Happy Birthday Bull Market!

Jeffrey Buchbinder:

Hello everybody, and welcome to the latest LPL Market Signals podcast. Jeff Buchbinder here, your host for this week, with my friend and colleague, Dr. Quincy Krosby. How are you today, Quincy?

Jeffrey Buchbinder:

Thank you very much indeed. I'm fine. I'm very happy to be with you on this day. We've missed a couple of days for our usual global Thursday, but I'm happy to be with you today. Thank you. Thanks for inviting me.

Jeffrey Buchbinder:

Absolutely. Yeah. So we do a call for advisors every Thursday. So Quincy, I hope you're back this coming Thursday. Well, one of the reasons you're on is because that lazy bond guy on the team, Lauren Gillum, is taking the day off. It is Monday, October 14, 2024. The bond market's closed, but we equity folks are working, working hard for you. The market is certainly doing enough that it makes sense to pay attention. We're up nicely here as we're recording this Monday afternoon. So let's get to it. Here is our agenda. We're going to start with just a quick recap of the market last week. Then spend most of the time talking about the bull market because it turned two just this past weekend. Happy Birthday Bull Market. Next, just some really high level thoughts on the start of earning season, a little bit on the China-Taiwan situation, and then we'll preview the week ahead.

Jeffrey Buchbinder:

So let's start with the recap for last week. It was another good week for the stock market based on the S&P 500, up a little over 1%. The S&P's now been up five straight weeks, and it's not quite to the record number of record highs. I think we still have maybe 20 or so to go to do that, but we have had 45 new highs this year and we ended at one Friday. We'll get another one today it appears. Just tremendous. So Quincy, when I think about this strong run we've had, I think about the old adage climbing a wall of worry because there is a lot to worry about right now, and yet this market just keeps going up.

Jeffrey Buchbinder:

Oh, yeah, absolutely. The wall of worry is getting taller, I think, and it can change, needless to say, and the market's on guard for that. Just to give you an example, if we look at the Middle East, we could look now and say it's a regional issue, but if it, if it widens and becomes much more than a regional issue, you are going to have the market paying tremendous notice on that. And by the way, we know how it is widened within the region. I mean, a year ago, it was very narrow, and it has definitely been expanding. So that's important. It's extremely important, especially as we have been sending in equipment and American soldiers despite a hundred of them manning those equipment installations.

Jeffrey Buchbinder:

So that's one thing. And then, you know, you've got the uncertainty regarding the election and that's something that, you know, the market is expecting certainty at least that that first week after the election. But there's a question mark there. And then you've also got another issue that's percolating under the surface, I think, and there's a tug of war, Jeff, a tug of war that I've been following. There are those who are adamant that inflation is going to tick higher as we get toward the end of this quarter. And that same camp also thinks that we're going to see economic activity slow a bit. And so the question then becomes what does the Fed do if that scenario unfolds? So that's another one that would be very important for the market, obviously.

Jeffrey Buchbinder:

Yeah, I've seen the word stagflation pop up over the last few days. Doesn't look like that, but I can understand the worry.

Jeffrey Buchbinder:

Yes, exactly. Exactly. And I mean, that's a major concern. And then you have the other concern is, depending on who wins and who gets into the White House, the question is how much debt is going to be added to the already, you know, exponentially growing exponentially debt that we already have? And what does that do? So the market, but this is the nature of a bull market. It navigates, it navigates. It maneuvers around these obstacles and it pays attention to what the market is telling the bull and what the earnings are telling bull coupled with the guidance, which is extremely important right now.

Jeffrey Buchbinder:

Oh, absolutely. We'll get to that in a minute. One thing the market's not worrying about too much is AI, because tech was up, you know, two and a half percent last week. It was a lot of the AI names. You wrote about this last week, Quincy, that the, you know, Jensen Wong, the CEO of Nvidia, is talking about how demand is crazy, right? And customers. Insane. Where customers just can't get enough that there's, you know, there's not enough supply for the demand. And so you saw a lot of the AI names do well last week, not just Nvidia, but Super Micro and Dell and Arista Networks and others. So it was a big AI week. That AI is not really a brick on the wall of worry. It's not just another brick in the wall for you Pink Floyd fans.

