you want to put that chart?

SPEAKER_01 20:42

Yeah, we have a chart of earnings estimates I can send over.

SPEAKER_00 20:45

Okay, pod pony, let's put that earnings estimates up right now. All right.

SPEAKER_01 20:48

Next 12 month earnings estimates for the SP 500, right? Next 12 months is a combination of 2026 and 2027. At the halfway point, half of it comes from 2026, half of it comes from 2027. So 2027, all us to say, matters. Now, at the start of the year, 2027 EPS estimate was $355 a share for the SP 500. That's up to $396 a share. That revised, you know, that estimate has gone up 12%. The 2026 estimate went up 10%. The 2027 estimate went up 12%. What's driving that? It's tech. It's actually three sectors. It's technology. Technology, uh EPS is expected to for 2026. Let's see, it's expected to rise about 21%. 2027 estimate for the tech sector is expected to rise 33%. Energy, same thing. 2026, of course, that we know because the Iran War expected to rise 57%. 2026, 2027. It's not expected to pull back, it's expected to rise another 21% on top of that. Material, same thing. 16% 2026 growth, 14% 2027 growth. Right.

SPEAKER_00 22:00

Um that's the story. When you sa yeah, that's amazing story. When you said three things, I thought like location, location, location. Oh, you're gonna say tech, tech, and tech. I thought you were gonna say, which is kind of what it is in a way.

SPEAKER_01 22:11

But it gets to like tech, energy, materials.

SPEAKER_00 22:14

Yep.

SPEAKER_01 22:15

What's why is this uh the stuff going up? Because they make stuff. And they're making stuff, and that's you know, if they're increasing revenue and profits and margins, they because they're making stuff, what does that mean? That's you have inflation on the other side.

SPEAKER_00 22:48

Well, we'll talk inflation in a second. Let me let me chime in on earnings here. So last quarter, right? That'd be the first quarter earnings season, three months ago, right now, earnings were expected to be about 13% in the first quarter. Suddenly they came in close to like 28 or 29 percent. So way like that's like historically better than we've ever seen. This quarter, the one that's just starting right now, which kicks off a lot of big financial companies and on facts versus feelings every single week going forward. We will talk about how earnings are doing. Um, expected to be up about 23 to 24 percent. So I will say that's a pretty high bar. Yes, we'll probably still come in better because that's how this usually works. I believe I saw a fact with John Butter says amazing work. Shout out to John over at Facts Ed. He looked at the last 40 quarters, 2037 of them saw earnings come in better than expected. The only two that didn't was like COVID. Okay, that makes sense. And then two times in 2022 when you had uh the massive spike in inflation. Other than that, outside of a hundred-year pandemic and generational highs of inflation, earnings usually come in better. Don't think that's gonna be different this time. But I guess my question to you, son, about earnings, even going forward, everybody knows earnings are strong. Everybody knows profit margins are strong. There is a time when that's all priced in. I'm not saying we're there, but are we? Not yet, I think.

SPEAKER_01 24:00

I mean, you know, like even from you know, overall sense of spending, like I said, one company's investment is somebody else's revenue and profits at the start of the year, or this is actually more November of last year's when we started writing a 2026 outlook.

SPEAKER_00 24:15

That's not even November's not even that far away from the other side now. I'm like, oh my god, we gotta start writing the next one.

SPEAKER_01 24:21

Right at 2027 outlook.

SPEAKER_00 24:22

Oh man.

SPEAKER_01 24:23

But we have this chart showing, you know, we put this in our Fully Outlook, and then we kind of repeated this for our mid-year outlook. At the start of the year, you know, Fully Outlook, we thought, okay, these hyperscalers, Microsoft, Alphabet, Amazon, Meta, and Oracle, together they'll spend about $470 billion this year on CapEx and about $530 billion in 2027 to get per year, it comes to about 1.7% of GDP. By the way, that's these are massive numbers. 1.7% of GDP. It's not we're not talking about the GDP of the Maldives. We're talking about the GDP of the United States of America, 31 trillion dollars, right? And guess what? After a couple of earnings seasons, that 1.7% of GDP has increased to two and a half percent of GDP.

SPEAKER_02 25:08

Wow.

SPEAKER_01 25:09

You know, these five companies that they're telling us, no, we're not gonna spend $470 billion on CapEx, we're gonna spend $740 billion in 2026 alone.

SPEAKER_00 25:19

And check after earnings season. You said it's $740 right now. What is it? $740. So just remember that number, everybody. In the month, we're gonna update it. And I'm gonna say it's $850. I don't know. Make up a number. I don't think that's what we do with these, but make up numbers that keep going higher.

SPEAKER_01 25:31

And again, it's not pull forward, it's not coming from oh, we're gonna spend less in 2027 because this year, because of tax cuts, things like that. We're gonna do that, you know, accelerated depreciation. No, no, no, no, no.

