Can Stocks go Higher?

Episode Transcript

(00:00):
This is straight talk from the housewith certified financial planner Tracy Aton right here
on thirteen ten WI b A.It's No Tracy and the team at t
Anton Investment House. Of course,Tanton Investment House a fee only fiduciary with
offices in Middleton. Place to getto know them right on the website Tanton
Investment House dot com. That's tA N t O N Investment House dot

(00:21):
com. Not only can you getNo Tracy in the team, you can
also listen back to this previous showspodcast. Also, if you're looking for
money management or portfolio management, youcan set up an appointment at a time
and a date that's convenience to you. We got to shed on over to
Tanton Investment House dot com or picka phone call the office right in Middleton
six oh eight five zero one fifteenforty nine. That's six oh eight five
zero one fifteen four nine. Andjoining us this morning is certified financial planner

(00:43):
Tracy Andton. Tracy, how youdoing this week? I'm doing great,
Seohn, how about you? I'mdoing well. We're gonna talk about the
fishing report. One of these things. Thanks for another, Yes, one
of those those things. If youdo see a fisherman, folks ask them
how the how the fishing is.It's always good for your mind, spirit,
and soul, and it's a goodconversation. So yeah, we're going

(01:06):
to be talking. You've got aninteresting conversation this week, Tracy. What
are we going to be talking abouttoday, Well, the big tech companies
have been dominating discussions lately, Sean, so people are raising questions about how
much further the stock market could reallyclimb. So today what we're going to
do is discuss the article by theCapitol Group called five Reasons why Equities Could

(01:26):
Defy the Odds, and it's writtenby three equity investment directors. There and
again, according to the Capitol Group, which is part of the American Funds,
even though stocks have been on therise recently, they do not believe
valuations are overly stretch. So whyis that. Well, one of the
reasons is global corporate earnings have bouncedback from a low point and are expected

(01:49):
to keep getting better. Plus withinflation leveling off and interest rates hopefully dropping,
they believe equities are quote unquote ina sweet spot. So of course
they say, you know, they'remight be some volatility do to earnings reports,
or elections, or changes in interestrates or world events. But in
their opinion, stocks are in apretty good spot. So I just wanted

(02:12):
to focus on why do they believethat? And I think there they do
have some good reasons why, soI wanted to cover that well, this
should be absolutely fascinating. Of course, as we talked this week with sortified
financial planner Tracyton, I mentioned thewebsite earlier. If you haven't had a
chance to check it out, definitelyhad on over their Tanton Investment House dot
com. I tellhe number six oheight five zero one, fifteen forty nine.

(02:35):
That's six eight five zero one,fifteen forty nine. And Tracy,
I know one of the very importantthings to you, and one of the
things I love and look forward towhen we talk is getting some of the
inside information, some of that data. And let's talk about some of those
those data points, some of thosekey factors that are that are driving stocks
forward. Well, sean earnings growthgrowth will be the driver, so that

(02:55):
continues to push stocks in a positivedirection. So Vidio took home the gold
with an impressive earnings beat, boostingits market value by a whopping two hundred
and seventy seven billion, according onFebruary twenty second, and Meta wasn't far
behind, benefiting from the cost cuttingmeasures initiated by a couple of years back,
and adding nearly two hundred billion inmarket value on February second, sweetening

(03:19):
the deal with a dividend announcement.So overall, though, the S and
P five hundred information technology sector sawa robust twenty two point seven percent year
over year growth and blended earnings perfact Set Data. SO Capital Groups chief
investment officer Martin Romo recently pointed outthat while tech company evaluations are high,

(03:42):
in his opinion, they're not excessivelystretched. Now some people do think they
are, but according to him,no, so. Romo highlighted a broader
range of tech firms, including theMagnificent Seven and Broadcom, emphasizing their continued
influence on markets and economies. Henoted that many of these companies are growing
in a discipline manner and achieving operationalefficiency like never before. That's fascinating.

