Charting the Rally and Why Stock Buybacks Could Help It Continue

Jeff Buchbinder:

Hello everyone, and welcome to the latest LPL Market Signals podcast. Jeff Buchbinder here back in the saddle this week after being on vacation last week. Thank you to Marc Zabicki and Kristian Kerr for filling in for us. Really good podcast. I did listen to that replay. Really good job, guys. Pleased to be joined by Adam Turnquist here, our Chief Technical Strategist to talk about some charts and a whole lot else. We got a lot to cram in. So thanks, Adam, for joining. How are you today?

Adam Turnquist:

I'm good. Glad to have you back in action. We missed you last week on the Research team, so happy to be here as well, and doing another Market Signals podcast.

Jeff Buchbinder:

I appreciate that. Yeah, it's good to be back. So it is Monday afternoon, February 26, 2024. As we're recording this. The you know, market's not doing a whole lot today overall at least. So when we talk about what happened last week, you know, a lot of those returns might be similar, at least by the end of the day Monday. So here's our agenda for this week. We've got what I'll call an NVIDIA-powered <laugh> rally last week. NVIDIA was up about 8% for the week, so there was certainly more to the rally than that, but that was a good piece of it. So stocks were up last week. We'll review what worked and what didn't. Next is a review of some interesting charts that Adam pulled. I think the Magnificent Seven theme will be evident here in the first couple of pieces, actually, first three pieces of our agenda.

Jeff Buchbinder:

Maybe not the fourth piece but we are also going to talk about share buybacks. And actually the Mag Seven is doing quite a bit of those as a group. Then we'll finish up with a preview of the week and the core PCE being the big data point this week on Thursday. So we'll certainly be watching that one closely. All right, so let's start with the review of last week's performance. The S&P 500, actually, this is a five day look, so it's not just a four day week last week, which was shortened by the holiday. But up over 1% and up for the four days as well. That was the 15th up week out of the past 17. S&P 500 is now up over 23% off of the October lows, which certainly has caused some to think that maybe this rally needs to get a little bit of a breather.

Jeff Buchbinder:

Adam will weigh in on that in a minute. So good week for stocks. I mean, in terms of drivers, I really think the earnings and the AI story was most of it. Because we are still digesting some hot inflation data that is pushing out expectations for rate cuts. It's created some market jitters, but we're still at all-time highs. And you know, market may be braced for that PCE inflation reading later this week at this point. In terms of sectors, I think you know, staples stands out, but that was really a lot of Walmart, strength for Costco as well. So we certainly wouldn't say that that means that this market's turning defensive. It's really more responding to earnings and that certainly you know, helped the value side. We got some strength in healthcare too. Adam, I know you've been writing a lot about that. Healthcare largely a value sector at this point and has done pretty well lately. So you saw value do a bit better than growth last week. A little bit of a reversal of recent trends. Adam, anything you wanted to highlight on the sector side?

Adam Turnquist:

Not necessarily. I think it's just been pretty astonishing to see this risk appetite staying on the table despite the market being a little bit overbought. And what we've seen in the interest rate backdrop. I had to go back and look at where the 10-year started the year, and it was right around 3.88, and now today we're around 4.30. And Jeff, if I told you we went from 3.88 to 4.30, I'm guessing you would not have the S&P up 7% year to date. So some pretty big statement weeks.

Jeff Buchbinder:

Definitely not.

Adam Turnquist:

for bulls, I think.

Jeff Buchbinder:

Yeah, that's tremendous resilience. Plus we were, you know, pricing in something like seven Fed rate cuts this year, and now we're down to four, maybe even a little bit less than four. And yet here we are at another all-time high at least as of Friday's close and you know, up 7%. So yeah, this market's been very resilient. Another market that's been very resilient outside the U.S. has been Japan, up almost 17% year to date. A market we continue to like, given the focus on shareholder value and that, you know, certainly that market and economy benefiting from still accommodative monetary policy. Otherwise it really wasn't, I don't think anything, you know, particularly stands out across countries and markets. So we still at LPR Research prefer to be in the U.S. But we do like Japan quite a bit.