SPEAKER_02 25:42

Okay.

SPEAKER_01 25:42

2027, last year they told us we're gonna spend a total of $530 billion. That's increased to almost 900 billion.

SPEAKER_02 25:52

Oh my.

SPEAKER_01 25:53

That's insane. And if they're spending, that means somebody else is getting this money as revenue and profits. There's a reason why South Korea is up over 100% over the first six months of the year. Taiwan's up over 60, 65 percent. Uh, momentum's riding at the hundredth percentile relative to three-year returns. Uh at least relative to the SP 500 over the last three years, because it's riding the semiconductor wave. That's what's happening right now.

SPEAKER_00 26:21

Yeah, no, no, no doubt about it. Um, so building on a semiconductor wave and the shortages, we're gonna talk about inflation a little bit and then Fed and then maybe get the stocks do that. I think we've covered it. Um earnings? I think I mean we're gonna talk a lot about earnings the next month or two. Anything else you want to talk on? Are we good?

SPEAKER_01 26:37

I uh the big picture there is you know, earnings are going up because all these companies are spending.

SPEAKER_00 26:41

Yeah.

SPEAKER_01 26:42

Right?

SPEAKER_00 26:43

And the consumer's pretty good, the labor market. I mean, housing's not great. If you talk about the economy, uh housing market is an issue, no doubt about it. But um, I mean, I've said before, just imagine if interest rates go a little bit lower, maybe the housing market comes back, maybe the labor market gets better, the consumer gets stronger. I mean, these are all listen, they can go the other way too. I get it. But um, I learned a long time ago the stock market's the best forward indicator we have for how the economy's doing. Last I checked, global stock markets are hitting all-time highs, like the time we're doing this practically. So I think uh call me old-fashioned, I think the labor market and the economy are going to get better the second half of this year. So the shortages have caused a lot of issues with inflation on the AI side of things before the war even started. Sony, you were one of the very few people in this little corner waving your hand and said, Hey, I'm kind of worried about inflation. It we're seeing it broaden out in services, broadening out in uh goods. Um, and then the AI shortages were creating a lot of higher prices as well. And that has led to 3, 3.5% inflation. You said at the start of the year in our outlook, inflationary growth environment. Everybody hears inflation running 3, 3.5%. They think, oh my goodness gracious, everything has to fall apart. You said, No, that we said no, that's not true.

SPEAKER_01 27:45

Usually it's like, oh, stagflation. Stagflation means we get high inflation and the unemployment rate goes up. The unemployment rate has gone down, it's gone down.

SPEAKER_00 27:53

So we have not had stagflation, we've had an inflationary growth environment. Um, what would you what are your thoughts on inflation going forward here? I guess I think it's a problem, right?

SPEAKER_01 28:02

Okay, and I think the market recognized it because of the Iran war. Oil prices went up, and the moment oil prices go up, everyone's like, oh my god, we have an inflation problem. Yes, that is true. But then on the other side of it, oil prices have almost completely reverted. Yeah, round tripped a this week, notwithstanding. I mean, who knows what's you know, part of me is like, I don't want to keep track of what's happening in the straight-up hormones anymore. It's just so tiresome.

SPEAKER_02 28:30

I mean, yeah.

SPEAKER_01 28:32

But setting those that aside, right? Tariffs were the other big reasons like, oh, inflation's high because of tariffs, and once that passes through, we're done. Well, for one thing, tariffs haven't completely passed through. The Fed had an interesting study about this. I mean, maybe about 30% of the tariffs are yet to be passed through to consumers, so it's not completely gone. We still have ongoing supply chain disruptions, unfortunately, over the Middle East War. That's going to impact fertilizer prices, food prices. I think that's yet to come. And you mentioned services outside of housing inflation. I think that was one reason I looked at that. It stayed elevated, whether it's for child care, vet services, laundry, dry cleaning, haircuts. Yeah. Inflation's running hard for all of those things. And that told me that's why I thought the labor market is not that weak. You wouldn't be paying that much for a haircut or dry cleaning or pet services if the labor market is weak. That's part of the reason I was like, no, this doesn't, you know, it doesn't compute right? Inflation's hot there. And then the other thing, we have a structural thing. I'll come to the AI piece of it. Yep. But a structural thing is, you know, we everyone's talked about reshoring supply chains to make them more robust. I was at uh the Economic Club of New York a few weeks ago, thanks to Neil Data for the invite. I heard Scott Besson speak, and he was talking about making supply chains more robust, especially from a national security standpoint. That's great. I am completely in favor of that, but that's also inflationary. Right? It costs more. Yeah. Right? Now that's better. It's more resilient, and you know, you have redundancies and things like that. But yeah, it costs more. So there's inflationary pressure from there. I don't think this inflationary pressure goes away. And then you have the big difference between the 90s and right now. Everyone compares this to the 90s. I mean 97, 98, 99. I have no idea. But the big thing that is different is the 90s, the tech boom was deflationary. Prices were coming down. You look at the personal consumption expenditure for computer software and accessory, straight line down. It was deflation, right? You think about TVs, globalization is just ramping up. That's the reason why prices are coming down. That's not the case right now. And now you think about we talked about micron, right? Not a recommendation. Micron's margins are 80%. Yeah. But that's the other side of that is we're paying more. We talked about this last time. You're paying more for MacBooks or iPhones and things like that.