(04:04):
As we as we learn some ofthis stuff, I think and I understand
how news industries and other things tendto work. There is, you know,
oftentimes an inherent pessimism on things,and they start looking at some of
the data and you look at someof the track roads, they're going,
wait a second, here, there'splenty of plenty of opportunity for stocks to
go higher and tracing when we lookat why and I think, Sean,

(04:25):
it's all about putting things in perspective, right, So oftentimes, you know,
we'll focus on one area and youknow, like here it's the Magnificent
seven and the tech stocks, butthere is a lot more stocks that are
out there, so that's where youknow, the focus should be really on,
you know, the whole broad marketinstead of and even the bond market

(04:46):
has opportunities, So it's not justthe technology that we're you know, stocks
are high, but you know,what are we looking at for? Like
the S and P five hundred earningsin twenty twenty four, that's what we
should be asking ourselves and case corporateearnings are expected to continue to rebound.
In fact, companies in the Sand P five hundred grew in earnings by
nine point eight percent in the lastquarter of twenty twenty three, and the

(05:10):
estimates of twenty twenty four is thatearnings will continue to recover in fact,
sixty six percent of the SMP fivehundred companies beat earnings in the fourth quarter
of twenty twenty three, and sixtythree percent reported higher revenues than analysts were
expecting. So the estimates of theSMP five hundred anticipate a gain of over
eleven percent in twenty twenty twenty twentyfour, and that's a lot given that

(05:34):
in twenty twenty three it was zeropoint eight percent. So that's basically looking
at you know, earnings are improvingand they're expected to do well in twenty
twenty four. So basically stocks followtypically follow earnings, and there's good news
that people are expecting. Here goodreasons to feel good and feel optimistic as

(05:57):
well. As we talk with certifiedfinancial planner Tracing Anton this morning right here
on thirteen ten, wib I mentionedthe website. It's no Tracy in the
team, of course, you canlearn more about t Anton Investment House on
the website Tanton Investmenthouse dot com.You can also listen back to the podcast
that's spelled t A N t ON Investment House dot com. If you're
looking for money management or portfolio management, Tracing the team they'd love to get

(06:20):
to know you. They'd love totalk with you. All I got to
do is schedule at appointment right fromthe website at a time and a date
that's convenient to you. Again thewebsite Tanton Investment House dot com, or
as always, you can just pickup phone give them a call six oh
eight five zero one fifteen forty nine. That's six oh eight five zero one
fifteen forty nine. That's for theoffice right in Middleton. The website,
though, is super convenient to scheduleat appointment right at Tanton Investment House dot

(06:44):
com. So, Tracy, whatare what is the current outlook for US
equity valuations? What are we seeingthere? Yeah? So, despite again
the fact that stocks have gone up, according to Capitla Group, equity valuations
don't appear stretched, and so wheninitially examining certain SMP five hundred sectors,
their valuations might seem a bit high, for example, the tech area.

(07:06):
However, taking a closer look atthe price to earnings ratios over a ten
year period suggests that there could stillbe room for growth, and whether stocks
keep rising will heavily again depend onearnings growth. Unlike the past decade where
low interest rates and expanding multiples werethe main driver, so again it all

(07:27):
depends on the earnings of these companies. Also, considering the expectations for growth,
US equity valuations seem reasonable, especiallywith recent strong earnings, so the
US economic environment also seems supportive,leaning towards a gentle economic slowdown rather than
a recession, despite potentially volatility dueto concerns about interest rates and inflation.

