Host: Today's capital markets segment is brought to you by Alpaca. In New York morning trade, we are looking at the major US stock averages extending gains and oil as well as Treasury yields pulling back while Wall Street debates the sustainability of AICA as well as a hawkish Fed. Sanctuary Wealth is out with one of the most bullish outlooks on the street. The S&P 500 will reach 8,225 as a productivity-driven golden age of investment takes hold. At the same time, Bitcoin has rallied to eight-month highs, lifting crypto-linked equities like Strategy as well as Coinbase. Well, joining us this morning is Mary Ann Bartels, chief investment strategist at Sanctuary Wealth. Marianne, great to have you on the show. Thank you so much for joining us. So let's start out with the major US stock averages, in particular your S&P 500 target. So given where Treasury yields are right now and oil prices, what margin expansion or earnings multiple are you modeling to get that benchmark to that year-end target?
Marianne Bartels: So, I, I don't really put a multiple on it. Um, what I'm really looking at is the earnings power of the market, um, which is absolutely extraordinary. Um, and there is breadth of earnings, it's just not the Mag 7, although we got a really nice breakout in the Mag 7, technically, uh, yesterday. So, trying to apply, um, you know, even the interest rate environment, there's an old rule of thumb on Wall Street that, that I grew up with, which is called 3 steps in a stumble, meaning it takes 3 rate hikes, uh, before you really start having a negative impact, um, on equities. And then I always remembered, uh, doing analysis, looking at higher interest rates and how technology traded relative to the market. And I updated some of my models, and, and they said exactly the same thing, that technology companies are not as sensitive to interest rate hikes. In fact, there's no correlation at all. Um, so I think tech can do extraordinarily well, given the backdrop of higher interest rates. And then Worsh talked about um some of the indicators he was watching, and one of them that he's highlighted that I'm not hearing a lot of people talk about is money supply, and my ears perked up because when I went to Wall Street, that was the key indicator that we watched every Thursday. That's what the market traded on. And looking at M2, uh, money supply is growing about 5.4%, and there's an old money number, uh, called MZM money at zero maturity, and, and we've updated that model, and that's growing at 7%. And I think that's gonna allow the economy to actually withstand, uh, the Fed, uh, raising rates, and really what they're doing is just removing the accommodation that they gave in 2025.
Host: Yes, and Marianne, you brought up a lot of important points because here we are kicking off the week with the spotlight on geopolitics as the UN General Assembly gets underway in terms of high-level talks. But when we look at Fed fund futures, the swap markets are pricing in 3 additional Fed rate hikes by July of next year, at least for now, and we're keeping an eye on inflation numbers. But give us a sense of how a higher rate regime could impact corporate margins moving forward.
Marianne Bartels: Well, I'm not worried about higher rates impacting margins. What I am worried about is oil prices, particularly diesel prices, impacting margins and earnings. And you did have that warning from JB Hunt. So I think it's more the energy complex that we need to be mindful of, especially when we go into the next earnings season, as to how that's actually impacting margins. I really don't think, um, even if we get two rate hikes this year, it is going to be significant. Um, but the higher oil prices may start negatively impacting earnings as we go into 2027.
Host: An important point because all of us are keeping a close eye on energy whether we're talking about WTI, Brent, or diesel prices which continue to hit record highs and we know that is a problem when it comes to those levels. But when we take a look at the markets, we're keeping an eye on sector as well as rotation. So is this volatility that we're seeing, especially when it comes to AI, a healthy pause within a secular bull market, or do you think investors are refusing to pay up for growing AI capex?
Marianne Bartels: No, I, I think this has been a very good, healthy rotational market. And, you know, a lot of pockets of tech, uh, really consolidated for months. You know, a good example is Mag 7. Even the semiconductors, uh, had anywhere between a 20% and 30% pullback, and now they're rallying and they're technically breaking out. Um, and I think September can wind up being a better month than, uh, historically, because historically, the, the month of September is down about 2.6, 2.7%, and here we are with the leadership, at least in my view, tech and semis being the leadership of the market, actually breaking out that we're actually looking to have possibly a better September. That may open up the door door for continued volatility, uh, within the markets, maybe in October. But then we're gonna be very close to the, um, the positive seasonals, uh, for the market going into November and December. And that's why I closely really looked at my price target. Was it reasonable, um, with, you know, the higher interest rates, oil staying elevated, that we can hit these targets, and I think we can because the economy is still growing. Monetary policy has a lag of 12 to 18 months. So the rate hikes that we're getting today are really not going to impact the market next year until around spring or summer, right? Because the market's discounting 6 months ahead. So I really don't think what we're seeing the Fed do today, um, having a material impact this year, but we're gonna have to be cognizant that it's going to have an impact next year. And as I said, one of the areas that I'll be watching is money supply, because if money supplies, um, can continue to grow, it'll help cushion the higher interest rates. Um, but if money starts contracting, that historically is a negative. One of the historical, um, points that I can give you is 2018, where the Fed was raising rates and money supply, actually was contracting in 2017 going into 2018. And we wound up having a bear market correction of 20%. Um, so I still believe we're in a secular bull market. I think, um, I'm more concerned about going into 2027, having a significant pullback somewhere in the range of 15 to 20%, but in the ongoing secular bull market, I do not see this market uh peaking anytime soon.
Host: And Marianne, I have time for one more question. So I do want to get your take on what we're seeing in crypto. So yesterday we saw Bitcoin rallying past 870, and we saw shares of Strategy as well as Coinbase surging to eight-month highs. And on the heels of the clarity, a lot of focus has been on agency-led oversight from both the SEC as well as CFTC. So what are you paying attention to right now and do you think we're out of the crypto winter?
Marianne Bartels: So, yeah, that's a really important point. Um, to answer your, uh, question straight up, yes, I think we, we're, we're over crypto winter. Um, I was looking for crypto to bottom out in the 4th quarter. We're getting it a little bit sooner. I, I like the breakouts that we're getting, particularly in Bitcoin. And what I also like, it's also a, um, a sign of a risk measure, uh, uh, a liquidity signal, um, that I use, which is, which is bullish in confirming the moves that we're seeing, uh, in, in the equity market. So, I do think that we're out of crypto winter. It doesn't mean that we can't go back and maybe test some levels, but if people, uh, were looking to add to crypto on a technical level, these are some of the levels that, that we would be looking at. But I always caution investors, uh, there's significant volatility, probably the highest volatility I've ever seen in my career, uh, within the crypto space, but I, I, I do think, uh, we can get better performance, uh, going into, uh, year-end and possibly going into the first quarter of next year.
Host: Well, Marianne, always great talking to you. Thank you so much for joining us this morning and as always, thank you so much for your insights as well as your perspective.
Marianne Bartels: Thank you.
