'I think you can get to 10,000 in the next 18 months' says Joe Terranova about the S&P 500

[00:00:00] Speaker 1: Ed Yardeny had already taken his target to $8,400 for 2026, says we're going to $10,000 or beyond by the end of the decade. The roaring 20s in full effect. Why? Because earnings are amazing. Evercore this morning. Long-term stock market trend continues to be higher. We have the potential for a FOMO-driven overshoot. SPX 9000 is attainable in the next 12 months, even if you don't overshoot on a valuation standpoint. Joe, what say you? [00:00:28] Speaker 2: I think you can get to $10,000 in the next 18 months. I see no reason why not. I agree with the representation of earnings being at really a historic pace for the last seven quarters. The market is kind of settling in as you move towards the back end of August. I'm hearing a lot of people say, okay, look at the market and maybe this is the opportunity to sell. There's universal bullishness and that's the reason to sell. And I couldn't disagree more with that. I think really what's happening as you move towards the end of August is the market's becoming more tactical. The market is identifying opportunities and maintaining those opportunities. So memory came back last week. Optical came back. We're maintaining that position. We're rebuilding positioning. The bullish momentum remains in place. Energy. We've spoken about the refiners. Same example there. Rebuild positioning. Maintain positioning. And then financials. Look, once again today, I'm looking. You've got Bank of America, 52-week high, State Street, Charles Schwab, PNC. So there's strength in financials as well. The market is more tactical. And just because it appears as though maybe volatility and the environment is a little bit slower, the market's not moving as fast, that is not a reason to sell. That's actually indicative of a market that is waiting to re-accelerate as we move into the fall and broaden out once again. [00:01:56] Speaker 1: Okay. Thankfully, Weiss is not maintaining his positioning because he is no longer blending in with the wall. So we appreciate that. Appreciate you putting a new piece of art up, Weiss. What about you on this market? Yardeni, $10,000 by the end of the decade, $9,000 by the end of the 12 months for Evercore, $10,000 from Terranova. People are pretty bullish. I asked the question, too bullish or just right? [00:02:24] Speaker 3: You know, I'm bullish as well, and I try to think of what can derail the bullishness. We know earnings are good, and there's every reason to believe they'll accelerate. A lot of it are driven by AI. So what are the obvious things that could hit it? Number one, if rates go up measurably, if the Fed starts tightening, and that'll be because of oil, or the consumer, which is still two-thirds of the economy, starts to weaken further. Now, I think the market's going to look both past oil and the consumer because it's really one and the same thing. So I am bullish. And, of course, there's always the AI trade, which right now shows no sign of easing up. So, yes, I'm in agreement. The market could move higher. But I do think there's some risks out there, which I just named, which could derail a little bit. But I don't really see any disaster. [00:03:17] Speaker 1: Okay. Stan, what do you think about this market? Do you think people are getting a little too bullish or not really? Because there are a couple of other notes. Ned Davis research today, it's hard to be a bear in this business. History's favorite, the bulls. I think everybody knows that. But the long-term trend in valuations look extended. The tape's holding up, but we're watching for deterioration. Deutsche Bank asks, does something have to give? Right? Everybody is so glowing about this, what they call a near immaculate scenario where basically everything goes right. Is that a sign of watch out? [00:03:53] Speaker 4: Well, I think you mentioned, Weiss just mentioned valuations. And so two areas of potential concern are going to be slowing AI CapEx or, you know, an inability to rationalize CapEx, which obviously we haven't seen as part of the results over the last several weeks, valuations, to Steve's point, actually we've seen PEs compress on stronger earnings. And despite the risk that Steve mentioned, which is real rates have been rising. And I think, Scott, if we were in a different environment where earnings growth was not as strong and as broad, this increase in the long end of the yield curve, not just here in the U.S., but outside of the U.S. as well, would be creating a significantly more consternation. In terms of equity investors. But yet, this earnings growth has been the underpinning of this. I do think that there's going to be a bit more dispersion as we come out of this earnings season. There typically is. We're cusping into September. There could be some policy questions. And so I guess it comes down to what is your view that the areas of earnings strength that we've had, which is technology, but broader technology. [00:04:56] Speaker 1: Gosh, at this point, kind of everything now. But that's what I'm saying. It's not as glowing as tech, but it's like you can't even hate. You can't hate on any part, really, of the earnings picture. You're doing like 14 percent average for every sector