Jeff Buchbinder:

And some of the non-China emerging markets like India and Latin America. So turning to the bond market, of course, you know, you mentioned Adam, that bond yields have ticked higher, but over the last five days, they weren't higher because we did see some gains in the bond market. Rates are now at the high end of our year-end target range. So you know, we actually think they'll start to move lower here before long. We're just in this period again, where we're digesting the delayed Fed rate cutting cycle as well as you know, I think the latest inflation data caused some folks to doubt whether this downward trajectory and inflation will continue. I'll also highlight before I hand it back to you, Adam, on the dollar. So the dollar was actually up five straight weeks, but then we got a down week last week. So that was you know, supportive of international equities to some extent. But you know, the recent trend has been dollar higher and that certainly favors the U.S. markets and is part of the reason why the U.S. has outperformed so far, year to date. Anything to highlight here, Adam?

Adam Turnquist:

It's interesting right now just to look at where the 10-year is as we talk about our, the upper end of our range technically as well. I think this kind of 4.35 to 4.40 range for the 10-year Treasury yield is going to be a pretty difficult resistance level to get through, especially when you talk about the macro backdrop and kind of this delay to rate cuts. It's really a when not if type of scenario for the Fed. And of course, the dollars highly correlated to the 10-year that's been struggling, call it right around resistance of 105. So we've seen these relief rallies in both of those assets kind of fade a little bit or lose some momentum. I think obviously the equity market is welcoming that news.

Jeff Buchbinder:

Yeah, and with yields higher, certainly bonds from here should be able to provide some cushion if stocks to pull back. So thanks for that, Adam. Let's get into your charts here. You've got, like I said, kind of a Mag Seven theme to some of this, but I think the first question people are going to ask is you know, given how far this market has come, you know, when is a pullback coming maybe, and how big could it be?

Adam Turnquist:

Yeah, that's probably the number one question I'm getting from advisors and clients is, how long can this rally last? And first and foremost, there's nothing bearish about breaking out to record high. So we had that move last week. You can see on the chart of the S&P 500, we gapped to a new record high last week, bouncing right off support at that 20-day moving average, the blue line, you can see how that's acted as a dynamic area of support for the index. So if we do get a pullback, that would probably be one of the first spots I would look on this chart. We have it listed at 4,966. Then you have the rising 50-day, the prior highs at 4,800 is kind of your next levels of support to watch. But this move has really been parabolic. And when you get an end of a parabolic move, the textbook tells you typically pull back.

Adam Turnquist:

You don't necessarily consolidate sideways. And the degree of those pullbacks is anywhere from kind of a third to two thirds of the initial move. The most common pullback area, again, according to the textbooks, is about 50%. So if you extrapolate that out from the highs of last week, that would get you to the 4,600 level almost to the penny in terms of a 50% retracement level. So I think that would be a pretty ideal entry point if you miss this. And if you're looking for a pullback. Not sure if we're going to get there, but when you look kind of at underneath the surface in terms of when this pullback could occur, I think we're getting close to that point. Just looking at market breadth overall. First, it is very bullish with about three quarters of the S&P above their 200-day moving average.

Adam Turnquist:

But second, we're not seeing that number expand anymore. We had a higher percentage of stocks above their 200-day moving average back in December. And what surprised me is we've had a higher percentage of S&P stocks making new 52-week highs in December versus right now. So along that Magnificent Seven theme, it's really these mega caps doing the heavy lifting. We can see that maybe the market could broaden out a little bit, but I think that would be a welcome rotation right now. But when you see these divergences and market breath and momentum, you often see a pullback ensue. So we'll see if that plays out over the call it following weeks or month at this point.

Jeff Buchbinder:

Yeah, I mean, I'll be the first to admit that you know, we probably need some digestion or consolidation and a little bit of a dip from here would make perfect sense. You know, maybe as we move to the end of earning season, it would be a logical time for that. But also keep in mind that when you look at record highs on breakouts, and you just said this, Adam, that it's not, there's nothing bearish about a breakout. If you go back and you study what happens with stocks at all-time highs, you'll see that they come in bunches. And it's a much better bet to think you're going to get more highs, at least in the near term, than a correction once you hit one. You know, we've also done studies. I know Adam, you know, these numbers where, you know, if it's been more than a year since you hit a new high and you get one, on average, you're up double digits for the following 12 months. So definitely you know, not a reason to sell here certainly. And we're maintaining our fully invested allocations in our recommended tactical asset allocation model. So let's move on. And here's where we get a little bit of the Mag Seven Adam. You know, you're making the point that just what five stocks we'll use the Fab Five instead of the Mag Seven, with apologies to the Michigan basketball fans. These five stocks have really been a huge piece of the returns year to date.