(07:50):
As long as the companies keep meetingor beating these earnings expectations and the job
market remains robust, US stocks shouldmain steady, according to the Capitol Group,
and again, companies with clear plansfor earnings, growth, pricing,
flexibility, and a solid market positionshould be able to navigate through any challenges

(08:11):
that arise. That is interesting andit's it's to me, Tracy, And
I don't know if this grabs youthe same way grabs me. But every
time we're expecting some of these jobnumbers to come out, I'm always I'm
thinking, Okay, sooner or later, this has got a cool off.
Things have got to slow down.And it just it's just like every time
they come out, you're like,oh goodness, we added where are these
where are these new workers? Andwhere this is coming from but it's just

(08:33):
amazing stuff. As we talk thismorning, you're so right, Sean,
You're so right. Well, thankyou. Not often do people say that
to you, No, not atall. I will think that, especially
coming from you talking this week withcertified financial planner Tracy Andton, you might
be wondering that how this is affectingglobal markets. We're going to get the
details from Tracy in just a moment. That's what we call in the business,

(08:54):
a cliffhanger. Will talk with Tracyabout that coming up next. In
the meantime, even't been to thewebsite tea Anton Investment Heal dot com,
Now is the time to head onover there. That's t A N t
O N Investment House dot com.Donaldly, can you listen back to this
in previous shows podcast? You canalso get to know Tracy and the team
at Tanton Investment House. And ifyou scroll down a little bit, you'll
see Tracy's smiling face. Little boxpops up and says, let's chat.

(09:16):
And from there you can schedule anappointment at a time and a date that's
convenient to you. If you're lookingfor money management or portfolio management. Tracy
would love to work with you.She'd love to get to know you again.
First step head on over Tanton InvestmentHouse dot com, or of course
you can always pick up phone givea call at the office right in Middleton
six oh eight five zero one,fifteen forty nine. That's six soh eight
five zero one fifteen forty nine.We'll talk with Tracy about those reports and

(09:41):
of course that effect that it's havingon global markets, with the details from
Tracy. Next, Straight Talk fromthe House continues right here on thirteen ten
WUIB. This is straight Talk fromthe House with certified financial planner Tracyanton right
here thirteen ten wui b A talkingwith Tracey this week about stocks and can
they go higher? If you missedany part of today's program, or you
want to listen back or share theprogram, or listen back to previous shows,

(10:03):
just head on over to Tanton Investmenthousedot com. That's t A N
t O N Investment House dot com. From there, of course you can
listen back to the podcast. Youcan also get to know Tracy in the
team as well as schedule and appointmentat a time and a date that's convenient
to you. Again, the websiteTanton Investmenthouse dot com or pick a phone
call the office right in Middleton sixeight five zero one fifteen forty nine.

(10:24):
That's six oh eight five zero onefifteen forty nine. Kind of left that
last segment with a cliffhanger, Tracy, some great news and some really interesting
expectations for growth. Let's talk thatabout kind of how that affects the global
markets, right, So, ifyou're looking at the big picture, Sean,
when considering the twelve month forward priceto earnings ratios, most industries within

(10:48):
the like All Country World Index,which is the ACWI, seem to offer
a tract of pricing. According toCapitol Group, many are either at or
slightly above their ten year forward priceto earnings racial particularly as central banks worldwide
are expected to ease their monetary policy, potentially leading to a decline in longer

(11:09):
term interest rates. So again,it's just you know, they give you
these stats, and you know whatdo all these stats mean? Well,
I guess it is important to notethat the significant surge in the US stock
prices over the past decade has pushedup the waiting of the US companies in
the ACWI index to a considerable sixtythree percent and this lifts both prices and

(11:31):
valuations for the index. But reallythe point here is outside of the US
stocks are relatively more reasonably priced,with companies boasting strong franchises and global brands
offer trading at a discount compared totheir US counterparts. So basically, stocks
are less expensive internationally for very similartype companies. For example, many European

(11:54):
and Asian companies have established solid marketshare in sectors such as semiconductor, aerospace,
pharmaceuticals, and luxury goods, andthe anticipation of lower interest rates in
various non US markets could further againsupport global stocks. So in the US,
the upward trend and share prices hasalso led to an increase in valuations.