in the market. [00:05:07] Speaker 4: And when you say something like taking out one time, you still have earnings growth of 21 percent. That is incredible in terms of the breadth that's required. I would say the other thing to look for as we go into the fourth quarter is where you want to be positioned in terms of this idea of compute as an asset class. And NVIDIA brought this up last week with their memorandum of understanding. What does that mean? Does that mean memory? Does that mean networking? Does that mean hardware? And I think that's where you're going to have to be a little bit tactical, a little bit selective in the next six weeks or so, because those opportunities plus semis are probably going to be more attractive than what we've seen, for instance, in software in the short term. [00:05:46] Speaker 1: Do we think, Jimmy, that this, you know, what Deutsche calls this current equilibrium, do we think that's sustainable? [00:05:55] Speaker 5: Yes. But for how long is the question? And I would say certainly through the end of the year. And the equilibrium that I see, and Shannon, I think you were pointing this out, is that the multiple roughly 21 times next year's earnings on the S&P 500 is very reasonable for the growth rate that we're having in earnings, mid-20 percent, even if you strip out the one-timers. The problem, and I'm not going to say the problem, but the thing to consider is that growth rate of mid-20s percent is not going to last in perpetuity. That's why I'm not that comfortable going as enthusiastic into 2027. Let me be clear. I am not suggesting selling stocks. That's not my point. My point, though, is that over the last four years, including this year's, we've had well into double-digit percentage returns on the S&P 500. And I think that will continue through year end. But I think the bar for growth of earnings becomes much higher in 2027. We're looking at, you know, roughly 14 percent earnings growth next year. And the slightest disappointment to those numbers could bring the multiple down. Now, let's be clear. We're talking about earnings growth and a market that should be going higher. But I think it's tough to predict a fifth year of double-digit gains. It's only happened once. Only happened once, the late 90s. [00:07:04] Speaker 1: Why aren't people talking about, guys, give me the 30-year, please. Why aren't we focused and fixated more on that, the 30-year Treasury, which is now at 529, OK, Warsh, comes out of that Fed meeting, right, and, you know, reveals the fact there were three dissents. The talk seems to be much more hawkish, even though the action didn't match the rhetoric. Nonetheless, the 30-year yield shoots higher. We continue to have a lot of issuance coming on the market, right, these debt raises from the hyperscalers, among others. The concerns about the deficit and whatever other issues you want to suggest are leading to the fact that the 30-year yield continues to rise. It doesn't matter? [00:07:48] Speaker 5: For now, it doesn't matter, but I think you're onto something, Scott. I do. I don't so much think it's the 30-year that matters as it is the 10-year. The 10-year, as I think we all know, has been in a range of 4% on the low end to 5% on the high end for about three years. And we do have to wonder if what the 30-year is doing is telling us that the 10-year is going to go higher. And if it goes above 5%, that could be a way of the world saying, listen, we're not going to finance indefinite deficits, whether it's at the federal government level or at the hyperscale or negative free cash flow level. But I want to make this point clear as well, that while it is wise of you, Scott, to bring up that question and for us to discuss it, this is not an action that somebody should take now, at least in my opinion. Somebody should not look at the 30-year at 5.29% and say, well, that's it. I got to get out of all my hyperscalers because higher interest rates are here. What the interest rate environment is reflecting is that there is greater uncertainty with Kevin Warsh, who is speaking much less to the media. [00:08:45] Speaker 1: I mean, it does, Shane, raise a question of, you know, whether this is an opportunity to increase your exposure in bonds or if it's too early because you still think that yields are going to back up even further. I mean, I hear some people suggest that this is a generational opportunity potentially the way that the 30-year has backed up. [00:09:05] Speaker 4: Yeah, and curve steepening is not getting the attention, I think, that it deserves. But I think that the reason why is that for right now, I think the equity markets in particular are looking at real rates rising as an indication of growth. You start to think about that in terms of inflation or valuation stress or that greater issuance, then it starts to look a little bit less tenable. But the overall steepening of the curve gives you as an investor significantly more latitude to add incremental duration a couple of years, lock in some nice yields, and then potentially benefit if, like we expect, the Fed doesn't hike this year. You're going to see that come in as you get closer to December, and you could have already locked in what have been much more attractive yields than they were at the start of the year.