Adam Turnquist:

Yeah, they've been a major driver just like they were last year. The composition has changed a little bit. When you look at this is the list of the top 10 contributing stocks to the S&Ps total return. There's some healthcare names in there this year, but majority of the Mag Seven are still in there. You can see NVIDIA putting up a quarter of the S&P's total return, but you have 60% of those, you know, within these five stocks that have drove the entire S&P 500 rally. So we do have that concentration risk. Of course, some of these names are very overbought as well, and could be due for a little bit of a breather. You know, NVIDIA's up massively year to date following their earnings report. I think, we'll talk a little bit about that and just the Mag Seven earnings outlook as well. I mean, they're kind of earning their keep as well when you look at their earnings contribution. So not only are they doing the heavy lifting in terms of price action, they're putting up some pretty impressive earnings growth that you've been highlighting over the last several weeks.

Jeff Buchbinder:

Oh, no doubt. Yeah, I haven't done the math on the actual earnings growth for the seven, but I'm pretty sure it's north of 60% <laugh>. It might even be, might even be 70 as a group. But, you know, more impressive than that, I would think is the estimate revisions for 2024 earnings for that group are up over 20%. So really, really strong. And, you know, people who think this is 1999 again and we're going to crash, we would just point out the earnings are justifying these gains, right? These are very, not just profitable companies, but companies that are seeing their estimates revised higher which is, you know, supporting those moves higher in these stocks. Maybe not all of them <laugh>, but certainly most of the Mag Seven having a really strong year. So you know, I guess you get this mega cap theme again here with, with this chart, Adam. You have percent of companies that are within each sector that are outperforming the S&P. I think we've seen some of these change maybe over the last couple of months. I mean, you tell me, but I think healthcare has maybe seen a little bit of a uptick recently, and I've actually seen that maybe tech is starting to move a little bit lower on this metric, correct me if I'm wrong.

Adam Turnquist:

Yeah, it has. It's been a changing, changing in terms of the percentages, but I think the theme is still there when you look at offensive sectors outperforming defensive sectors. You can see the lowest bars there, staples, real estate utility. So you still have an offensive tilt to the market right now. And I think that's one thing that's lost in the headlines about what we were just talking about in terms of a few names driving all the gains as we highlight here. It's not a zero sum game. You still have a third of the S&P outperforming the index this year. And when you look at the sectors, again, it's more cyclical sectors. You have industrials, you have nearly half the industrial sector outperforming the index. Tech has come down last year that was consistently above 50%. We're now seeing that come down a little bit, maybe at the expense of healthcare, you know, where those flows going.

Adam Turnquist:

That's been the big change that we've witnessed. Healthcare was really not participating, let alone outperforming last year. And then financials are holding pretty steady at 40%. I think that's a good sign for the health of this bull market as well. One other one has been materials, that's popped up there, that was a little bit of a relief rally in that sector has broadened out. So I think when you look at it overall, it does suggest it's a more of a sustainable bull market. We haven't seen any leadership changes underneath the surface of the market.

Jeff Buchbinder:

Yeah, certainly the you know, the weight loss drugs have helped healthcare, particularly Eli Lilly, and then you have in materials, you have the chemical companies benefiting from lower natural gas prices. Plus there's been somewhat of a sentiment shift in favor of China. You know, everybody's focused on stimulus and whether that economy is bottoming, it may have. You saw the Chinese equity markets actually do well last week. So I think maybe there's a little bit of spill over there into the materials sector as well. So that's one to watch. We're still not putting those sectors at the top of our buy lists here just yet, but that certainly if this solid performance continues, those could be areas to look at here before along. Our favorite sectors continue to be communication services, which has really had strong earnings and pretty strong performance. And then energy, which we still think is a good buy the dip candidate. But you know, certainly we recognize that the performance has not been very good of late. So, moving on to your next chart, Adam, the equal weight S&P, this has gotten so much attention, probably more attention than it's ever gotten recently with, you know, how strong the top of the S&P has been. You know, people are thinking that the market would, would broaden out and that maybe the equal weight is a better place to be than the market-cap-weighted S&P 500, which is how it's expressed traditionally. What do you think?

Adam Turnquist:

There's been a lot of attention, I've had a lot of questions on this, and I think the focus has really been on the top part of this chart because we had a little bit of a breakout here for the equal weight S&P 500, what we call a bullish flag pattern. You can see climbing toward record high territory, but you have to take it in context in a relative trend, right? So we compare this to the S&P, the cap weighted S&P on that bottom panel. And even though we're making progress on top, you're not seeing an inflection point yet on the relative strength. So the market-cap-weighted S&P is still outperforming, but what I found interesting when digging into this a little bit more is one, we're right at this major area of support that goes back to the pandemic lows and the rate of change that we've witnessed over the last year in terms of that relative performance.

