Why Stocks Can Keep Rallying Even as Bond Yields Rise

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Make it at least 3 short paragraphs. give YouTube titles as well. and tags and include guest name (don't put anything in bold or use -)-Well, Wall Street may be wringing its hands over rising bond yields and Fed chair Kevin Walsh pulling back on forward guidance.

But our next guest says this market is repeating the 1990s playbook.

Back then, stocks soared right alongside Treasury yields that were between 5 to 8 percent.

So joining us live to break down whether we're still in the early stages of a productivity driven bull market and where to put capital to work is Nancy Tengler, CEO and CIO at Laffer Tengler Investments.

Nancy, good morning.

Thank you so much for joining me.

So this morning we are looking at global bond yields higher and there is plenty of concern over higher yields on Wall Street as well as on Main Street.

But you point that stocks thrived in the 90s with the 10-year treasury yield averaging around 6%.

So in your opinion, why is the market getting the interest rate story wrong and why can stocks keep rallying with yields at these levels?

Well, Remy, thanks so much for having me.

I think for two reasons.

The first reason, and I'm answering the stocks rallying question, is that if you look at this year alone, we've had about 25% earnings growth in the books.

And yet the stock market's only up about 12%.

So stocks have actually gotten cheaper from the beginning of the year.

And yet the prospects have not dimmed.

So I think that's one point.

And then the second point is that productivity-driven growth. is disinflationary.

And so what we saw in the 90s was people became, they were doing more with less, and that funneled through to corporate margins and earnings.

Now there was a bad ending to the 90s, I'm not equating our current situation with that.

But what I am saying is that productivity cannot be underestimated, and it's hard to measure.

We listen to all the companies, Remy.

We sit on the conference calls, and we are seeing not only cost savings and growth, but new product development, all coming from AI-driven and technological changes at company levels.

Think of Walmart using robotics, cloud computing, AI.

All of that goes down to the bottom line, and it's one of the reasons why we're at historically high margins.

Yeah, so while I have you here, Nancy, I do want to ask you about your six 426 selections here.

And tell us how much runway you think is really left in the rally that we're watching right now.

Well, if you go back and look historically at bull markets, this one currently ranks, I think, about fifth or out of the last eight bull markets since 1966.

We're up about, since October of 2022, we're up about 117%, but the average bull market runs anywhere from 250 to 500%.

So I think if you believe that the earnings, that we are in the early stages of AI, then you have to believe that this is the market correction testing volatility that's normal in any sort of shift in technological leadership.

Think of this economy as an economy in transition, and there will be disruptions.

Some people will lose their jobs, some people will gain new jobs, but in the short term, and then interest rates will also be front and center, particularly in this environment because of the massive amounts of debt that we have.

But it really, if you look at interest rates over the last year, I mean, they've traded in a pretty tight range.

And yes, I know that we're above 2008 levels at the moment, but I just don't see it.

We've just been there recently, as recently as a year, the 10-year was above 5%.

So I think people need to step back, relax, and focus on the fundamentals.

That's ultimately what drives stocks.

The fundamentals are still pretty amazing.

Yes.

And Nancy, finally, before I let you go, I do want to ask you about Amazon and NVIDIA.

I understand you've added both of those names to your value portfolio.

So what makes those tech giants attractive value plays right now?

Well, if you just start with Amazon, Remy, I mean, this is a company that's trading below the two big box retailers that are in most portfolios, Walmart and Costco.

It's trading at about a 20 times Multiple if you can average that over the next three years 20% earnings growth averaged over the next three years, plus you get a technology company thrown in.

For free, if you will, so I think this this becomes one of our favorite names from an earnings growth price earnings growth to. multiples, price to earnings, price earnings to growth multiple.

I'm sorry.

I need a little bit more coffee, I think.

And then NVIDIA is trading at a multiple well below the markets, growing earnings 80 to 100 percent.

There doesn't seem to be any hiccups in sight.

I get it.

The stock's trading at a discount because of the circular financing quote-unquote that Wall Street's worried about.

Management addressed that in the earnings call.

I think if you don't own it, you want to acquire it.

Both these names we're pretty optimistic about in our value portfolio.

Well, Nancy, we are fast approaching the market open here on Wall Street, so we will have to leave it there.

But thank you so much for joining us this morning, and thank you so much for sharing all of your insights.