Jeffrey Buchbinder:

It is something right now the market is very comfortable with and in fact is a driver not just of market gains, but of earnings growth as well. So that continues to be a positive story. Turning the bond market, the Bloomberg Aggregate Bond Index was down about a half a percent. The 10-year yield rose 13 basis points last week. That is a big move. So Quincy, this fits in with the point you just made about some people are worried about inflation. We had a little bit of a miss on the CPI, so that sparked some of the inflation worries. We, of course, have had a couple of hurricanes. Certainly we're thinking of those in the path of either of those storms. They were nasty, needless to say. And so you had a little bit of a move in oil on that. But I mean, after the market saw that this latest storm, Milton was not, you know, as strong as had been feared, you know, got a little bit of a pullback in energy, but still there were some inflation fears, I think resulting from the hurricane. What else do you think is going on here in the bond market, Quincy, that has people concerned?

Jeffrey Buchbinder:

Well, look at the two-year. The same time the 10-year jumped on that CPI report. I believe that the two-year actually came down. And that's interesting because that's most closely associated with Fed policy. The reason for that, by the way, was the initial unemployment claims. That was what I found very interesting. Is that one goes towards the inflation and yield goes up, and the other goes towards, wait a minute, wait a minute, the economy could be hurting if this continues. And that's, I think was the knee-jerk reaction in the market, in two different directions.

Jeffrey Buchbinder:

Sure, yeah. The storms clearly impacted jobless claims. So we'll probably see another distorted number this week. Hopefully those claims will revert right back to their recent trend shortly. But right now we are about 30, 25, 30,000 I guess up from recent averages. We've also had a pretty strong dollar, which has weighed a little bit on the metals, at least slowed down the ascent. And then you have skepticism around whether China's stimulus is going to be as impactful as people had hoped. So certainly we'll keep watching the metals prices and, and the dollar. But right now, the dollar is hoping the U.S. outperform international equity markets. So let's turn to the bull market. This is certainly a happy topic, Quincy, because we got to year two without a bear. And, you know, as we've talked about, you think there's a decent chance that we will get to year three, although maybe not as strong as year two. So you wrote a piece this week for the Weekly Market Commentary, which you can find on lpl.com that I think gives people some really good perspective on this bull market. You know, how far we've come and, and what the prospects look like for maybe getting through another year. So why don't you share some of those thoughts, and I'll try to flip to the slides that that fit what you're saying.

Jeffrey Buchbinder:

Yeah. Well, one of the things that I did, I look back on that day October 12, 2022 and that was the death of the bear, right? And the bull was born. What's interesting is that the we woke up and the market was down most of the day. And we also had Fed minutes the day before, and some people have talked about those Fed minutes the day before, as perhaps setting up a psychology, or a psyche, in the market for sort of an attitude that the Fed is prepared to fight inflation, is prepared to fight it. So, but the point is that for the middle to the end of the day on October 12, 2022, was an interesting change, a recalibration, if you will.

Jeffrey Buchbinder:

There was a CPI report, and it wasn't great. I mean, back then. 8.9, was it 8.9%, Jeff? That's not great. But the point is, that would be the high. That would be the high that we would get, but it was lower than expectations. And the thought is that what happened was, and, you know, everyone always says about a bull. Well, of course, it was, it was covering shorts, of course. Well, all bulls or all big major rallies begin with covering shorts. There's nothing wrong with that. There's nothing... It's how the follow through hits, right? And the follow through was really... People get so depressed, so miserable about the market. So unhappy, actually saw a modicum of hope in that report that came out. And then we saw the market actually turned higher. And then, of course, the next day we built on it. But one thing I do remember was that the sectors that led the market higher were semiconductors. I remember it was housing, it was consumer staples, but I didn't see transports in there. And that bothered me. I have to just be honest. It bothered me.

Jeffrey Buchbinder:

Semis are the new transports, Quincy,

Jeffrey Buchbinder:

What? What is that?

Jeffrey Buchbinder:

Semis are the new transports, right?