SPEAKER_00 30:55

This is Apple's Apple increased across the board, like 20 to 40 percent.

SPEAKER_01 30:59

Right. You look at the PCE personal consumption expenditures price index for computer software and accessories, year to date, that is up 64%.

SPEAKER_02 31:08

Yeah.

SPEAKER_01 31:09

Right? It's going the other way. The line was coming down for about 25-30 years. Now it's just shooting back up. That is a big difference. We have an inflation problem. It's hard, like I said, for all those reasons I listed, it's hard to see that inflation problem going away anytime soon. But coming to the Fed, we got FOMC minutes last week. Yes. A lot of people are like, oh, these are really hawkish minutes. I mean, uh, we're in the business of seeing what's not priced in. And I feel like what's priced in is like a very hawkish Fed that is on the verge of hiking rates, maybe even in July. The odds of a July rate hike is until it's 40% right now. I just checked it before a call. It's like, wait a minute. I don't think they're going to raise rates in July, to be clear. Right? But the odds are 40%. That seems too high. But in the minutes, what was interesting is quote unquote, almost all participants think they can hold or eventually cut rates if inflation, quote unquote, soon heads back to 2%. Now, soon is a keyword there.

SPEAKER_00 32:09

We're waiting five years for that, so don't hold your breath.

SPEAKER_01 32:12

We're on sixth year now and six years, we'll probably get to seven. But for now, look, the reality is I read that and think most members think inflation will be transitory. Because otherwise they'd be hiking right now. They literally said if inflation remains higher, higher rates will be necessary. So right now I'm sure they they kind of you know implying that we think this will pass. Even though they're acknowledging that inflation is broad-based, they still think you know we think you can just hold off. Okay. Right. But I think that's actually dovish for the market. Right. If inflation's elevated, inflation's rising, you have an inflation problem, the Fed's not doing anything, that's dovish. That's good for the stock market.

SPEAKER_00 32:53

Right. Uh, you know, at the start of this year, the question was how many times will the Fed cut? Not if the Fed will cut, because that was obvious. Everyone, oh, the Fed's gonna cut. Um, and you said from the very beginning, no, there's a there's a little bit of inflation problem. Now we said, listen, they might cut, but we didn't think it's being as as aggressive as some said. And you you said the whole time it might be harder for the Fed to cut than a lot of people think. Fast forward to where we are now, now it's a 180 of now most people expect the hike. We're saying, no, the Fed's probably on pause. Um, and again, that comes off to be net dovish. So um, you know, let's not forget when it comes to new Fed leadership and good transition in the equity markets, you could you do tend to see some equity volatility around new Fed leadership. That's on average. We can give you sometimes it did and sometimes it did, but just something to think about. August, September, October of a midterm year, yes, you know, can be a little troublesome, wouldn't be shocked at all if we had a little more volatility here after the rally that we saw in the second quarter, but we still are optimistic about the second half of this year. Uh Sona, do you want to put a bed uh or put a pin in the Fed and inflation and economy start talking equities?

SPEAKER_01 33:53

Yeah, I mean, the big news last week is Walsh released the names, the members or the leaders of all those different committees. Sonna, that was not the big news. Nobody cared. No, I you cared. You cared, nobody else cared. I was scared a little more, a little bit more of the World Cup. But but yeah, no, look, I saw that. My takeaway was that, you know, these people, the names sound great, but it's like every other blue ribbon commission in the government. They're always very well-esteemed people in those, you know, chairing those commissions and things like that. Almost all the time, it amounts to nothing. Right? Yep. Right now, the market's pricing in close to 160% probability of rate hikes by December. That means they're baking in 100% probability of one hike and 60% odds of a second one, which means two rate hikes are baked in. I doubt they're gonna cut. I know, I doubt they're gonna hike. I know Walsh is saying that price stability is what matters. I don't think he's gonna do anything about it. Because he has for one thing, he hasn't even told us how he's gonna do it. And looking at the minutes, like I said, I read it as wait, these people all think inflation's transitory, right? Maybe at some point they'll have a code of come to Jesus moment, but we're not there yet. So I don't think they're gonna cut. That's it.

