Episode summary
US Stocks Hold Steady as Oil Prices Rise
Bloomberg Surveillance
· · Guests: Steve Auth
Summary
Steve Auth said Federated Hermes remains constructive on U.S. equities into 2026, with a two-year S&P 500 target of 8600 and a 7800 target for next year. He argued that earnings growth, stronger nominal GDP, productivity gains and next year’s stimulus could support another upside surprise, especially if the labor market stays relatively stable.
He said the market should broaden beyond the dominant AI and mega-cap trade. While staying modestly overweight the AI winners, he expects rate cuts to help housing, regional banks and other interest-rate-sensitive parts of the economy. That broadening, in his view, would also support emerging markets and some Latin American exposure, while Japan remains interesting because of ongoing restructuring and a recovery in real estate.
On bubble worries, Auth said the current setup does not yet look like the kind of speculative excess that usually defines major market tops. He pointed to a lack of excess liquidity, valuations that are not universally extreme, and investment levels that remain below prior industrial-revolution peaks, saying the market is still early in the cycle rather than late.
Key takeaways
- Steve Auth sees the S&P 500 at 7800 next year and 8600 in two years, with the case driven by earnings growth and nominal GDP.
- He expects Fed rate cuts to lift housing, regional banks and other rate-sensitive sectors as the market broadens beyond AI leaders.
- Auth said he is not underweight tech, but wants to trade it as relative value rather than expect it to keep leading the market.
- He called Europe “okay” but still less compelling than the U.S., while seeing Japan, emerging markets and Latin America as more interesting outside the U.S.
- Auth said the market does not yet meet his definition of a bubble because liquidity, regulation and valuation conditions are not extreme enough.
Notable quotes
“We've got a two year target of 8600. We've got 7800 for next year and really driven by earnings growth at this stage”
“The Fed cutting helps the interest rate sensitive parts of the economy that have been suffering”
“we are playing this broadening out trade, but not not going underweight or avoiding the drivers of the same, which are the tech stocks”
“we're in a secular bull market here. This is only the third one in the last hundred years”
“we think generally where early before you start calling for a bubble here”
How the episode opens
We think it's pretty good. We've got a two year target of 8600. We've got 7800 for next year and really driven by earnings growth at this stage.
We've got earnings that yeah, 390 out three years and you know stocks eat nominal GDP growth. Nominal GDP growth looks really good to us. You've got the revolution driving earnings.
You've got enormous productivity. We've got GDP next year up 3%. I think the consensus is to we've been on the high side all along.
We've been more right than wrong on that. But you know, you've got a lot of stimulus coming next year that we think could get you a surprise on the upside. And with the job market relatively stable, that means a big boost in productivity, which is a big boost in earnings.
So, yeah, I think the set up looks pretty good for aspects 8600. I'm all in is Dow 60,000 here at 48 now never done that. No I've never.
That's a first again. What sectors kind of screen well for you guys Steve because we've had tech has been such a star for so long and then the story over the last two or three years has been the star sector. Greenwald Right.
So what we're trying to do is we don't want to be out of this air trade because it's the driver, but we're just modestly overweight, those stocks and again, playing relative value within there. And we think the big picture next year is finally this broadening out happens. The Fed cutting helps the interest rate sensitive parts of the economy that have been suffering.
So that starts to lift housing, regional banks, emerging markets have actually had a good year this year off a very low levels. We think that's a really interesting place.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- ai market outlook
- cpi inflation data
- federal reserve rate cuts
- treasury yields
- oil prices and geopolitics
Companies and tickers mentioned
- FHI
- BCS
- BMO
- MU
- Federated Hermes
- Barclays Plc
- BMO Capital Markets
- Micron Technology Inc.
Watch the episode
Watch “US Stocks Hold Steady as Oil Prices Rise” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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