Jeffrey Buchbinder:

Yeah. Well, yeah. And about three, four trading days later, transport joined. The other thing that we were looking at very closely those days was how many of the stocks of the S&P 500 had crossed its 50 day moving average. And that number wasn't great. Some of the grateful markets that we've seen, that boy, that number goes way, way up very, very quickly, and then moves into ultimately the 200 day. But nonetheless, it was enough to change the narrative. And of course, we built on it. And this is the part that I love. So I was looking at the names of the companies that had done well, the next couple of days. And Nvidia was in there, but it wasn't in there as the star. It wasn't in there as, oh, Nvidia all by itself. It was in there with a group with some other names.

Jeffrey Buchbinder:

You know, you could see it knew how to play and act nicely with others as opposed to having to be the star that it is now. And so the market then discontinued to gain and gain and gain. It isn't as if we didn't have some really horrible sell-offs. Of course we did. Bull markets do that. But nonetheless, we always came back. And the other part of the story is, as we talk about all the time, was the concentration in the mega tech names, and particularly AI as a theme. Because remember, AI as a theme, it's fairly new. I mean, it isn't as if this was ongoing back then. It actually started with IBM talking about it and not that long ago actually. And then Nvidia comes in as the infrastructure star to provide all of the semiconductor chips.

Jeffrey Buchbinder:

So in any event, that helped move the market. And that was dramatic because look at the names. Look at the names, and the capitalizations, and how much money they make. You can't fight that. And, you know, that is the underpinning of the characterization of American exceptionalism. That's what we're talking about. Other countries have one name, maybe two names in the big semiconductor space, but nothing compared with what we have. And that is what just took the ball. You can argue and argue all you want, that oh well, it was wasn't really fair. Well, this isn't about fairness because 493 names really didn't do that well. Some of them are catching up, of course, but it has to be when Nvidia now is not on the scene. Yesterday, actually, that was the case.

Jeffrey Buchbinder:

Nvidia wasn't hogging the air. We allowed other companies to gain. But when Nvidia is out there, the way Apple used to be, there's no fighting it. There's no fighting it. They suck up all of the energy, the market energy, the market psyche. But nonetheless, the bull has continued and there was one other thing about the first year as the market didn't go up that much, not so what we expect to see in the first year of a bull. So there were many who thought, you know what? This is kind of lame. But then we get into, oh my gosh, this helped pull that bull way up in there. And the bull is still running, suggesting by the way, that we will have another year, statistically, we have to say this, statistically, it should be lower returns, maybe between eight and 10%.

Jeffrey Buchbinder:

But, you know, given this theme in the market now, AI and the tech names that have to integrate generative AI into their operating systems, that could create a whole other momentum once they start doing that in earnest. So it's been fascinating, a fascinating run for the bull, but the bull is intact. And remember, the bull market does pull back. Absolutely. It pulls back, it rests, it goes down. You know, you think it's game over and it comes right back up. And that is the essence of a bull market.

Jeffrey Buchbinder:

So I'm showing a chart of the average two-year bull. And then this one, and you can see the point you just made Quincy about how, first of all, you get dips, which clearly we've gotten. Second of all, this bull got off to a slow start. I'll show you the year by year in a minute. But the 21% gain after year one was well below the norm. And then look at how we caught up, right? From, I mean, year two was 32%, year one was 21%, then you compound that you get over 60. I think at the moment it's about 63% for this this bull market, although now it's a day older than two years. Still we got a lot of momentum. I think when you look back on this bull market, however long it goes, it's probably going to be thought of as the AI bull market, maybe even more than the post-Covid bull market.

Jeffrey Buchbinder:

That makes sense.

Jeffrey Buchbinder:

Right. Or, you know, some Federal Reserve, I don't know, the late nineties had a lot of different characteristics to it, but certainly soft landing will be a part of this. If this bull market keeps going.

Jeffrey Buchbinder:

Well, let's remember August of 1982 was when we got the first breakup with the Federal Reserve Chair Volcker. And remember, you didn't have TV. They didn't announce it. It was one of the most famed economists from Solomon Brothers who picked it up and then went around in the fax machine and started telling his clients, who were all institutional clients, the bull market has begun. The bull market has begun. Get into equities. Isn't that fascinating? And by the way, you know what the unemployment rate was that day, in August of 1982? Over 10%.

Jeffrey Buchbinder:

Yeah, I was going to guess nine plus. Yeah.

Jeffrey Buchbinder:

Yeah.