SPEAKER_00 35:13

All right, well, I'm gonna rip the band aid off. We're done talking about the feds. Let's talk about something more fun. Um, here we go. So so we are in a bull market, right? We had a pretty solid first half of the year, SP 500 up about 10%, small caps up 20%, mid-caps kind of right in the middle. Honestly, look around the globe, like you just said, Sonu, most of the globe actually did better than the U.S., continuing the trend that we saw the year before. I think anyone's complaining with a 10% um gain. I think the shocking, not shocking, but the surprising thing was yes, Mag 7 down on the year. Most of those thoughts. Now they've come back. I mean, like I said, Facebook just had a 15% week last week. Um, but the first half of the year, that was surprising. Obviously, semiconductors were the huge winners, software was the huge loser. There was a lot of things. We had the war, we had the 100% spike in energy literally overnight, which is supposed to happen every 4 million years because it's a Six Sigma event. It happened. But then you look up and all this stuff happened, and it's still a pretty good year. Um, so talking about the second half of the year. What do you think about value growth? Well, how would you think about value growth the rest of this year? This is interesting.

SPEAKER_01 36:12

And even I would club small caps into this. I always mention how small caps get out of a great first half, 21%.

SPEAKER_02 36:19

Yeah.

SPEAKER_01 36:19

But half of more than half of that came from the AI stuff, right? Now, what's interesting is that all of that AI stuff, the Russell indices at their rebounds at the end of June, they all got kicked out of the small cap, and now they're part of mid-caps because they went up 100, 200, 300, 400%. These are even industrial small caps related to data strong data centers, infrastructure, power, cooling, you know, contracting, all sorts of things, right? And same thing with value. The Russell 1000 value index of the large value, a big, you know, you had a whole bunch of tech-related names in there. You had Intel and Cisco and Micron and all of that. Micron's out of there now. Now they put it with the radio's rebounds, they put it on the other side. So this gets interesting because let me just make sure.

SPEAKER_00 37:08

I want to just make sure people understand what you just said. Literally two months ago, Micron was a value stock. Yes. Think about that. Micron is a value stock. Two weeks ago. Up until two weeks ago. Yeah, so even a month ago. I mean, so like this is, and there's a lot of this stuff where we manage a lot of money, we have a lot of smart people. I don't, I'm a non-portfolio manager strategist, but like a lot of smart people on our team are looking at this, stuff, peeling back these onions, saying, Whoa, you just better be listening you'd be bullish AI, whatever. That's fine. You should be. But you really better know what's in uh what you're investing in. And when you hear microns of value stock, that's just the craziest darn thing I've ever heard. But it was. It was. Go ahead.

SPEAKER_01 37:44

Because I I think the big thing is, yes, uh for the most part, people are like, well, I'm a lot of professionals don't want to go all in on the AI thing, and even individuals like, oh, I want to diversify. Maybe there are some folks who think it's a bubble. But when you diversify, you think, oh, maybe I'll pick value, maybe I'll pick small cap, which is good until you look what's in there. But it also sets us up for an interesting six months because like you talk about breadth as well. If small caps rally from here, it won't be because of AI, because all that stuff has gone out. If value rallies from here outperforms the second half, I think, wow, that is some real rotation because a lot of the AI stuff is out, right? So I think now the test comes, right? But it's something that I think I'm definitely paying attention. Value outperformed growth over the first six months of the year. Small caps outperformed large caps over the first six months of the year, but a lot of it was riding on AI. And you have these massive returns, right? When microns up, I don't know, 200, 300%, whatever it is. You know, that even if it's a small part of the index, it matters a lot. It makes a big contribution to excess performance. Now that's shades. The question is what happens next, but something I'm definitely keeping an eye on.

SPEAKER_00 38:58

Yeah, you know, you think let's talk about mag 7 because I know people obviously pay attention to that, and a lot of people invested in it, and it hasn't done all that well, all things considered. Uh, this time two or three weeks ago, it was known as the lag seven. Everybody and their mother was kicking them when they were down. They're not going to be able to do that.

SPEAKER_01 39:11

Giving another ETF, lag seven. Yeah, maybe come up with that.