Adam Turnquist:

It's down 13% on a relative basis versus the S&P, that level has only been exceeded one time, and that's, goes back to April 1999. So pretty rare period of underperformance by equal weights. You couple that with forward progress on the absolute chart, and then right at this major inflection point of support, I think at least odds are increasing for a little bit of a bounce here on the equal weight. And when I think if we do get that, it'd be a constructive sign suggesting, hey, the market's broadening out a little bit and for the right reasons. You can see when the absolute price is moving higher and the relative price is moving higher on this chart, that's exactly what you want to see in a bull market and a signal that things are moving beyond the mega caps that we mostly focus on. At least in the media, we'll call it.

Jeff Buchbinder:

So, you know, I don't think it's too hard to make the case that this market is reasonably valued when you include the Mag Seven, because the earnings power is just ridiculous, right? But some people are saying, well, you're better off buying the equal weight or better off buying, you know, the S&P 493 because it's cheaper. Well, sure, you might take the multiple down from, you know, 21 to 19 or 21 to 18 and a half, something like that, but then you lose the earnings growth, right? Because earnings are still declining. They might in Q1 too, for the 493. So, you know, we're not going to say, you know, don't be too quick. How about this? Don't be too quick to just go to the 493 <laugh>, right? Because the earnings power of the Mag Seven is just amazing, frankly. So I mean, you could also argue both of those valuation metrics are high, right? 21 PE is not cheap on 2024 earnings estimates for the S&P 500, not cheap at all. But again, we might get double digit earnings growth out of that index, not the 493, but the 500.

Adam Turnquist:

Goes back to the old adage of, you get what you pay for, I think, if you're looking at those names.

Jeff Buchbinder:

Oh, a hundred percent absolutely. The earnings relative to the growth outlooks. I mean, PEs relative to the growth outlooks still look pretty reasonable, at least for most of those names we would argue. And certainly not anything like we saw in the tech bubble. So this is a really interesting chart to talk about. We could, you know, do a whole podcast on just how the market's going to fare around the election. What I think is interesting this time is because we have a rematch, we kind of know what we're going to get, whether you get Trump or Biden, assuming we don't get someone else <laugh>, which is I guess possible still but assuming we get Trump or Biden, the market knows what it's going to get. So you don't have as much uncertainty as you normally would when you're talking about a potential you know, new president. So I don't know what your thoughts are on that, Adam, if you think maybe that means we can't follow the orange line, maybe we can, we're on track now, <laugh>, but seems to me like it's more market fundamentals than policy right now driving this market.

Adam Turnquist:

I think you nailed it in terms of that weak seasonality that we typically see in Q1. You can see, on average, the market low, or at least for the S&P, has been recorded in Q1 72% of the time. And I think it does speak to the uncertainty around the presidential candidates. Of course, we'll hear more about Super Tuesday coming up next week. Now that we kind of know the candidates, maybe we track toward more toward the gray or the orange line and look at those double digits. Like you said, we're certainly on that trajectory as of right now. So yeah, it's just one of those seasonal stats I think is pretty interesting when you couple the seasonality with some of the overbought conditions, those divergences we talked about, maybe it does help make the case for a potential pause or a pullback, whether it's in, you know, the rest of this month, which is starting, you know, it's wrapping up in a few days here, but more likely toward March. Maybe that's where we see a little bit of weakness. That's not outside the realm of historical seasonals there.

Jeff Buchbinder:

Yeah, this is so hard to call. You know, I think, you know, normally if an incumbent loses, that's because the economy's in recession, right? Or just, or even just bad, not necessarily recession. But if Trump wins or if the market prices in a Trump win, it's going to price in tax cuts <laugh>, right? Or at least more tax cuts than we'll get under Biden, we'll probably get some tax cuts under both extended in, you know, in 2025 when the Trump tax cuts from a few years back expire. So that's one element of this, right, where an incumbent losing might not be bad for markets. The other piece of this though is that Biden's not really getting a lot of credit for a good economy <laugh>. So maybe this is going to be one of the rare elections where it's not the economy, it's other issues and the economy could do well or maybe it even weakens.

Jeff Buchbinder:

And Biden isn't blamed just like he's not really getting credit right now. Really hard to say how the market plays this, but I think, you know, expecting a 13% year on a potential Biden win, that might be a little bit aggressive. I think the, you know, I think the risk is high, we don't get that, even though we've already got six, seven the market's going to get a little expensive. And again, we've seen this movie before. It's just it's hard to say that the policy outlook is going to drive this market higher. So, that's my take.