Jeffrey Buchbinder:

By the way, you might have to explain to some of our listeners what a fax machine is.

Jeffrey Buchbinder:

I don't even remember. I was always clumsy with all of those machines. I was like, yeah.

Jeffrey Buchbinder:

We love our young listeners. We love listeners of all ages but certainly some young ones might even might not even know.

Jeffrey Buchbinder:

Yeah, that's true.

Jeffrey Buchbinder:

The Fed got progressively more transparent. Eventually you could look at how thick Alan Greenspan's briefcase was. At that point, the Fed started telling us a little bit more. And then of course, that I mean, that got us to the press conferences and all of that, which is way more transparent than the Fed used to be. Some would argue maybe too transparent now. But we'll leave that debate for another day. But you see here, this is just line by line, all the bull markets that got to year two since World War II, and you see that a couple of them saw year three down, but most of the time, year three was up. You also see that four of these didn't make it to year three after celebrating their second birthday. And what ended them, I'd say three out of four were recession. And one, 1968, was really about the fear of recession and maybe Federal Reserve making a mistake than it was really a recession itself. But you could really tie in recessions to all these things. So recessions don't just die of old age, it's a popular market adage. They're murdered, as gruesome as that sounds typically recession is the culprit. And at this point, Quincy, there's no recession on the horizon.

Jeffrey Buchbinder:

No, there isn't. But that's, despite, there are those who claim that we are on the cusp of a recession. That even the labor market numbers are weak, much weaker than the headline number suggests. And that we will be heading into a recession. But, you know, we went through this before we went through this even after the beginning of the bull market where the recession, this did not follow through. It did not manifest itself. And granted, I could see, you know, the case on both sides as the Fed was raising rates. But the fact of the matter is the strength of companies is what kept this bull market intact when all is said and done, the U.S. consumer.

Jeffrey Buchbinder:

Oh, no doubt. I mean, how many people were calling for recession a year ago? 18 months ago? We even thought the odds of recession were at one point, potentially as high as 50-50. The data and the history was pointing in that direction, so just a resilient consumer and corporate America just continuing to do its thing. And here we are. I think that you did make the point though, Quincy. It's important to highlight this, that year threes do tend to be more modest in terms of returns. So the average year three is 5% since 1950. But if you just look at the gainers, it's a little bit higher than that. Of course, these two losing years, 1961 and 1980, are dragging down the average. So if we're up and we think we will be up, that's where you get to maybe seven, 8% returns.

Jeffrey Buchbinder:

The high single digits that you mentioned, Quincy. So we're not going to formally announce a target for 2025, but that's a very reasonable expectation for the next 12 months as long as the economy holds up. This is a chart that I stole from Adam Turnquist who was on with us last week. It shows the duration of these historical bull markets on this scatterplot against the annualized returns. So what you see here, the current bull market is in orange. This is still one of the shortest bull markets. So it's reasonable to think we've got, you know, a couple more years or more left if, you know, this bull fits the historical pattern. But at the same time, it's also reasonable to expect more modest returns because these annualized gains as the bull markets get older, annualized gains fall. So that 27% annualized gain that we've seen in the last two years is probably going to edge lower when we put a year three, hopefully a year four or year five, or maybe even more than that on top of it.

Jeffrey Buchbinder:

So I think this is really good perspective. We're maturing as a bull. Probably not going to get the you know, 32% gain we got in year two, may not even get the 21% that we got in year one. So let's move on to earnings, Quincy, I know you follow this really closely. So I want to get your thoughts on the banks. JP Morgan really made kind of a splash. You know, Jamie Diamond, just a few weeks before the earnings release said that net interest margins were going to be pretty bad. Expectations were too high. So what happens? People sell off the banks and then he, you know, comes out with really good numbers. Much better than expected. So I think maybe that's a microcosm of the whole earning season here. It might be the low ball, the low ball, lower the bar, and beat it earning season. What do you think of that thesis?

Jeffrey Buchbinder:

Absolutely. I mean, the bar has come down and they're beating the bar. And again, this is a market that's also very much focused on guidance. Again, trying to establish whether or not we're going to have a slow down. And you know, the companies do well. Margins are healthy. We always pay attention to the operating margins because when you are worried about the labor market, you are going to focus on margins. Because when margins really come under pressure companies are forced to, for lack of a better term, to cut costs. And a lot of that has to do with labor. And so when the margins are healthy, you don't expect that really severe keen focus on the labor. So this is, I think, good news and the the analysts across the board seem to think that as we get through the earning season. We'll see that overall generally marches have held up very well. And that's very good news for the earning season.

