Transcription
economist Jeremy Seagull. Gentlemen, it's great to have you. Professor, I'll start with you. You call this an excellent choice of Mr. Wars. Your first pick. Why? He's the most experienced. Um uh I I think he did a great job during the financial crisis. He's gotten, as you know, praise across the board from central bankers, not only those on Wall Street. Um and and you know certainly he likes a lot of Trump's policy but he's not going to be a lackey. He's not going to be a toad. I mean you know look at the dollar jumped. I think there was a lot of international concern Trump was going to put someone in is just going to lower lower interest rates. Well that's not happening. I think he picked the most responsible uh qualified man uh here and I think that's a very positive for Wall Street and and and the dollar.
>> Wow. Interesting uh commentary there. Professor Tom Lee. you you agree with that and what do you make of the the very trades that I highlighted at the very top of this show um because it's so dramatic silver's rollover today as was the runup that we've seen.
>> Yeah. Um well I I I think it is a good choice for Fed share but and the move in gold and silver today it's it's an interruption. So clearly the market is rethinking uh the implications of of a new Fed share. I think the timing was a surprise cuz it all kind of came out last night and uh I think it's very healthy actually for silver and gold to be seeing some profit taking because that was a juggernaut trade that I think in many ways was like a vortex sucking risk asset risk appetite from everything else into those two trades.
>> You think those two trades are done? I mean, you talk almost as if you think this is merely a pause that might refresh. The velocity of the move out of silver today is somewhat startling to look at. The market's not supposed to act that way.
>> Yeah. >> I don't care what happened back in like in 1980 or whatever. It's not supposed to to to do this.
>> That's right. Um, you know, I think there is some fundamental reasons for silver to be rising and gold is of course now should hold a place in someone's portfolio, but those were parabolic moves. I think you're right that could look like blowoff tops similar to 7980. We won't know with the fullness of time.
>> Okay, professor, what do you make of those trades? We often talk so heavily about stocks and and we will, but these are the moves that have grabbed everyone's attention. Gold, silver, dollar, probably find a few other things too.
>> When you I mean I agree with Tom when you have so many momentum players that join gold and silver uh just playing that trend. This is exactly the type of reaction you get. You know that parabolic move down and then a little any little piece of news or little selling and maybe just the confidence. Hey, Wars is not going to debase the you know, the currency. Uh that's enough to trigger this sort of reaction. This could be the high for for quite a while. But I still think that uh you know I agree that you know having a sliver of gold or some gold in your portfolio is probably still a good idea. I mean it is a good counteryclical asset. Uh it does diversify against risk assets.
>> Okay. So Tom, um your call on the market has consistently been that you think we're going to have what you you describe as a three-phase market. You have great start to the year and in all respects we've we've seen that we've hit record highs this week again on the the S&P. You're going to get a draw down. You've even used the words bare market and then we're going to get a nice ramp into year end that you think can get us to 7,700 by the end of the year on the S&P. Explain.
>> Uh well, it has been a good start and as you know many people kind of follow what markets do in January because that sets the tone for the year and we're on a positive start. Plus, the first week was positive. It's a good omen. So, I I actually think our 7700's probably low. I think the S&P could maybe even do 8,000. We're not sure. But uh we also know that there's a few things that need be need to be digested. You know, three years of good gains. A lot of good news is priced in. There could be a policy shock. Um there's been a lot more and and maybe part of it is the White House picking winners and losers in front of the midterms. And the third is that we have a new Fed that the market is going to test. And I mean today's a taste of it, right? That we have an announcement of it and the market's already picking winners and losers among commodities or assets or dollar. So I think those can contribute to a draw down. Last year it was a policy shock that took us down 20%.
>> Professor, how does that summation from student Lee sound?