(12:18):
So you know, what's the pointhere. It's basically look globally.
You know, if you don't haveglobal stocks, and I like using global
funds versus just an international fund becausethe fund manager gets to pick and choose
how much is in US versus international, and that makes you know, managing
it a little bit easier and pickinga little bit easier. But if you

(12:39):
don't have any international stocks, Iwould consider making sure you do, because
the stocks are much less expensive.You know, outside of the US,
because the US has had such agreat run. But these other areas,
you know, there's there are companiesthat are leaders in this area that lie
outside the US. Did sing tohear about some of those opportunities and kind
of but what folks are keying inon and of course the advancements being made

(13:03):
over seeds and kind of and playingthat. You know again that you mentioned
some really quality companies out there aswell as talk about the Asian and European
companies as well as we talk withcertified financial planner Tracy Anton right here on
thirteen ten. WIBA have mentioned thewebsite recently. I don't know what I'm
doing. You should head out andcheck it out right now. Tanton investment

(13:24):
House dot com. That's t AN t O N investment House dot com.
It's a priority on this show tocheck out that website. Or of
course you're looking for money management,I know, I try. You're looking
for money management or portfolio management.You can schedule an appointment right online or
pick up the phone call the officeright in Middleton six oh eight five zero
one fifteen forty nine. That's sixoh eight five zero one, fifteen forty

(13:46):
nine. We always talk about theMagnificent seven for darn good reason, Tracy,
what are some emerging areas of strengthbeyond the Magnificent seven. I think
that's a great question. So eventhough the Magnificent seven bost impressive returns in
twenty twenty three, their performance overa slightly longer period tells a different story.
Sean. So, from the beginningof twenty twenty two through twenty twenty

(14:09):
three, only one of these topcompanies ranked among the SMP five hundred's top
performers, due to significant setbacks thatthey had in twenty twenty two. So,
while some argue that the high valuationsof tech giants are justified by their
strong earnings and potential growth, obviouslyin AI artificial intelligence data shows that a

(14:30):
broader range of SMP five hundred companies, especially in energy, healthcare, and
industrials, delivered relatively robust returns.So again, as earnings growth rebound in
sectors beyond techs, we might witnessactually a shift in investor interest toward a
more diverse array of companies. AndI think that's already happening. The market
is broadening out so to mitigate therisk of overconcentration in portfolios strategies. Focusing

(14:56):
on again, where is your where'syour money invested? AID allocation might consider
reducing exposure to both technology firm technologysectors and US equities, seeking basically greater
diversification. Now I'm just going tostart this or you know, say hey,
you know I say this, Butthen it all depends on what percent

(15:16):
you have in these sectors. Andperhaps you have already diversified. Maybe you've
already pulled back in that area,or you already own value stocks, or
you already own international stocks. Thenperhaps you don't need to, you know,
worry so much about as at allocation. Maybe you've already done it,
So it just depends on the portfoliohave. But you know, if you
haven't yet, then you should lookat adding value stocks and international stocks just

(15:41):
because they're relatively less expensive. Andagain it's all based on earnings and if
the earnings of the company's relative tothe prices. You know, if you've
got high pees, some sometimes thatcan be too high and you can find
you can find true value in otherplaces. So I would just encourage you
to make sure you're portfolio folio iswell diversified. And that's something we always

(16:03):
say. But in particular in thisarea, when those seven stocks now make
up about thirty percent of the Sand P five hundred, you don't want
to be totally overconcentrated in just afew steps. I feel like if we
go back to the shows from thenineteen nineties, I'll have a tape somewhere
of you using the word diversified.Tracy. I mean, this is this
is trying. It's an important wayfor very good reason. It's an important

(16:29):
word. And when we talk withcertified financial planner Tracy Anton, it's important
to have have options and of coursetake a look at where all the opportunities
are. Tracy, love to talkwith you. All I got to do
is schedule that appointment right online Tantoninvestment House dot com. If you're looking
for money management, to portfolio managementor pick up phone giver, call the
office right in Middleton. Six oheight five zero one, fifteen forty nine.
That's six oh eight five zero one, fifteen forty nine. Let's talk

(16:52):
about some of the additional factors thatyou can contribute to the continuation of stock
performances through this year twenty twenty four. Tracy, Yeah, so this is
amazing. So companies in the sand P five hundred excluding financials are holding
cash levels that are near their tenyear highs. So this surplus cash could
drive various activities such as stock buybacks, mergers and acquisitions, or dividend payouts.

