Episode summary
Tech Propels Stocks Higher
Bloomberg Surveillance
· · Guests: Lori Calvasina, Christopher Waller, John Williams, James Egelhof, Powell
Summary
US stocks were supported by a softer Fed outlook, but the guest argued that the bigger story is still the market’s need to work through volatility and valuation pressure before the next leg higher. She said the recent pullback was overdue and welcomed the fact that the market finally crossed a 5% decline, because that may clear out some of the overhang heading into 2026.
The guest said earnings remain the key support for equities, with a healthy profit backdrop and roughly 10% earnings growth in next year’s consensus. Even so, she thinks the current Fed cycle is only a modest easing move, not the start of something dramatic, so rate cuts alone are unlikely to be enough. She described the market as reacting more to the combination of earnings, policy and sentiment than to any single catalyst.
A major concern is that earnings sentiment is not as strong as it was earlier in the year. She said the rate of upward revisions peaked in August and she wants to see whether analysts can push that back up as companies start unveiling 2026 outlooks in January and February. Until then, she thinks investors are dealing with a still-unsettled market that is benefiting from earnings strength, but not yet from fully improved expectations.
Key takeaways
- The guest thinks the market was overdue for a 5% to 10% pullback and sees the recent decline as healthy.
- She said the earnings backdrop is still supportive, with consensus implying about 10% growth next year.
- The guest argued that expected Fed cuts are helpful but amount to only a modest easing cycle, not a major new tailwind.
- She said earnings sentiment matters as much as earnings themselves, and upward revisions peaked in August.
- The guest expects January and February to be pivotal as companies begin giving 2026 guidance.
Notable quotes
“we think stocks can do well next year, but we do think we have some stuff to work through to get there”
“we have thought for quite some time the market was way overdue for kind of a 5 to 10% garden variety type pullback”
“I do think earnings growth is extremely important. I think that's what's been powering markets”
“I think January is going to be sort of a pivotal time, to be honest, time when companies really kind of unveil the 2026 outlooks”
“The reality, though, is that earnings sentiment matters just as much as the earnings themselves”
How the episode opens
I think as we you know, we are sitting here this morning, the futures are up a little bit. We had a good Friday. We had a very short range, is had a good Friday.
He did. He did. And look, I mean, anecdotally, it sounds like there are a fair number of people who wanted to take some time off this week that aren't getting it.
So I think people are at a minimum are going to be cranky when they get back after December. But I think the reality is that there have been a lot of things causing stress in this market, maybe not any single one of them, enormous stress, but it all kind of adds up. I think the Fed was one of those, frankly, because we had seen expectations for cuts taken out.
And when you've seen that happen in recent years, you know, kind of going back to late 2022, that tends to trip up the stock market. And when we put cuts back in, it tends to help the stock market. So I have no idea what they're going to say.
I know that our VIX rate strategist has been in the December skip camp and then he thinks they resume next year. So my guess is the drama is not yet over. But we also know that valuations have been a problem since August and we've seen, you know, fly to valuations sort of bumping up against ceilings.
We're going to cycle into new earnings at some point. But right now, companies don't want to talk a whole lot about 2026. So I think it's I don't think they want to talk about September.
I don't think so either. I mean, I will say, you know, the consumer companies are coming up.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- tech-driven stock rally
- fed rate cut odds
- us treasury yields
- bitcoin selloff
- ukraine-russia peace deal outlook
Companies and tickers mentioned
- GOOGL
- GOOG
- BABA
- Alphabet Inc.
- Alibaba Group Holding Ltd.
- BNP Paribas
- RBC Capital Markets
Watch the episode
Watch “Tech Propels Stocks Higher” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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