SPEAKER_00 39:15

Yeah, yeah, lags, lags. Um, but the reality is I looked at like Google Trends, right? Love look at Google Trends. You get send them, you can type in anything you want on Google Trends. You type in lag seven. I mean, Soto two weeks ago is like the most ever in five years. Like people, the lag seven was in the lexicon. And again, as you talked about with Fed and Hawkish, Fed, Dovish Fed, what's priced in, what's not. Well, okay, what's priced in is everybody's beaten up on a group that still makes a lot of money, that still has a lot of momentum potentially. So I think, you know, not a not a huge shock to say this, but I think the mag seven is a pretty good second half of the year. I think we're still in a bull market. Life blood bull market is rotation. Maybe semiconductors don't keep doing what they're doing. That's okay. Maybe it passes the baton back to software that was beaten up, and maybe the mag 7 is beaten up. I mean, that's kind of how this stuff works. Um, while we're still saying you want to be over with equities, but you want to be diversified. You don't have to be a hero and pick one thing or another and even own around the globe, too. We'll maybe talk about around the globe in a second. But I still think it makes sense to have some value, have some growth, have some large, have some small. I mean, I wish we could tell you just go all in on, you know, one particular thing. We're not going to. It's not that we manage money. That's pretty risky because if you're wrong, you're really wrong. But in a structure bull market like we're in, I think you want to own a lot of things that way you can benefit from whatever. I mean, honestly, six months ago, trust me, we would have been more in semiconductors had we known what was about to happen. I mean, trust me on that. But you know, if you have some growth, you have some things, you own some semiconductors, you're you're you're you own the SP 500. Well, you own semiconductors. I mean, it is what it is, and you benefit from that rally. So no, I went all over the place with that. What do you want to add or what do you want to take it? I I mean it gets back to what even in our own portfolios.

SPEAKER_01 40:50

You are ride the wave, and we are tilting to that. How are we doing that? One way is momentum. We've talked about this. I won't, you know, repeat ourselves about what momentum's doing. Momentum's doing fantastic, fantastic, but it started to get really volatile. One day it's up a lot, one day it's down a lot. We talk about how South Korea is sort of like a leak, you know, overnight. It's like South Korea's down 10%. I know, okay, it's gonna be a bad day for momentum then.

SPEAKER_00 41:13

But even like South Korea is down 10%, you're like, ah, of course it is. Like South Korea's up eight percent. Ah, of course it is. You talk about getting numb to volatility. Now we're not the ones living there, we're not the ones trading it, but still, like, but oh my, yeah.

SPEAKER_01 41:24

We have it in our portfolios and we don't want to live with that kind of alt city, so we are we've always barbelled it with low vol. And I think low vol is that one place that has actually acted as a diversifier because it's not, it doesn't have any AI stuff, barely any AI stuff. So it sucks, right? No, the truth of the matter is we would have been better off without it, but we don't want to put all our eggs into that momentum basket. I mean, you know, hindsight is 2020. We could have ridden momentum and said just go all in on that. We haven't. And in fact, now we're being a little more careful too. We're paying attention to what we own, whether it's in value, whether it's in growth, whether it's in small caps and mid-caps, right? We have some sectors too that we like, some healthcare. I'd love to get your thoughts on healthcare too. Financials, small financials are slowly coming back. By the way, that's a sign that the economy is fine. You know, community banks wouldn't be doing well if the economy is, you know, struggling. You know, that's not the case. And so, yeah, I I think there are a lot of places to diversify. I would like to see rotation because that would obviously benefit us, but I don't want to see too much rotation because that would tell me the AI wave is running out of steam. I don't think that happens for that matter.

SPEAKER_00 42:37

Well, what well said there, you know, I mean, we haven't discussed healthcare very often on this podcast because we it's not a group that we've really liked, honestly, because there's been other areas that looked better. And you think about, you know, okay, well, Mag 7 growth. I mean, those are the leaders that are going to do really well or they're gonna do really poorly. Um, and we are diversifying a little bit. We are bringing the cash register a little bit with some of the big gains that we've had. And healthcare is one area that that really looks good. I mean, biotech, we know we have a technical model, won't get too into weeds of this, but we have a technical model around for our advisors. And we had a biotech a while ago. I think Barry, uh, shout out to Barry, he looked at biotech. I said, every time I trade biotech, it never works. So don't whatever. Trust me, you don't want my opinion. Like it doesn't, it doesn't matter what I say. It's going to be wrong. But biotech has been done incredible. And again, from a risk-on appetite, like, is biotech strong really a sign that the market's about to roll over? No, I don't think so at all. But there's other factors of healthcare that are doing that are doing well too. I mean, healthcare has been cheap for a long time. Now listen, just because it's cheap doesn't mean you should buy it. These are other reasons, but again, healthcare, financials, industrials, still some of the you know, technology names are those are still the momentum names. There's things that we still like, but again, barbelling it with some other things that maybe honest to goodness, I hope low, I don't hope, but I guess I would prefer if um low vol continued to lag, because that means all the other stuff that we've been in is still doing well. Um, and honestly, if low volts to do better, our models won't do as well because we're tilting certain particular ways. That's what we have to do when you manage money. Um, but it's it's we've been doing pretty well with it.

