Episode summary
US Stocks Hold at Record Highs as Bond Yields Fall
Bloomberg Surveillance
· · Guests: Cameron Dawson, Adam Crisafulli, Florian Ielpo
Summary
The guest argues that the early-year rotation into banks, industrials, and industrial commodities looks more like a pro-cyclical trade than proof of a true global reacceleration. He says the move began in November, after growth stocks had run to a very rich valuation premium, and that the key question is whether incoming data will actually justify the optimism embedded in markets.
He is also wary of the consensus setup for 2026. The host notes that strategist outlooks are almost universally bullish, and the guest says that makes him nervous because no strategist is expecting a down year. Still, he thinks markets can grind higher, with the bull market now in its fourth year and history suggesting positive returns are still possible about half the time.
On earnings, he says 2026 expectations call for about 12% to 13% growth and roughly $310 a share for S&P earnings, but that forecast already assumes meaningful margin expansion even as consensus GDP growth appears set to slow. In fixed income, he says lower starting yields and tight spreads leave less return potential, so his firm is trimming some bond exposure and reallocating elsewhere.
Key takeaways
- The guest says the current leadership in banks, industrials, and commodities looks cyclical, but it may not be backed by the data yet.
- He says the market rotation started in November after growth stocks reached an 85% premium to value in October.
- The guest says 2026 earnings expectations of 12% to 13% growth and $310 a share may already be aggressive because margin expansion is baked in.
- He says institutional positioning looks neutral, while retail investors are max overweight and margin balances have surged.
- The guest says fixed income has less upside from here because yields are lower and high-yield and investment-grade spreads are already tight.
Notable quotes
“the character of this rotation has been one that's been very pro cyclical”
“it appears that this pro-cyclical rotation is coming with a narrative of global re acceleration, which I think remains to be seen if the data actually supports that”
“There's not a single strategist who is expecting a down year in 2026”
“we think that we'll have volatility along the way, but that there's still room for the markets to press higher through the end of the year”
“you're not getting as much of a return as you were at the beginning of the year given yields are lower”
How the episode opens
I think we have to appreciate it. At the start of the year, we typically do see some of this last shall be first kind of rotation where the names that had lagged start to lead, at least for a short period of time. What's interesting is that actually started back in November.
The rotation really kicked off in November because that's when we saw the blow off top in some growth shares. They traded to an 85% premium to value at the peak in October. So there was a lot of room for valuations to come in.
And I think the character of this rotation has been one that's been very pro cyclical. If you look at what's leading, it's things like banks and you have industrials doing better, industrial commodities doing better. So it appears that this pro-cyclical rotation is coming with a narrative of global re acceleration, which I think remains to be seen if the data actually supports that.
Well, I'm thinking about my inbox over the last six weeks from the South Side, and there are 26 outlooks, almost universally positive, bullish, 10%, 12%, 15%. Expectations for S&P stock performance in 2026. That makes me nervous.
Does it make you nervous at all? There's not a single strategist who is expecting a down year in 2026. You know, we are going to make some news this as.
Look, we think that we'll have volatility along the way, but that there's still room for the markets to press higher through the end of the year. But here, the key point is that in the fourth year of the bull market, we've had 23 bull markets that have been three years over the last 50 years, 56 years or so. And the conclusion is about 50% of the time they're able to get to that fourth year of positive returns.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- bond yields
- federal reserve rate cuts
- equity record highs
- labor market data
- geopolitical risk
Companies and tickers mentioned
- VLO
- DLTR
- AAPL
- ADP
- NewEdge Wealth
- Valero Energy Corp.
- Dollar Tree Inc.
- Apple Inc.
- Automatic Data Processing Inc.
- Lombard Odier
Watch the episode
Watch “US Stocks Hold at Record Highs as Bond Yields Fall” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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