Episode summary
Bull Market Health Check. Plus, Philip Morris CEO Jacek Olczak | Barron's Streetwise
Barron's Streetwise
· · Hosts: Jack Bary, Andrew Bary · Guests: Jacek Olczak
Summary
The episode argues that the U.S. equity market remains expensive but not necessarily fragile, with the bull case still anchored in AI-related capital spending. Scott Ren of Wells Fargo says the S&P 500 is not in a dot-com-style bubble because today’s leaders have real revenues, cash flow, and earnings, even if valuations are around 25 times earnings. He expects AI capex to keep supporting growth through next year and says a 10% pullback would be a buying opportunity rather than a reason to de-risk.
Ren also suggests investors should not chase value, small caps, or overseas markets as hedges. He favors technology, industrials, utilities, and financials, and says the S&P 500 could reach 7500 by next year if the big growth names keep delivering. Over a three-to-10-year horizon, he thinks returns should be attractive, though probably below the 20% plus gains seen in 2023 and 2024.
The second half turns to Philip Morris International, where Jacek Olczak makes the case that smokefree products are now a better business than cigarettes. He says smokefree products already account for 41% of revenue and 42% to 43% of profits, with margins improving as Iqos and nicotine pouches scale. The argument is that Philip Morris is becoming a growth company, not just a dividend stock, because it is deliberately reallocating cash from cigarettes into less harmful products.
Key takeaways
- Scott Ren says today’s market is closer to a high-valuation but fundamentally stronger version of the late-1990s rally than a classic bubble.
- Ren expects AI capex to keep driving S&P 500 earnings and thinks a 10% correction would be a buying opportunity, not a sell signal.
- Ren is overweight technology, industrials, utilities, and financials, and underweight U.S. small caps and emerging markets.
- Jacek Olczak says smokefree products already generate 41% of Philip Morris revenue and 42% to 43% of profits.
- Olczak frames Philip Morris as a growth stock because cigarettes fund the transition into Iqos and nicotine pouches.
Notable quotes
“the S&P 500 is going to offer attractive returns. Are they going to be, you know, 20 plus% that we've we've seen in, you know, 23 24”
“At the end of the day, this products actually yielding better margins than a combustible product”
“41% of Philip Morris's revenue now comes from Smokefree Products”
How the episode opens
When you look out three, five plus years, 10 years, I think that the S&P 500 is going to offer attractive returns. Are they going to be, you know, 20 plus% that we've we've seen in, you know, 23 24? We'll see what happens in 25.
Probably not. They're going to be lower than that, but I think they're still going to be attractive. Hello and welcome to the Baron Street Wise podcast.
I'm Jack How and the voice you just heard is Scott Ren. He's the senior global market strategist for Wells Fargo Investment Institute and he's talking to us today about this AIdriven bull market for stocks. Is it a bubble or is the getting still good?
We'll also hear from the CEO of Philip Morris about profits after tobacco. I mean, not really after tobacco. After the growth for the business of setting tobacco on fire and uh inhaling the smoke, there's still heated tobacco that doesn't produce smoke and there's nicotine products that don't have tobacco at all.
You know what? We'll get into the details later. Listening in as our audio producer, Alexis Moore.
Hi, Alexis.
Hey, Jack. I was just reading about the Deep Seek selloff in January of this year and uh I couldn't remember what it was. I could I mean deep it sounds familiar but I was it a was this a submersible?
Are we talking under the ocean? What's going on? Remember China had launched this cheap AI model and the thought was that China had jumped ahead of the US and everyone else in AI and this was going to spell trouble for our companies trying to make money off this stuff.
And uh Nvidia fell how much? What was the decline? It was January 27th and it looks like 17%.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- ai investing
- stock valuations
- bull market outlook
- big tobacco
- smokefree profits
Companies and tickers mentioned
- PM
- Philip Morris
Watch the episode
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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