Adam Turnquist:

Yeah, I think that's a fair statement. And it's always hard for to predict how the market reacts to any type of presidential elections, even the midterms. I think we learned that lesson in 2016 with the surprise reaction in the marketplace there.

Jeff Buchbinder:

Yeah. And don't invest with your politics. We've seen that. Yeah. Time and time again it's about fundamentals and you know, regardless of what happens in the election, the market's going to do what it's done for a hundred years, which is go up, you know, on average eight, 9% a year. So that's a good topic. We'll hit that again in the next several months, no doubt, <laugh> because it is an election year. So let's turn to buybacks. So Adam, this is the topic of the Weekly Market Commentary this week that you wrote while I was on vacation. So thank you for doing this. It's a really interesting piece. I think this is one of the reasons why maybe it's easier to stay fully invested now because maybe some buybacks are going to come in and support the market on any dips.

Adam Turnquist:

Yeah, when we looked at the numbers and I think you can make the case that buybacks are back, that was the title of our research note. And we look at just the technicals here. This is the S&P 500 Buyback Index. It's the top a hundred S&P 500 stocks with the highest buyback ratio. So these are the companies buying back most of their shares within the index simplistically, and we're just getting into record high territory here, going through the prior highs as we highlight. A little bit of a consolidation and a breakout. If you look at the momentum indicators and just overall trend, looks like this rally has more room to run and maybe some catching up to do to the broader market. If you go to the next slide, you can see just how the buyback index stacks up to the S&P 500.

Adam Turnquist:

This is over the last, I think, 20 years here. And it typically outperforms the S&P on an annual basis just on overall price gains. You can see the dotted blue and the dotted orange line. So over the last 20 years, the buyback index has outperformed 71% of the time on a calendar year basis, putting up about a 11% average annual return. That compares to about 9% for the S&P 500. So maybe some room for that buyback index to continue. Certainly when you look at some of the stocks within there we talk a little bit about, we'll go into the factor tilts and everything else, but generally in terms of their quality and earnings growth, they look pretty constructive as well. So I think it's going to be an increased topic we'll hear more about this year as more and more buybacks get announced.

Adam Turnquist:

Right now we're on a pretty good clip. I think there's been just under, I think under 200 billion in buybacks announced year to date. A big one of those was a $50 billion buyback announcement from Meta when they reported earnings. So think it's going to be, again a big theme for the market this year in terms of not only just reducing share count and driving valuations and potential earnings growth, but also when you look at buybacks as a potential kind of a stabilizing factor, if we get any type of downside with a lot of cash for companies to put to work in their own equity.

Jeff Buchbinder:

Yeah, I think the you know, the companies that have a lot of cash that are most profitable, that have the strongest balance sheets, those are the ones you would expect to do buybacks, I would think. And then, you know, you mentioned that that supports stocks because you get the purchase, right? You get demand for the stock in the marketplace which is obviously positive, but you also get less share count, right? And that props up the earnings per share metric, which you know, is obviously positive and would increase the demand for stocks even further. So it's really kind of a double whammy, I guess you could say on the upside here from buybacks. So this look is it's factors associated with the buyback index. And so Adam, you, you took out the buyback, right? It's ex the buyback index in the S&P, so it's just the buyback index and it's the rest, right?

Adam Turnquist:

Yep. And then we equal weighted them really to determine what makes a buyback company in terms of its fundamentals. And we looked at different factors, and these are just single factors from a Bloomberg model. So you can see the buyback stocks that are in that index have tilts more toward momentum, value and growth versus the non-buyback index. So in terms of some of those factors, they have better earnings yield, better valuations for growth. They have better five year sales and revenue growth than the other index or than the ex-buyback index. So those are really the factors that have, when you break them down and compare more on an apple to apple basis, what's the difference between their kind of, their fundamentals, we'll call it versus the broader market. So I don't know, Jeff this is a technician talking a little bit more fundamentals. So <laugh>, you might feel free to chime in if you have any added color there.

