00:00 Speaker A
So let’s talk about then where people should be looking outside of the AI trade or sort of the like direct AI trade when we’re talking about Big Tech, Mark. What other sectors um would you be looking at? I mean, there’s certainly a lot of laggards this year to pick from, but just because something’s lagged doesn’t mean it’s going to do well next year. So how what are you what are you looking at? What are you thinking about?
00:33 Mark
Well, we look at the macro picture and it’s been much more resilient than had been feared. and also the earnings uh trends that that over the last couple of quarters have been very encouraging. So we’re looking at areas that have been largely forgotten from a valuation perspective, like financials, like industrials and also small caps, areas that are pro cyclical, a little bit risk on historically, uh but haven’t necessarily uh done that in the in this cycle and certainly this year. So, we’re we are in the optimistic camp, uh but we’d be much more oriented towards the risk reward group uh that has higher upside and we think, you know, the the groups that are in the low to mid teens valuation that are expected to grow in a, you know, double digit type of pace next year, that’s the areas where you’d be looking.
01:31 Speaker A
Um and how reliant are those areas on a Fed rate cut? And does it matter if it starts or resumes, I guess, in December or in January and beyond.
01:51 Mark
Well, the December rate cut, you know, as you know, is much more, you know, about a signal than it is about that 25 basis points per se. Uh the small cap space and certainly the financials have been very reactive towards movement in Fed funds curve. Uh and the fact that we’re up almost towards an 80% type of expectations for December is certainly a tailwind for that group. But this is more of a broader call. It’s the fact that the the rest of the globe is starting to accelerate. We’re seeing 4% uh type of growth within the the GDP in the third quarter, double digit growth across the S&P 500 in terms of earnings. So there’s a lot to like from the macro picture. And then as you get into next year, you have the fiscal and monetary tailwinds, the benefits from the weakening dollar, and then also a lot of this 250th anniversary uh type of events such as the World Cup. Those are all stimulative type of actions. So it’s not just the Fed, although the Fed is obviously a lot of the the measuring mechanism for the risk on trade.