SPEAKER_01 44:03

Um I have a question for you. I I want to they put this chart up. It shows you made this, which I like, and but we don't have to get too political, but it is what it is, right? Trump years a week early and tend to bottom in the spring, yeah, and our foliar you know, particularly. Projection is 15 to 18% for the SP 500. And kind of tells me, I know what you think, obviously, but I'm leading the witness here. But you don't expect a big pullback. And midterm years is supposed to be choppy. If we had a 9% pullback, that seems actually better than most midterm years. And going forward, do you think we have like, let's say, a 15% pullback? Or do you think it's going to be better than that?

SPEAKER_00 44:40

Well, I'll answer one second. So that chart's like one of my favorite charts of the year. We just did a blog, our whole team put together your favorite kind of chart or table of the year. And I said that one. Because on the previous five years under President Trump, I call this it is what it is. You're a week early. March is terrible. Now there's some randomness to it, but he likes to kind of do big events that maybe aren't as popular early in the year in March for whatever reason. And then, like as you get through the year, you kind of get through all that, and then you rally. And I mean, listen, under President Trump the last five times, July was higher every time. July's been higher the last 11 years. July's been higher to 13 the last 14 years. I don't know. I'm not smart enough to say it's going to end this year. I think July would probably be higher again because we've talked about a lot of these concepts, but various breadth, advanced decline lines getting new highs, breadth leads price. The last two weeks in a row, the AAII sediment pole, we had more bears and bulls with market-like foot with all-time highs. I mean, every time we have a little volatility, we had a 5% or intraday back in the middle of June. The level of panic in the air on a normal 5% peak to trough, quick little thing in a June swoon when June is usually weak. Our friend Jeff Hirsch, um stopped for Salmanac, yeah, he's like June swoon's a great, great thing. Because the June swoon opens up the door for a stronger July. And maybe once we get through July, get some stronger earnings, that'll that'll be the case. But to answer your specific question, I guess one place we're a little different than a lot of people, we don't think the Fed's going to cut. I think labor markets will be stronger. And I I think one 9.1% peak to trough we start with this year is going to be the max we see. Doesn't mean we can't have a 5% or maybe we could have an 8%er. But the things that I look at, I don't think we're going to have more than a 9% peak to trough correction in the second half of this year. And I know that runs counter to what a lot of people think. Mid-term years are midterm years are historically the most volatile, 17% peak to trough correction. But the good news, when you're off the midterm year low, and no one knows when that's going to be. I want to be very clear. But in this particular case, it might be like March 28th or 29th, whenever we had the low. I forget the exact low, but right around there. You're up over 30% a year later, right? So sometimes no pain, no gain. Um, that's kind of where we see potentially the second half of this year, because some choppiness, sure, but I still I'm just so encouraged by when we had the choppiness, when we have tech pullback, we had momentum really pull back. What happens? You have 350 stocks in the SP 500 higher, and the SP might be down half a percent because yeah, some of the big things are down more, but that rotation happens. Not like people are just selling everything, they're rotating the other areas. And as you kind of digest some gains, I know when I have the chart, I'll just explain it. The NASDAQ 100 went up a whole bunch the last two months. NASDAQ 100 is just going sideways. And you think about oh, big cap tech is lag, Max7's lag. Yeah, it has. But you look at this big picture chart, you're like, oh my, is it just catching its breath after that huge rally for another surge higher? Of course, my take is yes. Um, and we'll just have to wait and see on that. But those are some thoughts there. But I think the midterm year we'll get we'll get some scary headlines, quote unquote, because it's midterm years. But um, I don't, I don't know, Sena. Put it on record. I don't think we're gonna have more than 9.1% Peter Trough correction. You know, by the last comment, let's you jump in. The last peak was on June 2nd. June 2nd was the last peak on the SP 500. You know, we had about a 5% intro pullback in the middle of uh June. We had a little bounce or so. But yeah, I don't think that happens. It happens. I love it. I think it should happen. I mean, you want to refresh the fear a little bit. What uh what'll worry me is the first time we're down 5%, and everybody's saying, Wow, isn't this great? Shouldn't we buy this? We don't see that. We we have not been seeing that. That's interesting.

SPEAKER_01 47:56

Every time these days when they go down three percent, five percent, it seems like the panic level is just up yeah a notch. Yeah, right? For some crazy reason, like you have the chart, we can put this up as well. Volatility is the toll we pay to invest. Five percent mild corrections, yeah, and you labeled it as a five percent mild correction, happens three to three and a half times a year. Yeah, at least three, like somewhere between three and four times a year, so that should be expected. But I guess people still panic. I'll I'll you know, you're gonna hate me for this. I'm gonna bring the Fed back into it. Like I said, the probability of a rate hike is 170% for the full year, which means 100% probability of one hike, 70% odds of a second one. And we're in the cap that they won't hike. But now let's say the market, I mean, you know, we could be wrong, but let's say we're right. And suddenly that 170% as the months pass on into the second half of the year, starts to get to zero. Okay. That's a tailwind, right? I mean, I think it's a tailwind for rotation as well, for that matter.