Jeffrey Buchbinder:

Yeah. I'm going to write an earnings preview for next Monday for the Weekly Market Commentary. And I'm going to talk about margins in there. If energy is dragging them down right now. But if you take energy out, it's really remarkable. I mean, we could be at all-time high margins in just the next two or three quarters.

Jeffrey Buchbinder:

It is. It's amazing. And that's, you know, coming out of Covid.

Jeffrey Buchbinder:

2021, very high.

Jeffrey Buchbinder:

Yeah. It's been such, you know, every single earning season, you know, earning season is let's look at the margins list and margins have been holding up and going into this earning season. The margins are doing very well.

Jeffrey Buchbinder:

Yeah. And I also want to call your attention to the Q4 and beyond earnings growth expectations. Now these numbers are probably going to come down because they pretty much always do. They've already started to come down, but we're still talking about low to mid-teens earnings growth numbers. That is not the type of earnings picture that ends a bull market. And frankly, I'm surprised that the estimates have held up as well as they have. We're still looking at a consensus bottom up of around $275 a share. Yeah. In S&P 500 earnings, a little more than that, $275, $276. Frankly, I thought they were going to come down faster. So that to me suggests that there is underlying strength. Some of it is the AI names, right? And the Mag seven, in fact, of that 4%, I think three points of it is Mag Seven.

Jeffrey Buchbinder:

So if we do end up with 4% earnings growth, we probably won't. We'll probably do six or seven. But whatever the number is, there's a good chance that the majority of it is going to come from the Mag Seven. So they're still the driver, but it's good margins, good demand, obviously for AI, which is driving tech and the economy's holding up pretty well, which is supporting the cyclical value sectors like industrials. It's certainly been, you know, helping financials maybe do a little bit better than the market and analysts had expected. You put all that together and, you know, double digit earnings growth in 2025 looks realistic. So that's a pretty good environment for stocks. We need earnings to come through to support these high valuations because we're now back to 22 times.

Jeffrey Buchbinder:

That's fine. It's rich.

Jeffrey Buchbinder:

It's absolutely rich. But, you know, if rates cooperate, inflation cooperates, and we get this earnings to come through good chance this market can hold up. However, as you know, Quincy, we've talked a lot about the wall of worry. There are risks. The election, you highlighted. Middle East, you highlighted. There are other risks certainly that could cause a pullback. We think we're overdue for one. Usually they come in October. We're halfway done, and we don't have one yet. We'll have to wait and see. Hopefully we don't get it. But odds are we do. Might not be big, but it's probably coming. Here's another big risk, Quincy, that you've written a lot about. China-Taiwan, we got some developments here over the past few days that investors should be aware of.

Jeffrey Buchbinder:

Well, yeah, I mean, this is interesting because the simple reason... I'm going to tie that, so to speak, tie that in with Taiwan semiconductor. China celebrated its anniversary of the founding of the people's public of China. And during that, President Xi Jinping made the case again that Taiwan will be a part of mainland China under the one China policy headline. And basically this said it's going to happen. Then there was pushback from the president of Taiwan. And at their National day, which was just a couple of days ago this week, I'm at a loss of what day it is, by the way. It could have been yesterday, but nonetheless, made it very clear we are not subordinate to Beijing. We're not subordinate to China. Made it very clear. Well, what followed, and that was this week was China came in and surrounded Taiwan.

Jeffrey Buchbinder:

Surrounded Taiwan militarily. I mean, we've seen this over the last year, the incursions into Taiwanese airspace going deeper and deeper into Taiwanese airspace. That's been going on. But what happened now was a full fledge full warning, military warning to Taiwan. Basically, we're not going to accept this. And by the way, what Beijing has done, and this is what they do, by the way, when they want to build a case against someone, even, you know, a leader from another country, which is Taiwan. They build the case. They accuse them of insubordination, of all kinds of things. Well, that's what Beijing has been doing with the president of Taiwan. Building a case against him as someone who is subversive, subversive toward Beijing, towards the one China policy. That's how they do it.