Jeff Buchbinder:

Yeah, so this is not the Morningstar style boxes, right? Where, you know, stocks are either put in a value bucket or a growth bucket. When you use a factor model they can, a stock can score well on value and growth, right? Because it can have a reasonable earnings yield and then it can also have a strong growth outlook in terms of earnings and sales. So that might be confusing to see a stock or see an index score well on value and growth factors. But it's true. And actually it further supports a buyback index as an interesting investment to look at, right? These have also been strong momentum plays they've been working. Certainly the Mag Seven is in here to some extent, maybe even, to a large extent. So really this is a we think an area that you should consider as an investment thesis favoring buybacks. So really interesting stuff. Speaking of the Mag Seven here, Adam, we got some big numbers. You mentioned the Meta buyback, but they're not the only ones doing big numbers.

Adam Turnquist:

Yeah, it's pretty much almost across the board we'll call it in terms of buybacks. You can see the blue line is what the Mag Seven did in terms of total buybacks. And then what you need to know about buybacks is they authorize a share repurchase program. They don't have to execute and buy those shares back. They do it when management really wants to execute that. So there's, that leaves some remaining shares to buy. And you could see in the orange, each company how much they have to buy as a part of those repurchase or that those authorized share back or buyback programs. And total, when you look at the Mag Seven, you have about 150 billion to buy yet within that, within those programs, right now, of course Meta sticks out with 50 billion Apple's got a big one at 36.

Adam Turnquist:

Even NVIDIA last year announced a buyback program. They got about 19 billion to buy, but Tesla does not have a buyback program. I threw it in there just for context to show how it kind of stacks up within its, we'll call it peers in the group. So definitely if we do get some downside or a pullback in some of these names, you can look for those companies to potentially come in and start buying back shares and they got a pretty good arsenal <laugh> to get through. So could help some, you know, stability on the downside as well.

Jeff Buchbinder:

Yeah, it's, it's not on here, but Berkshire Hathaway has a fair amount of cash too. <Laugh> certainly.

Adam Turnquist:

Fair amount is an understatement.

Jeff Buchbinder:

Warren doesn't buy back his own stock when it's on the high side in terms of price to book value. So we might not see big buybacks out of them, but boy, they have a lot of cash to put to work as well. So thanks for that, Adam. Again, the Weekly Market Commentary can be found on lpl.com under the Research tab, and you can find that commentary that Adam did such a great job on. So let's go to the week ahead here and then we'll wrap. It's all about core PCE. I mean, I highlighted the ISM and the prices paid index within the ISM will get some attention, but I think by far and away he core PCE, the Fed's preferred inflation measure is the report of the week. And given the uptick in the CPI and the PPI, economists are looking for, and the market, are looking for this to tick higher. However, keep in mind that the real estate component of the PCE is smaller and it's calculated differently than it is within the CPI. So that while we might get an uptick, we probably will get a little bit of an uptick, it might not be as dramatic as what we saw with the CPI. So anything to add to that Adam, or any other data points that you want to highlight here?

Adam Turnquist:

Nothing major. I think you nailed it. PCE is really the NVIDIA of inflation reports, I think this week. And I do think when you look back at the PPI reports, the CPI that came in hotter than expected, expectations have moved higher. I was looking at just the swap rates for overall CPI, which is just how the market kind of forecast CPI, one way that they forecast it. And they really didn't move a whole lot after that CPI report. So I was surprised they treated it more as kind of a one-off. And I think that's going to be, the PCE report is really going to be a determining factor, I think, or help the market determine if this is more maybe a one-off monthly type of uptick. I think you had great insight in terms of that shelter component as well, that's going to be an another key thing that differentiates it between the CPI report. So,

Jeff Buchbinder:

Yeah, that, you know, you might see some negative headlines where, you know, the six month annualized core PCE moves back above 2% or something like that. We are going to see a little bit of an uptick, but one data point doesn't make a trend and the real estate piece of this will start to work in our favor, even if it maybe hasn't too much recently, right? That's the services component that's been stubborn of both the CPI and the PCE to a lesser extent. So we just got to be patient. The, you know, rents are going to come down. We've got more supply, or at least the pace of increases will slow. We've got more apartment supply coming and all of these real-time indicators of rental rates are suggesting that you know, in the coming months, inflation, at least that piece of inflation, will be tame and we think the rest of it will remain tame as well.

Jeff Buchbinder:

So you know, I think the market, even if we get a little bit of uptick, should shrug that off for the most part. Might get a little bit of an uptick in yields, might get a little bit of sell off, but don't expect a repeat of that huge sell off we saw in the CPI. So, thank you so much everybody for joining another LPL Market Signals. Thanks Adam for jumping in this week after you know, I took the week off last week. We'll be back with you next week certainly for another Market Signals. Otherwise I'll just sign off here and say, everybody have a great week, and we'll see you then.