00:00 Speaker A
Well stocks closing the day in the green despite a hotter than expected inflation print for more market reaction. We're bringing in Ross Mayfield now, investment strategist at Baird. Ross, great to see you. So, uh listen, Ross, look at these markets. We got green everywhere. We got records everywhere. What do you make of these markets, Ross? Does does the momentum continue, do you think?
00:26 Ross Mayfield
Uh it would seem so. I I don't see much right now at least in the near term in terms of a catalyst that could derail things. You have uh one day it's it's AI fueling big tech, the next day it's rate cuts fueling small caps, materials, some of the more cyclical names. Um so again, that that backdrop of um kind of a a structural tailwind in terms of AI that's really permeating a lot of different sectors. and then a no recession plus rate cut backdrop, plus the optionality of you have the tax cuts, a lot of stimulus coming in the next couple of years. So there's a lot to like right now and and underneath it all is a a fundamentally strong market with earnings uh quite strong. So could we consolidate here? Could we take a breather? Sure, you need to do that even in good bull markets, but um pretty constructive on the next 12 months.
01:05 Speaker A
What about Ross, negative seasonality? You know, I was talking to another strategist earlier in the show about that, but I mean, your opinion is that is that a risk? Is that all in the rearview mirror? What do you think?
01:21 Ross Mayfield
You know, seasonality to us is kind of like the thing on the margins that you can use to to bolster or or kind of tweak an investment case, but it's not a kind of a core tenant of a case, right? We entered uh this seasonally weak period with really strong momentum. We've seen plenty of Augusts and Septembers that have been really strong in past bull markets if you look at the late 90s, I think it was like 95 to 98, you had September was 4 and a half percent, 5%, 5%, 6%. So the seasonality is is something that you can use to kind of tweak a case, but if the rest of the case is bullish, I'm not going to use seasonality as a reason to turn bearish. And I think that's the the the message of what we've seen over the last couple of weeks as well.
01:57 Speaker A
What about sentiment, Ross? How do folks feel? I mean, is there any contrarian indicators there?
02:03 Ross Mayfield
That to me is I I don't think we're there yet, but I think we're starting to be in a place where it's something to watch. Um the survey data is mixed. Um there's still some survey data out there that that's fairly pessimistic or at least not euphoric, but you see some of the meme stocks, you see um you know, a risk on day on a day where again, you had initial claims at almost a four-year high. You had inflation not necessarily cool. Obviously, we're going to get the rate cut next week that everybody wants, but the macro was mixed. Um and you still have this big rally today. So to me there's there is a little bit of a sense of just real bullishness per pervasive. Um and that makes sense now that we're 35, 40% off of the low, but it starts to become a risk here. So that is something we're keeping an eye on.
02:39 Speaker A
Fed next week, Ross. Uh if we get the cut the market expects, how do you think the the market responds and reacts, Ross? Is that is that potentially a sell the news event?
02:50 Ross Mayfield
Yeah, I think that's a great call. Um this this rate cut uh is baked into the market. There's even like a 1 in 10 odds uh the mark based on Fed fund futures of a 50 basis point cut. I don't think we're getting that. But there is a lot of rate cuts now priced into the market. And I think there's potential to get the rate cut we want, but for the SEP and uh Fed Chair Powell to be a little more hawkish than the market wants it to be. You know, at this point, Powell is not the dove on the committee anymore. We have, you know, Waller and Bowman and several others making the case for more aggressive rate cut policy and and Chair Powell is going to be the one that gets in front of the cameras and has thrown cold water on some of the market anticipation at times in the past. So I think it could be a sell the news event, but you zoom out and directionally we're still heading towards more rate cuts and again with the rest of the tail winds behind the market. So even if it's a rocky um afternoon, I don't think it's any reason to uh to change the thesis all together.
