December 9, 2024 • 9 mins
In this episode of Paramount Wealth Perspectives, host Chris Coyle and Chief Investment Officer Scott Tremlett dive into the latest developments shaping global markets. From Big Tech’s shifting dynamics and the S&P 500’s rising concentration to mixed economic signals and a highly anticipated Federal Reserve rate cut, this episode unpacks the key events driving market sentiment.
Scott shares insights on last week’s economic data, including strong payroll numbers, improving manufacturing activity, and concerns over weakening participation rates. They also discuss final third-quarter earnings trends, expectations for 2025, and whether market forecasts are overly optimistic.
Looking ahead, Chris and Scott highlight upcoming inflation reports, central bank rate decisions, and global developments in Europe, China, and India that could influence markets this week. Stay informed, stay ahead, and join us as we break down the numbers and trends shaping the financial landscape!
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Chris Coyle (00:00):
Intro song game on.
Hello, everyone.
Welcome to paramount wealthperspectives.
Your go-to podcast for thelatest updates on global markets
and current economic events.
(00:21):
This is your host, Chris Coyle.
Each week we strive to bring youexpert analysis on market
trends, economic shifts.
And key financial developmentsfrom around the world.
Whether you're an investorbusiness leader.
Or simply curious about theglobal economy.
Our podcast is here to keep youinformed and ahead of the curve.
(00:41):
Now let's dive into the marketsand explore what shaping the
world of finance today.
Here with us today.
We have Scott Tremlett chiefinvestment officer and managing
partner at paramount associates,wealth management.
Scott.
Looking back to last week.
What are some major events youwould like to highlight?
Thank you, Chris.
Last week stocks were mixed.
(01:03):
With the NASDAQ as the bestperforming index.
Due to big tech leading the way.
There has been a lot of recentchatter about the broadening of
the market, but last week was areversion back to the largest
companies leading the way.
The cap weighted S and P 500.
Cap weighted means that thelarger the company, the more
(01:23):
accounts beat the equalweighted.
Equal weighted means that everycompany has the same weight
regardless of size.
By over two and a quarterpercent for the week.
This was helped in part by Mettaas the odds that Tik TOK is
banned in the U S before mayraised at 59%, according to poly
(01:43):
market.
Sorry, tick talkers.
Back to the two and a quarterpercent out-performance of the
cap weighted index.
This was the biggestoutperformance of the cap way to
index since July.
Bank of America also noted lastweek that the concentration of
the S and P 500.
Continues to push higher.
And now concentration sits wellabove the peak nineties tech
(02:05):
bubble levels.
UBS noted last week, theybelieve the market sentiment
reflects cautious optimism.
And not complete euphoria.
Noting the big techunder-performance since July.
However city group stated thatfuture positioning is completely
one-sided.
And Goldman Sachs.
Noted that us equities and totalhave seen the biggest inflows on
(02:29):
a three-month basis since 2021.
Wow.
Scott.
It's fascinating to see how muchthe market's concentration in
big tech has surpassed.
Even the nineties tech bubblelevels.
Do you think this reliance on afew dominant names poses a risk
or is it just a sign of theirgrowing influence?
Chris.
I personally, to me, theconcentration in the big tech
(02:50):
names is one of the biggestrisks heading into 2025.
I haven't been alone either.
As it seems that the flows intous stocks is not going to these
names.
For the six week period endingDecember 4th, big tech had his
largest six week outflow.
Of nearly$1.5 billion.
(03:11):
So that means that the biginflows I spoke of earlier are
going to other marketparticipants.
Also earnings growth for theseso-called magnificent seven
stocks are expected to slow.
Slow from 34% this year.
To 18% next year.
And if you take the video out ofthat calculation, That 18%
(03:32):
earnings growth number drops to3% expected for next year.
Lastly big tech is expensive at41 times price to earnings
multiples.
Above the 28 times for theentire market as of today.
That is a huge shift.
Scott seeing the largestoutflows from big tech in weeks,
(03:53):
wall valuations and slowinggrowth.