SPEAKER_00 48:55

No, no. Like I'm a big fan of like uh monster movies and all that stuff, grew up with that stuff. And you you're kind of that way, like you think you killed the monster and they come back. You're you're like, you're like that with the Fed. When I think we're done talking about the Fed, finally, someone who's done talking about the Fed, you just you just bring it back in. You just bring them back in. Um, what's the famous Godfather quote? You know, right? When I think I'm done, you bring me back in, something like that. Pull me right back. That's Al Pacino, right? Yeah. All right. Um, Sonda, we've gone a while. We wanted to stop around now. We've usually all spent a ton of, we've kind of hinted at bonds. Well, let's wrap, let's talk about bonds. I mean, you know, what do we think? I mean, where's all this come in?

SPEAKER_01 49:32

Inflationary growth, good for stocks, not that great for bonds.

unknown 49:35

Yeah.

SPEAKER_01 49:36

You know, the nice thing is, you know, right now the yield to maturity for bonds is about four or four and a half percent, depending on you know, but they look let's say the aggregate bond index, yeah, close to four and a half percent. So that's a cushion. So it's not like 2022. When you came into 2022, the yield is about two percent. And then when rates went up, you just got crushed.

unknown 49:53

Yes.

SPEAKER_01 49:54

Right now, yes, rates ago have gone up. You know, the 10 years actually sneakily rising over the last couple of weeks. It's close to 460 now. The two-year yield is at you know, four uh you know, 420. That's 60 basis points above the Fed's policy rate of 360. See, I brought the Fed back in.

SPEAKER_00 50:12

Yes, we did. Always do. Always do.

SPEAKER_01 50:15

But you asked about bonds. But 60 basis, which means what the two year is essentially the market's expectation for average short-term policy rates over the next two years. Right. Right, and what the market's telling us is that uh the current policy rate is 360, 363. We don't think it's going to be that. It's no, it's we don't think it's going to average that over the next two years. We think it's going to average 60 basis points over that. 60 basis points is more than two hikes, by the way. Yes, yes. Right? So the market's saying we think the Fed's going to get hawkish. Essentially, it's saying we think there's an inflation problem. The Fed's not there yet, but at some point they get there. But that's not a great environment for bonds, right? It's okay because you have that yield to cushion you in the event, like you know, even if you have a lot of duration. Okay. But that's why we say diversify, diversify is today. Energy's up again. Oil price. I'm looking at Yahoo Finance, our friends at Yahoo have this headline up. Oil prices rise as Trump vows to reinstate Orma's straight blockade. US and Iran exchange strikes. I'm like, oh my god. What date was that? Because that feels like we've seen this before.

SPEAKER_00 51:21

Would Yogi Barra say deja vu all over again? I know.

SPEAKER_01 51:24

It feels like that every single day this past 10 days. I mean, you know, the straight is closed. I like I said, it's just getting annoying to even pay attention to that. But this is an environment where you want to have managed features, some exposure to commodities. Energy prices are up today.

unknown 51:38

Right.

SPEAKER_01 51:39

Oil's up, and this is why diversify diversify is. Now, last thing before we close off, gold, right? We've been fans of gold for a long time. That's one way we've diversified diversifyers. We still like gold in our strategic portfolios. It's still, you know, in our moderate growth, conservative portfolios, there's a portion of gold in there. But in our tactical portfolios, we sort of cleaned house a little bit. There's some tiny portion coming from you know, manages things like that. But you cleaned house for the time being. And I think that's partially because from a macro perspective, if the Fed eventually has to take control of inflation, if they have to get hawkish, that's not a good environment for gold. That's essentially why I think gold is struggling today as I look at my screen. Gold is down another two percent. Wow, is it is it is below 4,000 or not yet?

SPEAKER_00 52:27

Not yet. Not yet. 4,020. Okay, so it's close. Um, yes, good stuff there. Now just so the listeners know when we say strategic, we're thinking three to five years approximately. And then when we say tactical, called maybe 12 to 18 months, sometimes shorter. So we added a lot of gold in our tactical models back on March 31st, 2023. So fortunately, we had a lot of nice gains, and it was an amazing diversifier when bonds did not do very well. So we still think diversified, but even managed futures, you know, we've gone plenty long, but that's kind of been a dirty word because let's be clear, they haven't worked. A lot of people say you should add managed futures, and they just haven't worked, but they've done really well this year, especially when we had all the volatility earlier this year back in March and April. Managed futures helped you sleep at night a little bit more. All right, Sonu. Um well, how do we want to end? You want to give a quick summary of your your travels for um for soccer, or just wait for that for next week or for the World Cup?