(17:18):
So you know, we've already seena surge and mergers and acquisition activity,
particularly among major players in the oiland pharmaceutical sectors. And again this
could contribute to long term earnings growth. So also companies are ramping up their
dividend payouts, further boosting total stockreturns. Notable examples include Meta and Salesforce

(17:40):
announcing their debut basically of dividends signallya commitment to discipline capital allocation. So
again, you know, when companiesare healthy like this and they have high
cash values and again ten year highsfor these companies excluding the financial sector,
that's pretty impressive. So that couldalso way up you know, stock prices
for twenty twenty four. You talkingcertified financial planner Tracy and Ton. Tracy

(18:06):
got a little over about a minuteand a half left in the program today,
and we think about cash flow,I mean, how else is cash
flow helping the markets? Well,looking ahead, you have capital expenditures are
expected to increase to meet the demandsof these technology companies, particularly you know,
for AI to work, they've gotto build data centers. And also

(18:29):
we're also you know, companies arereshoring their supply chains. So all of
this investment is anticipated to lead tosteady cash flow growth across various sectors.
And there's something called free cash flow, and basically one, you know,
corporate America is pretty in good shapewhen you look at this. So an
accounting analyst Dane Mott points out thatwhile free cash flow isn't flawless, he

(18:55):
says, it excludes miny activities,it still offers a solid gauge of corp
health, he said. So hehighlights that free cash flow numbers for non
financial SMP five five hundred companies intwenty twenty three were the highest numbers ever
recorded at one point five trillion,and they grew at a healthy year over
year growth of twelve point three percent. So I mean this, apparently,

(19:19):
this free cash flow ratio is abig deal, and right now it stands
at twenty six point four by theend of twenty twenty three, which is
less than the bubble that happened innineteen ninety nine, which was like the
ratio was like at fifty two.So I mean basically what they're saying,
you know, despite market you know, indices that are reaching recent highs,

(19:41):
the fundamentals and the macro economic backdrop, four equities remain strong. And while
economic and geopolitical events and domestic electionyear and all these uncertain days that might
cause more and more volatility. It'sobviously important to be you know, selective.
I know who you're using as investmentyou know, investment managers. But

(20:03):
the outlook is optimistic according to AmericanFunds. And I think this article does
a great job of saying, youknow, there's five reasons why equities could
move higher despite the adds. It'sgreat to hear. And by the way,
you heard the term M and Athat's mergers and acquisitions if I remember
correctly, right, Tracy, that'sright. You got to your test today.

(20:26):
I know. It's what a whata day it is, Tracy.
And of course, as we talkwith certified financial planner Tracy Anton, if
you want to start that conversation,start that connection looking for money management or
portfolio management, it's a fantastic dayto head on over to the website.
Tanton investment house dot com. That'st A N t o N investment house

(20:47):
dot com. Great website and greatresource. Also great opportunity there to schedule
an employment at a time and adate that's convenient to you. Again the
website Tanton investment House dot com.That's t A N t o N investment
House dot com. Or of courseyou can always call the office right in
Middleton six oh eight five zero one, fifteen forty nine. That's six soh
eight five zero one fifteen forty nine. Tracy, You have a fantastic day.

(21:10):
It's always fun and we will talkreal soon, my friend. Yeah,
sounds great, Sean, thanks somuch, talk too soon.