Raise questions about theirsustainability.
Shifting gears.
What happened with the federalreserve last week?
Chris.
We did hear some mixed signalsfrom the fed last week, but
before I get into that, I shouldset the stage on recent economic
reports.
We have seen.
First we heard of someresilience on the consumer with
(04:15):
positive spending commentaryfrom visa and MasterCard.
Along with some positiveretailer earnings from Lulu
lemon and Kroger.
Furthermore, maybe the biggesteconomic highlight of the week
came from the U S Novemberpayrolls.
That came in well aboveforecasts.
October jolts or job openingsalso came in above expectations.
(04:37):
November ism manufacturingincrease at its highest level
since April.
And it's best month over monthimprovement.
Since August of 2023.
I have to say, Scott, all ofthose reports sound very
positive.
Does that mean the fed is notgoing to cut rates next week?
Good question, Chris.
I have not yet given the fullpicture.
(04:59):
I spoke of manufacturing,picking up.
Yet the ism services numberdropped significantly for the
month of November.
Dropping to the lowest level inthree months.
There was also some concern onthe payroll report as the
participation rate seems to beweakening.
We saw the actual unemploymentrate tick up.
And the six month averagepayrolls trend fell to a cycle
(05:22):
low.
Along those lines.
And from what I previouslymentioned, Fed speak was mixed.
Fed chair.
Powell said that the economy isin notably good shape.
And that the fed can be morecautious as it brings rates down
to a neutral level.
Although the fed governor Wallerhad previously stated that he is
(05:42):
leaning towards a December rate.
Cut.
Now the odds of a 25 basis pointcut next week.
Are over 90%.
From approximately 65%.
The prior week.
Thanks for that.
Scott, it's interesting to seehow mixed economic data and
shifting fed rhetoric areshaping market expectations for
(06:03):
a near certain rate.
Cut next week.
So what has happening in theworld of earnings this week?
We have a few names reportingthis week risk, but earning
season is pretty much all, butover.
This week, we do have Oracle,Adobe Broadcom and Costco.
Looks like the final thirdquarter earnings growth for the
S and P 500 will come in atnearly 6%.
(06:26):
Beating expectations.
However, the trends are stillbelow five-year and 10-year
averages.
Let me interject quickly here,Scott, and ask you a question.
With earnings expectations,slowing and falling below the
five and 10-year averages.
What are your expectations forearnings next year?
Another good question, Chris,I'm reading that median
(06:49):
estimates for 2025 S and P 500earnings are to come in net$275.
For those who do not know how tointerpret that number, what you
do is multiply that number withthe price to earnings ratio, to
calculate the expected price ofthe index.
As an example.
Let's take the average price toearnings ratio of 28.
(07:11):
A little less than where we arenow.
And multiply that with the$275earnings number.
And you get an S and P 500 over7,500.
And nearly a gain of 25% nextyear.
Personally, I think that is afar cry.
But it could be wrong.
Most analysts are predicting.
Markets will be from six and ahalf to 10% higher than where we
(07:34):
are now.
That would mean that either theprice to earnings ratio would
need to drop.
Or that the earningsexpectations themselves.
Are just too high.
Historically analystsoverestimate the final earnings
number by approximately 6.25%.
Putting all of those numberstogether.
I find that the expectations fornext year.
(07:54):
Our little frothy.
Personally.
I see growth.
Slowing growth, but growth.
I would be happy with any numberabove 6% earnings growth for
2025.
That's interesting to hear howyou have pieced together, your
own expectations, Scott.
And I agree with you about themarket expectations, being a bit
(08:15):
frothy.
Lastly, what reports are youmost interested in this week?
Chris this week, we have bothconsumer and producer inflation
in the United States.
The European central bank isexpected to cut their rates by a
quarter point this week.
And Australia.
Uh, Canada and Brazil.
Also announced on rates.
(08:36):
India reports, consumerinflation that is expected to
have eased in November.
