00:00 Josh
We heard so much about negative seasonality, Sandy, but you know, September didn't seem hasn't seemed at least so spooky and now we're heading into October. I'm curious what you see ahead.
00:11 Sandy
Josh, we think um the stock market has been having a great year so far. The economy is still strong, and that should help carry us through.
00:23 Sandy
That said, we think investors should be really smart about how they're allocating their portfolios and for the portfolios we run for our clients who are corporate executives, family business owners, entrepreneurs, and inheritors, we're tilting away from the normal stock of the market. Uh within the US stocks in particular, we're tilting towards small cap. We think that there's a lot of room to run in small caps looking beyond just the the fourth quarter, but into the next couple of years.
00:54 Josh
Is is your confidence in small cap Sandy, you just think, listen, the economy seems to be broadly hanging in there and the Fed's cutting?
01:05 Sandy
Josh, over the last couple of years, small cap stocks have faced a an earnings recession. They've been battered by high wages, inflation and high interest rates. Having the Fed um begin an interest rate decreasing cycle has certainly helped them. Um when the Fed decreased rates by a quarter percent a couple weeks ago, we saw a 2% rally in small cap. So we do think that their headwinds are starting to reverse. If we see some more easing of interest rates, that should help blow some wind into their sails. Uh a lot of small companies here in the US rely on debt heavily to finance their operations and their growth. So any decrease that they can get in interest rates really helps them increase their overall earnings.
01:47 Josh
What about that mega AI trade and trend, uh Sandy, it's been so critical for the market. Does that trend look intact to you because there've been some some very well-known investors kind of throwing some red flags here, bringing up some concerns about all that AI spend.
02:02 Sandy
Well, I think AI um spend will continue to be with us for quite a while. There's some really great technology happening there that should have a deflationary impact on the on the economy. That said, Josh, as we look over our shoulders um at the month of September and the quarter before that, we see a a widening of earnings growth across the S&P 500. 11 out of 12 sectors experienced surprise upside to their earnings per shares that they that they were reporting and we think that trend will continue. So we're not advising clients to get out of technology, but we're definitely waiting the other 493 stocks in the S&P 500 more heavily. and as I mentioned before, really tilting into the small cap uh stocks because we think they are going to outperform.