Jeffrey Buchbinder:

They build a case and then they act upon that. So the question is, you know, when is this all going to happen? I don't know. But all I can tell you is this maneuver was in most cases I think would've been a declaration of war, right then and there. So people keep our eye on it. At the same time, this is why in our daily market update, I included Taiwan Semiconductor because right afterwards, a senior official in Taiwan started talking about Taiwan Semiconductor because from a business standpoint, that is what we think about. There's no doubt about it. Taiwan semiconductor is the manufacturer of these chips for Apple, for Nvidia. They are the DNA of everything that we have. I mean, that's how important Taiwan semiconductor is. So in the comments from this official, he said, yes, I wanted to talk about Taiwan Semiconductor. You know, they're building another plant in Germany now, that's coming on board in just a couple of years.

Jeffrey Buchbinder:

And then they're going to be building in Japan. And then, you know, obviously we've got two, I think in Arizona. That's what Taiwan Semiconductor is doing, trying to get out and rebuild outside, sort of in exile, if you will. It's not going that well. It's not going that well in Arizona. We know that. I mean, they said that they are training workers. They're bringing in workers from Taiwan, scientists from Taiwan in order to train the American workers. I think they should have been been on board by now, but it's taking a bit longer. So that's why there is that worry about if there is a takeover and they take over Taiwan Semiconductor, the officials at Taiwan Semiconductor have said over and over again that they are mobile. They could be out of there. Quickly set up shop elsewhere.

Jeffrey Buchbinder:

You know, there's a big question mark with that, and there's a question mark as to how China, mainland China, would actually take over. Would it be through a cyber attack? You kknow, all of those questions that I'm suggesting. So in any event, it's been heating up. I think that's the best way to describe it. It has been heating up in a material way. And it's not comfortable. Something is going to happen. They are determined to bring Taiwan under that umbrella of one China.

Jeffrey Buchbinder:

Hmm. So somebody made the point to me, Quincy, that a lot of the Chinese people think that Taiwan is already part of China.

Jeffrey Buchbinder:

And it has been. Yeah. Yeah.

Jeffrey Buchbinder:

And therefore, if China acts aggressively, it makes it seem like it's not part of China. You know, they certainly you know, cornered off the media. Right? So is that not the case anymore? I mean, how are the Chinese people going to react if China has to get really aggressive? I mean, will they even know what's going on?

Jeffrey Buchbinder:

Well, you know, there's a campaign within China, mainland China, of making enemies, you know, creating enemies, and that they have to be punished. They have to, they have to. Just in that and Taiwan falls into that category. So there is an expectation that Taiwan will fold. I mean, be the easy way. The easy way would be that you have officials in Taiwan that make it easy. Look at Hong Kong. I always have to talk about Hong Kong because we forget that when the British turned over Hong Kong at the end of the last century, well, almost to the beginning of this century. There were 50 years in the contract that it would remain as Hong Kong as we know it, as an administrative entity with all of the laws intact. It didn't take long for Xi Jinping to take over, essentially.

Jeffrey Buchbinder:

And you would have to argue that yes. They arrested many of the publishers, of the students who were objecting to it. I mean, I guess the trials will be going to begin soon. But the fact is they have taken over. And the question is, how do they do it in, in Taiwan? They're going to do it. How do they do it? And there's another question, and you know, we don't want to get off. It is, part of it has been the American problem. We've had a relationship with Taiwan from the beginning. There's an understanding that we will send military equipment there. Our cultural center is gigantic, which really upset Beijing because it looks like a ministry. However, for years, we followed a policy of strategic ambiguity where we never crossed that line, Republicans or Democrats.

Jeffrey Buchbinder:

We never crossed that line in saying, we will be there to support you in a military sense. That changed both the Democrats and the Republicans would go there and, and say we're going support you. And, you remember, it's like, what? Why are you doing this? Well, they do it, you know, for Taiwanese communities back here in the United States for votes. It gets right back and they look like as if they're very courageous. Now, I do want to say though, according to many of the surveys and studies I've seen, many of the Taiwanese do not believe in Taiwan. Do not believe that the U.S. would actually come and engage in a military sense to save them. So there's that again, to use the term tug-of-war between what we say and what what we would be prepared to do.

