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Wealthspire Advisors Chief Market Strategist Chris Maxey joins Market Domination Overtime to discuss the disconnect between the bond and stock markets.
00:00 Josh
uh listen, popular averages finish mixed here today, Chris, but it’s it’s been a a runoff those more March 30 lows. And for good reason, um stellar earnings. You note here Chris, we’re talking you say about the strongest profit growth since 2021. Let’s start there, Chris. you know, what is driving that strength? How broad is it and how sustainable?
00:21 Chris
Yeah, Josh, good to see you. So what we’ve been noticing is that uh first quarter earnings were were great, right? And and there’s no real uh mincing words there. It was a very strong quarter. Um as we are coming out, we have about 90% of companies that have reported so far if not a little bit higher. And right now, earnings have been growing at 27 to 28% year over year. But you’re also seeing the top line growth, so that revenue growth is up 11 to 12% over the last 12 months. Um what we’re pointing to is yeah, everybody knows that SpaceX is a big component piece of that. Um there’s been a valuation write up associated with those private investments that are being held and that IPO will be coming soon. But the reality is as you look across the board, um no matter what segment of the market you’re looking at, it has been a very strong quarter and that can be attributed to strong growth at the consumer level for things like retail sales. Uh we know that the labor market has been picking back up and that’s been beneficial. Um but overall economic activity has been there and that’s flowing through to corporate America and and frankly, we’re we’re just seeing a very strong economy right now despite so many of the negative headline pressures that remain out there and and that everybody is pointing towards.
01:21 Josh
Chris, what do you make of this possible disconnect here we’re seeing where the bond market though, Chris is showing some concerns. Stock market isn’t and I’m just wondering whether you see that disconnect continuing or no, you know, let’s say the 10-year hits, you know, a big round five. That could start to pressure equities.
01:36 Chris
Yeah, that’s a great question. And I think that’s the risk factor you have to focus on. Um there’s a conversation at at that 4 and a half% is the level. I I don’t think we can be quite so specific to say that stocks are going to sell off exactly at 4 and a half%, but if we begin to see that 10-year pull towards 10% or 5%, then uh yeah, that that’s where you have to start asking questions. The the the thing that we look at right now though is why are yields going higher? Well, it’s partially because of inflation, but it’s also because the economy is is showing signs of strength here. Um, a strong economy leading to higher interest rates, net net, that’s going to be okay. We’ll we’ll uh be able to navigate and manage through that and and and I don’t think that’ll be a problem. if it’s because growth is starting to slow down, we see a little bit of an indication that growth may be slower in the next uh in the second half of this year, but inflation, yeah, that that’s going to be temporary. And and so if we see that inflation is really pushing higher and it’s going to be sticky for longer, um that’s where 5% is going to be more difficult to stomach. But at least for right now, we we don’t personally don’t see that being the case.