China's top leaders begin intheir annual closed door meeting
on Wednesday.
After they announced over theweekend sweeping policies to
help bolster the propertymarket.
Well, we will certainly have tokeep on the lookout for those
reports and trends.
And I'm sure we will have plentyto discuss next Monday.
(08:58):
For now stay informed.
Stay ahead.
And join us next week for morekey updates shaping the global
economy.
Thank you for tuning intoparamount wealth perspectives.
We hope you all have a fantasticweek.
Intro song game on.
Hello, everyone.
Welcome to paramount wealthperspectives.
Your go-to podcast for thelatest updates on global markets
and current economic events.
(00:21):
This is your host, Chris Coyle.
Each week we strive to bring youexpert analysis on market
trends, economic shifts.
And key financial developmentsfrom around the world.
Whether you're an investorbusiness leader.
Or simply curious about theglobal economy.
Our podcast is here to keep youinformed and ahead of the curve.
(00:41):
Now let's dive into the marketsand explore what shaping the
world of finance today.
Here with us today.
We have Scott Tremlett chiefinvestment officer and managing
partner at paramount associates,wealth management.
Scott.
Looking back to last week.
What are some major events youwould like to highlight?
Thank you, Chris.
Last week stocks were mixed.
(01:03):
With the NASDAQ as the bestperforming index.
Due to big tech leading the way.
There has been a lot of recentchatter about the broadening of
the market, but last week was areversion back to the largest
companies leading the way.
The cap weighted S and P 500.
Cap weighted means that thelarger the company, the more
(01:23):
accounts beat the equalweighted.
Equal weighted means that everycompany has the same weight
regardless of size.
By over two and a quarterpercent for the week.
This was helped in part by Mettaas the odds that Tik TOK is
banned in the U S before mayraised at 59%, according to poly
(01:43):
market.
Sorry, tick talkers.
Back to the two and a quarterpercent out-performance of the
cap weighted index.
This was the biggestoutperformance of the cap way to
index since July.
Bank of America also noted lastweek that the concentration of
the S and P 500.
Continues to push higher.
And now concentration sits wellabove the peak nineties tech
(02:05):
bubble levels.
UBS noted last week, theybelieve the market sentiment
reflects cautious optimism.
And not complete euphoria.
Noting the big techunder-performance since July.
However city group stated thatfuture positioning is completely
one-sided.
And Goldman Sachs.
Noted that us equities and totalhave seen the biggest inflows on
(02:29):
a three-month basis since 2021.
Wow.
Scott.
It's fascinating to see how muchthe market's concentration in
big tech has surpassed.
Even the nineties tech bubblelevels.
Do you think this reliance on afew dominant names poses a risk
or is it just a sign of theirgrowing influence?
Chris.
I personally, to me, theconcentration in the big tech
(02:50):
names is one of the biggestrisks heading into 2025.
I haven't been alone either.
As it seems that the flows intous stocks is not going to these
names.
For the six week period endingDecember 4th, big tech had his
largest six week outflow.
Of nearly$1.5 billion.
(03:11):
So that means that the biginflows I spoke of earlier are
going to other marketparticipants.
Also earnings growth for theseso-called magnificent seven
stocks are expected to slow.
Slow from 34% this year.
To 18% next year.
And if you take the video out ofthat calculation, That 18%
(03:32):
earnings growth number drops to3% expected for next year.
Lastly big tech is expensive at41 times price to earnings
multiples.
Above the 28 times for theentire market as of today.
That is a huge shift.
Scott seeing the largestoutflows from big tech in weeks,
(03:53):
wall valuations and slowinggrowth.
Raise questions about theirsustainability.
Shifting gears.
What happened with the federalreserve last week?
Chris.
We did hear some mixed signalsfrom the fed last week, but
before I get into that, I shouldset the stage on recent economic
reports.
We have seen.
First we heard of someresilience on the consumer with
(04:15):
positive spending commentaryfrom visa and MasterCard.
Along with some positiveretailer earnings from Lulu
lemon and Kroger.