Jeffrey Buchbinder:

It's a difficult situation, and Xi Jinping seems to be determined to make it no questions anymore. Just go ahead and do it and get it over with because he doesn't stop. And by the way, if your economy is not doing well, right? If your economy is, even if you're Xi Jinping with all the power that he has, you know, we know historically that a military event tends to help a leader, you know, with the backing of the population and the winner takes all.

Jeffrey Buchbinder:

Yeah. He wants to secure his legacy and put, you know...

Jeffrey Buchbinder:

Yeah, exactly.

Jeffrey Buchbinder:

Taiwan and Hong Kong as feathers in his cap, I guess you could say.

Jeffrey Buchbinder:

Yeah, exactly.

Jeffrey Buchbinder:

This is why it's so complicated because you're sending arms to Taiwan. You're basically arming China, our perhaps our biggest threat.

Jeffrey Buchbinder:

Yes. Yes.

Jeffrey Buchbinder:

So I can't imagine we're going to continue to send weapons to Taiwan, you know, five, 10 years from now. We'll, see what happens, but very precarious. So, you know, we talked about the wall of worry. This might be the biggest brick on that wall, so we'll keep watching that closely, but clearly the stock market doesn't care about it right now, which is a good thing. So and hopefully there's nothing to worry about. And this can be sort of the easier path as opposed to the hard way. So just real quick we talked a little about earnings. We also get the ECB this week. Quincy, we're going to get a 25 basis point cut. It seems like pretty much a done deal. What else should people be thinking about this week?

Jeffrey Buchbinder:

Well, I mean, this week you've got a host of housing-related data that we'll be paying attention to. We're also going to get the Philadelphia Survey, manufacturing survey, and I mentioned Philadelphia. We'll have the Empire one as well, which is New York, New Jersey, Connecticut. It doesn't have as much of an input toward the manufacturing part of the U.S. but the Philadelphia one does. And so what we're going to be looking for there is new orders. We're going to be looking at employment expectations, and we're going to be looking at prices paid. Because again, this issue of do we have a little bit of inflation in the pipeline? The Producer Price Index last week said no, but nonetheless, we will listen to what these companies have to say, even coming out of the Empire Fed Survey, which will be coming out now. So we're going to be listening to that. Industrial production is going to be important. And retail sales. Yes. Retail sales will be coming out, and that is extremely important. And we all know why. 68% of our economy, GDP, comes from consumer spending.

Jeffrey Buchbinder:

Yeah. And the GDP trackers are still pointing to 3% for

Jeffrey Buchbinder:

That's right.

Jeffrey Buchbinder:

the current quarter. So yes, that is part of consumer spending. Not all of it, but it is a big enough piece of the pie that we want to pay close attention to that. So and then there's some big banks again reporting tomorrow or Tuesday. And throughout the week, we get Taiwan Semi, we get a SML. So we'll get some good insights into the chip.

Jeffrey Buchbinder:

Netflix!

Jeffrey Buchbinder:

And the AI theme. And Netflix is another one. So there's some big... Proctor and Gamble j and JI believe. So there's some big names coming this week.

Jeffrey Buchbinder:

40 S&P names this week.

Jeffrey Buchbinder:

Yep. We're going to get a good sense of the earnings environment here after this week. So that is certainly something to watch too. So, we'll, we'll stop there. So thanks Quincy, for, for joining. Thanks everybody for listening to another LPL Market Signals podcast. It's always a pleasure, Quincy, to to do this with you. Well,

Jeffrey Buchbinder:

Thank you. I missed you. I missed you.

Jeffrey Buchbinder:

Don't leave me hanging on those Thursday mornings. Don't leave me hanging.

Jeffrey Buchbinder:

I'll be, I think, by the way.

Jeffrey Buchbinder:

For those who want those comments. Clients of LPL have access to those through Account View and then LPL advisors certainly can see those in the Daily Market Update. So want to get that out there in case folks were wondering about some of the commentary that Quincy referenced. So again everybody have a great week. Thanks for joining and we'll see you next time on LPL Market signals. Take care.

Jeffrey Buchbinder:

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Jeffrey Buchbinder:

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