00:03 Speaker A

All right, stocks trading higher with less than an hour to go before the closing bell. Tech heavy Nasdaq leading the way after Nvidia coming out and announcing that $100 billion investment into Open AI. Markets also closely watching a slew of Fed speak this week. Here to break it all down is Brian Levit. He’s Invesco’s Global Market strategist. Brian, good to talk to you again.

00:20 Speaker A

Um let’s just start with kind of how you’re thinking about stocks, record highs. We got what we wanted from the Fed. We got through that event, felt like a clearing event in some ways. What are you looking at as we head towards third quarter earning season, towards the end of the year, um and and maybe an environment where people are making peace with stocks at record highs instead of being so upset about them.

00:46 Brian Levitt

Yeah, it has seemed like a battle for a lot of this year. I think it it makes sense to continue to make peace with equities. The the global backdrops reasonable enough companies continue to grow earnings. Uh if you look at corporate profitability divided by the number of employees companies have, it’s it’s absolutely surging. Uh inflation expectations are contained. The Fed uh wants to lower interest rates further. All of that is conducive for equities to continue to perform well between now and the end of the year.

01:14 Speaker A

You know, are folks still bothered by where we see the S&P’s multiple? Are they decomposing that between tech and other sectors? Like, how does that conversation go?

01:23 Brian Levitt

I think people are still bothered by it and and one of the things that people need to realize if you think of three distinct phases of a business cycle, early phase, investors tend to miss it because things don’t look great. middle phase, things to be tend to be a bit more expensive and returns are good, but but more muted and then you obviously want to avoid the late stage. Uh valuations are not timing tools. You could have valuations excessive for a while, but you would probably need to see something break in the economy or the Federal Reserve have to raise interest rates, neither of which are happening right now.

01:50 Brian Levitt

is that um the markets are heavily concentrated if you look at market cap indices and some of those valuations on the bigger names are driving extended valuations across the index. If you were to look at the same 500 companies equally weighted, the valuations are not as excessive. If you look at midcap, small cap, Europe, the emerging markets, valuations are not as excessive. So when you’re talking about elevated valuations, it’s largely a market capitalization weighted US index that you’re talking about.

02:08 Speaker A

Yeah, and you know, you mentioned Europe. Let’s talk a little bit about the international piece, speci specifically on stocks. Um you know, what those conversations have been like or are folks getting on board with the idea of that geographic diversification where we’ve seen Europe outperform for a good chunk of this year after it felt like, oh, I don’t know, 10 years where you you were getting nothing internationally and everyone hated that story, no one wanted anything to do with it. Feels like this has been a bit of a change in 2025.

02:30 Brian Levitt

It has and maybe it’s a little bit of a slow grind with with investors that tend to have a a home country bias. You talk about those 10 years, those 10 years were characterized by a very strong dollar environment, uh whether it was the US responding to crisis with greater fiscal stimulus or US tech companies growing earnings far beyond that of of many businesses around the world. You ended up with a very strong dollar environment. So what we’re seeing now for the first time really in years is a gradual easing process by the Federal Reserve.

02:57 Brian Levitt

2020, we went to zero immediately. 2008, we went to zero immediately. So we haven’t seen this in a while. What tends to happen in gradual easing um environments is that the dollar can moderate over time and when as the dollar moderates, well that incentivize investors to look elsewhere to own assets and other currencies. Uh that starts to unlock value outside. Uh you add on top of that, uh China looking to stimulate the economy as well as the Europeans uh with increased infrastructure and defense spending, you end up in a better environment than we’ve had for global investments in quite some time.

03:22 Speaker A

All right, we’ll leave it there. Brian Levitt with Invesco, appreciate the time.

03:25 Brian Levitt

My pleasure. Thank you.