Furthermore, maybe the biggesteconomic highlight of the week
came from the U S Novemberpayrolls.
That came in well aboveforecasts.
October jolts or job openingsalso came in above expectations.
(04:37):
November ism manufacturingincrease at its highest level
since April.
And it's best month over monthimprovement.
Since August of 2023.
I have to say, Scott, all ofthose reports sound very
positive.
Does that mean the fed is notgoing to cut rates next week?
Good question, Chris.
I have not yet given the fullpicture.
(04:59):
I spoke of manufacturing,picking up.
Yet the ism services numberdropped significantly for the
month of November.
Dropping to the lowest level inthree months.
There was also some concern onthe payroll report as the
participation rate seems to beweakening.
We saw the actual unemploymentrate tick up.
And the six month averagepayrolls trend fell to a cycle
(05:22):
low.
Along those lines.
And from what I previouslymentioned, Fed speak was mixed.
Fed chair.
Powell said that the economy isin notably good shape.
And that the fed can be morecautious as it brings rates down
to a neutral level.
Although the fed governor Wallerhad previously stated that he is
(05:42):
leaning towards a December rate.
Cut.
Now the odds of a 25 basis pointcut next week.
Are over 90%.
From approximately 65%.
The prior week.
Thanks for that.
Scott, it's interesting to seehow mixed economic data and
shifting fed rhetoric areshaping market expectations for
(06:03):
a near certain rate.
Cut next week.
So what has happening in theworld of earnings this week?
We have a few names reportingthis week risk, but earning
season is pretty much all, butover.
This week, we do have Oracle,Adobe Broadcom and Costco.
Looks like the final thirdquarter earnings growth for the
S and P 500 will come in atnearly 6%.
(06:26):
Beating expectations.
However, the trends are stillbelow five-year and 10-year
averages.
Let me interject quickly here,Scott, and ask you a question.
With earnings expectations,slowing and falling below the
five and 10-year averages.
What are your expectations forearnings next year?
Another good question, Chris,I'm reading that median
(06:49):
estimates for 2025 S and P 500earnings are to come in net$275.
For those who do not know how tointerpret that number, what you
do is multiply that number withthe price to earnings ratio, to
calculate the expected price ofthe index.
As an example.
Let's take the average price toearnings ratio of 28.
(07:11):
A little less than where we arenow.
And multiply that with the$275earnings number.
And you get an S and P 500 over7,500.
And nearly a gain of 25% nextyear.
Personally, I think that is afar cry.
But it could be wrong.
Most analysts are predicting.
Markets will be from six and ahalf to 10% higher than where we
(07:34):
are now.
That would mean that either theprice to earnings ratio would
need to drop.
Or that the earningsexpectations themselves.
Are just too high.
Historically analystsoverestimate the final earnings
number by approximately 6.25%.
Putting all of those numberstogether.
I find that the expectations fornext year.
(07:54):
Our little frothy.
Personally.
I see growth.
Slowing growth, but growth.
I would be happy with any numberabove 6% earnings growth for
2025.
That's interesting to hear howyou have pieced together, your
own expectations, Scott.
And I agree with you about themarket expectations, being a bit
(08:15):
frothy.
Lastly, what reports are youmost interested in this week?
Chris this week, we have bothconsumer and producer inflation
in the United States.
The European central bank isexpected to cut their rates by a
quarter point this week.
And Australia.
Uh, Canada and Brazil.
Also announced on rates.
(08:36):
India reports, consumerinflation that is expected to
have eased in November.
China's top leaders begin intheir annual closed door meeting
on Wednesday.
After they announced over theweekend sweeping policies to
help bolster the propertymarket.
Well, we will certainly have tokeep on the lookout for those
reports and trends.
And I'm sure we will have plentyto discuss next Monday.
(08:58):
For now stay informed.
Stay ahead.
And join us next week for morekey updates shaping the global
economy.
Thank you for tuning intoparamount wealth perspectives.
We hope you all have a fantasticweek.
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