SPEAKER_01 53:20

Yeah, I'll I'll write something, but yeah, I'm like, oh gosh, I was in Kansas City over the weekend watching the Argentina game. I mean, Kansas City is. I need to go for a Chiefs game. I mean, I don't know how many of our listeners are Chiefs fans, but that stadium just looked stunning. I just to think about goodness, this place probably is rocking when the Chiefs are playing at home. And but it was rocking on Saturday night because it felt like half of Argentina was in Kansas City, right? They were jumping up and down, Argentina won. It wasn't a pretty game, it wasn't a pretty performance. I they kind of struggled a bit, but you know, I got a nice video of uh Messi scoring the goal. I was just not scoring, he was assisting, corner clear, right? He was right there, you know, happened to be recording, so I was like, wow, this is great. You get you don't often get to see the greatest of all time play. That was magical. I took my nine-year-old boy there, so yeah, that was fun. Uh, I was talking to you before this, saying the security had such a hard time getting rid of the Argentinian supporters after the game, they didn't want to leave. They had some amazing chants, they had some amazing songs. I was like, it's all Spanish, I couldn't understand it, but it was fun. And uh fingers crossed, so like I'll be Dallas tomorrow to be recording this on the 13th of July, Monday. Uh tomorrow is when the outlook comes out. But you know, uh, you're traveling, I'm traveling, I'll be Dallas, fingers crossed.

SPEAKER_00 54:44

Your divorce your divorce is the 16th, right? I think isn't it? I mean, we travel a lot for work, and every time I turn around, Soto's like in a different city. I said, Your wife's gonna kill you. Like, she is on the way to that. You better, yeah. I don't know.

SPEAKER_01 54:56

But yeah, tomorrow for the France-Spain game, hopefully that will be good. Oh, I'll I'll round up, you know, I'll write something about all my travels in the World Cup. It's been a fun World Cup, and people have been spending. I was in New York, not to what's the game, you and I were in New York together. It was a fun time. There's a lot of energy. There's always a lot of energy in New York, but it felt a little more than usual.

SPEAKER_00 55:17

Even more, yes. Um, and you said in the very beginning, France, although maybe not like rocket science, but France was the favorite. You know, that's what a big call or what the other side. I like saying, you know, I don't know, whatever. Whatever, whatever, whatever. Exactly, exactly. Exactly. But um anyway, so we'll see. So it's it's been uh it's been a fun uh World Cup, and it's been a fun first half of the year. Um, we're honored that everyone um listens to this podcast. We've obviously been growing a lot, especially lately. So thanks to the new listeners out there. Um again, this was Here's Our Mid Year Outlook 2026. Uh everyone can go to Carsong Group.com slash outlook. By the time you listen to this, that should take you right to our Outlook. Of course, on social media, we're gonna be sharing it as well. We're really proud of it. How many charts are there, like 30 or something? Or how many do we end up with? Something like that. Uh I think something there's always at least. Probably most kind of things. There's a lot to something. There's a lot. We we love talking through charts, obviously. And I know a lot of people like learning through charts. So definitely check that out um if you haven't had a chance. Uh thanks to Pod Pony, our producer, as always. And Sonu, thanks to you for um actually being home for once and not traveling around the country to watch uh football. Uh you know, yes, I don't have football.

SPEAKER_01 56:33

Yeah, that's uh but uh yeah, no, it's been it's been fun. And hopefully, who knows, maybe our full year 2027 outlook will be still still riding the way.

SPEAKER_00 56:43

Still, still, yes, it's still still still still. Um, yeah. So everyone, thank you so much. Uh we'll be back. Oh, we can probably say who we're having next week. We might as well say it because we're close enough, right? Give it away, I guess. Give it away. Yeah, let's do it. Uh Mr. JC Peretz is going to join us the follow next week. Um, JC joined us a year ago. We talked charts and everything, and you go to the YouTube channel, it was the most viewed podcast we did all year, last year's with JC. So he um he brings the algorithms, he brings an opinion, he brings a lot of charts. So it'll be a ton of fun to have kind of a mid-year review uh with JC Peretz next week. Um but with all that, everyone, thank you for joining us. This was episode 196 of Facts versus Feelings in the book. We'll see you by soon. Take care. Thank you. Information provided on Facts versus Feelings with some of our geeks and Ryan Dietrich are for general information only and are not intended to provide specific advice or recommendations for any individual. The statements and opinions of show guests may not be reflective of CWM LLC or its affiliates. Past performance is no guarantee of future results. All industries are unmanaged and may not be invested in directly. Investing involves risk, including possible loss of principal. No strategy assures success or protects against loss. To determine what may be appropriate for you, consult with your attorney, accountant, financial, or tax advisor prior to investing. Guests on facts versus feelings are not affiliated with CWM L L C.