>> Yeah. Uh Tom is gutsier than I am in making short-term predictions. He has actually a fairly a fairly good record. Uh I I I would like his opinion. Um I we do see rotation. I I mean the AI phenomenon is is magical. Um is might this be the first year in three years where we see the other uh 493 stocks outperform or not? I'm I'm calling I wouldn't be surprised uh if the S&P only did 5 to 10% this year, but the non-MAG 7, the rest did 10 to 15 or even more. uh it's really hard to say when that might come and you know AI is still booming but I think I would like to know his opinion. Are there more is there more competition more doubts about adoption more fear that there could be a a technological breakthrough that might penetrate some of the moes of of these uh great stocks?
>> Do you want to answer that because you're pretty bullish these names?
>> Yeah. Um well one all of them are linked to the importance of AI and as as the tentacles and AI grows they all benefit. Um I think a lot of the progress in AI is invisible at the moment. That's why we're markets are kind of questioning things like what Microsoft reported but I I think that those invisible gains then lead to product productivity. Um but it's at the same breath this year I think the market is broadening because we've seen a lot of other trades work besides the mag 7 and it's not a bad thing. I mean that that to me is not late cycle a broadening of the market is as a midcycle phenomenon right because basic materials are doing well small caps are doing well uh a lot of industrials and and healthcare. So that's a sign of a broader market which is the other 493. It's a sign I I guess professor of what some would describe as a run it hot economy that is a runit hot stock market and all those cyclical areas are the ones that would do well. Now, normally after we would get a few of the mega cap earnings reports, I would ask you, what did we learn about the mega cap stocks this week, but I don't think we learned anything because I think the group shouldn't be discussed anymore as a group and we learned whatever we did about Microsoft and we learned something different about Meta and thus the stocks reacted differently.
>> I've never seen uh you know the mag 7 react so differently. uh uh they usually just go together and we and we think of them as a group. Uh but you know just uh you know continuing on what Tom said I mean really only 15 to 20% of of firms have really really even begun to use the potential of AI. uh and I mean those those are the ones that I think really have a a great opportunity to really raise their profits and we might see layoffs etc and so on but that's part of a cost cutting in in a technological boom and that's why I think in in some way they have the potential to outperform the mag 7 this year when you know you start out at 17 18 times earnings you don't need much above expectations at all uh to really have a a good move with a profit increase.
>> Let's talk about earnings real quick before I let you go. We, you know, we start out with the shrimp cocktail, the bank started out, and then we get the meat potatoes and we we're starting to get the entre like this, the companies that really really matter.
>> Uh estimates are high. We're exceeding them to this point. What's interesting to me is the price action has not necessarily matched the reporting. Reports good, price action not so much. Even among those that have done well, meta excluded.
>> Yeah. Um yeah, the numbers played out. If you compare this quarter versus last quarter, companies that are beating are rising a lot less. Basically half a percent now 5day gain versus 2% last quarter. But the ones that miss were falling 5 a.5% last quarter. They're falling 3%. So the market is almost taking the edge off on earnings results. But I think you you did point something out that's true. I think it's the first time ever that Meta and Microsoft had a divergent move. They've almost always moved directionally on the same day and one was down 11%, one was up 11%. Or I'm getting the numbers wrong, but that your point's well made. That's like a three or four standard deviation divergence.
>> Professor La lastly to you. Um, are you confident that earnings can live up to the hype because they really have to. It's where the the growth so to speak, in this market's going to come from. It's not really going to come from multiple expansion anymore. It has to come through earnings. What do you make of that?
>> Well, it certainly has to come through earnings for the Mag Seven. Uh, but you know, I don't, you know, the non-MAG7 are still selling at 18 19 forward earnings and, uh, I, you know, I think that's extremely reasonable. Uh, certainly, I mean, the outlook, listen, we got to go, let's hope we got this government shutdown taken care of, this a really good Fed pick out of the way. We have one little more speed bump to go. We need what to know what SCOT says about tariffs. That's going to come, you know, at the at the end of February. Uh, and after that, uh, you know, let AI do its work. I I think that that the skies look clear for a really great year in in 2026.
>> All right, we'll take your forecast for now, professor. We'll talk to you soon along with Tom Lee. Appreciate both of you. Enjoy the weekend and I know we'll see you soon.