Talk of the Tape: Is 2026 market optimism too high?

Warren Pies (Co-Founder) 00:00.780

Yeah, I mean, I think you have when you stand at the beginning of a new year, you have kind of a process of elimination go through because we're never going to see all the the wiggles that happen throughout a year. So we have the big picture is Fed is easing. I think that's

Warren Pies (Co-Founder) 00:12.980

pretty well known. It's just a matter of how much, two, three cuts, we think three. We don't see a recession. I mean there's been some fiscal contraction, but we still have, historically high fiscal deficits, and we think those will expand in the first half of the year due to

Warren Pies (Co-Founder) 00:26.940

the big beautiful bill impacts. And then we have earnings growth accelerating. We have Q4 earnings estimates. This is really important. Q4 earnings estimates have accelerated And that's not what you see usually seasonally. This is the fastest acceleration of Q4 earnings we've

Warren Pies (Co-Founder) 00:41.100

seen since the post-COVID recovery in 2020. So when you put all that together, it's really hard in my opinion to to construct a bare case. I understand the valuation point, but we've we've looked at that and they they don't concern us. In fact, I think what we see is margins

Warren Pies (Co-Founder) 00:57.340

expanding by 90 basis points in the Fed cutting and so again, we can't we've never seen it a year historically where multiples even contract under those conditions. And so, it's all lined up. I think the the Goldilocks environment that we've been in really post-liberation day is

Warren Pies (Co-Founder) 01:12.500

going to be with us at least through the first half of the year. That's when I think all the cyclical disinflation that's in the pipeline continues to come through. If there's going to be a problem next year, I think it's going to be later in the year when we start to identify

Warren Pies (Co-Founder) 01:26.440

the end of the Fed's cut cycle and in the rates market it's going to have to reckon with what that means exactly in the yield curve may normalize. But up until that point, I think it's they're pretty strong tailwinds to the bull market.