00:00 Speaker A

Mike and it’s good to see you. You know, let’s on the economic data, Mike, because we did get that read on the jobs market, initial jobless claims, 214,000, that was better than expected. You saw the the GDP print we got this week, Mike, of course, that was better than expected. you know, your take on the economy, Mike. I’m curious, you know, where we are and where you think we’re headed.

00:33 Mike

So the data would suggest that the economy is actually really strong, right? The GDP data, while it’s lagged, this is Q2 data that we’re just now getting yesterday, uh because the government was shut down. That was a really solid number. 4.3% uh for the third quarter. Uh the second quarter was 3.8%. So we have a six-month period of time where growth in the US post-liberation day has been 4% uh on average. Um so that’s really solid in terms of fundamentals of the economy

01:14 Mike

of what’s actually driving, you know, growth in the economy. The jobs picture has been a little bit more bleak on the whole over that time period in terms of job creation and the unemployment rate has ticked up, um but still in that four and a half percent range, which over long time long-term time periods is, you know, below the the long uh term average. So, things are seem pretty solid, um but there continues to be this conflict when we look at the economy writ large versus things like consumer sentiment, um which we got some pretty punky data on that uh yesterday where sentiment is pretty low.

02:00 Mike

So as we turn the page on 25 and head into 26, um it’ll be really interesting to see what companies are talking about in terms of fourth quarter sales, fourth quarter profitability, and what the consumers said versus what they really did when it came to their holiday shopping.

02:18 Speaker A

You know, that’s an interesting point, Mike, and I hear you on the consumer and I’m not discounting that. We have, you know, issues of affordability, we know issues of economic anxiety. At the same time, let’s say I I referenced that Q3 print we got, GDP print. Household consumption, Mike, jumped 3.5%. I guess my question as an as an investor, do I follow the sentiment indicators, Mike, or do I follow the hard data?

02:51 Mike

Yeah, so for us, you’re we’re following the hard data of the underlying economy and then like, you know, checking our work is squaring that hard data with what is actually happening with companies. And there’s long been this like soft data, hard data kind of split in terms of again, consumers, uh investors for that matter, doing what saying one thing, uh but doing another. And where the rubber meets the road there is are going to be earnings, right? It’s going to be earnings from companies

03:31 Mike

um, you know, that we all shop at around the holidays, um whether it’s, you know, from from Nike to Walmart, from uh Target to uh to home improvement uh center stores and for uh for regular home improvement projects. And I I think that’s going to be the data that’s going to be the tell. Like, are the are the figures that Wall Street is uh building in for 2026, which is about 13% earnings growth, are those numbers looking likely based on how 2025 ended. And I think that’s what we have to pay attention to.

04:09 Speaker A

You highlight here too, just talking earnings, Mike, you do mention the the other 493 in the SPX, their earnings growth, you point out looking solid. I mean, what does that suggest to you about the bull market broadly, Mike? Does that suggest to you, okay, well things are are relatively healthy, resilient?

04:35 Mike

Yeah, it’s it’s a much more positive story, I would say, um sitting here at the end of 25 than maybe, you know, the growth rates of these other 493 companies were a year ago. Um the the the 493 are are on track to kind of like almost 9% earnings growth for this year, which in any year is a solid earnings uh growth story. So, we’ve had this kind of bifurcation of like the magnificent 7 and then everything else. The magnificent 7 are still growing faster than that and fast enough in fact to pull up full year 25 earnings towards around 12% growth.

05:15 Mike

Um but 9% of that those other companies is solid. Uh and that’s that would be a catalyst for further improvement, further higher prices for the market at large, if share prices follow that earnings growth of the other 493 and we have broader breath in the market, for sure.

05:40 Speaker A

Mike, you do say here if we’ve got that Santa Claus rally, trim equities, especially big tech into strength. First of all, how come, Mike? Explain that to me. And then if if I was to trim, what am I rebalancing into, Mike? Which which markets, which sectors?

06:05 Mike

Yeah, so I just want to clarify. So so you use the right word trim, right? We’re not saying sell everything. Um and it looks like the Santa Claus rally is is is off to the races here. Um so that’s that’s great. We’ll take it. Um but our position with investors kind of all throughout the year and this is, you know, we’re straddling two tax years here. If you’ve done really well on something and that something now is a larger percentage of your portfolio than than what your risk profile would say is appropriate,

06:37 Mike

then it’s a good time, particularly if you haven’t realized gains yet year to date, to trim some of that back uh and take some of the proceeds and put it in other places of the market that maybe haven’t performed as well and rebalancing your balanced portfolio. For us this year, that’s looked like a combination of uh investing in some international equities, which are a little bit closer to large value than the large growth of the US market. Um and that’s also looking at some of those other 493, you know, outside of the magnificent 7. It doesn’t mean sell all of your shares in any of those, you know, individual companies, but look to trim, be opportunistic, trade out of the 30 multiple stocks into the 20, you know, 15 to 20 multiple stocks.

07:23 Speaker A

And finally, Mike, I have to ask you just because it’s been dominating headlines, the kind of blistering runs, Mike, we have seen in the metals with gold, with silver. I’m just curious, what what what message or messages do you think that’s sending investors?

07:44 Mike

Yeah, we we have a small position in gold for clients. Uh we think that there’s a central bank buying story there of, you know, kind of a a sized buyer if you will, of central banks across the across the globe that helps support that trade and that that is a long-term investment. Um silver as you know is up I think 2X, 2X plus of what gold is this year. Um and platinum is up uh big as well. Um we’re not as participatory in that. I think part of what’s happening in silver um you

08:18 Mike

uh be to be the the ETF is um there’s a little bit of meme stock frenzy there. Um and so I see that a little bit more speculative than gold. Um, excuse me, time time will tell.

08:34 Speaker A

Mike, great to have you on the show. Merry Christmas.