Remy Blaire: As the earnings season gets underway, we’re seeing a sharp divergence on Wall Street. And after navigating the historically treacherous six-week August-October stretch, equities do remain close to record highs, at least for some of the averages. Now, hyperscalers growing at 20 to 50% may easily brush off lofty yields, but multitrillion-dollar asset allocation models are facing a tipping point. So at what level do pensions and sovereign wealth funds siphon marginal cash out of equities and into risk-free debt?
Well, joining us live here at the New York Stock Exchange is Tim Anderson, managing director at TJM Investments. Tim, great to have you here. Thank you so much for joining me.
Tim Anderson: It’s always nice to talk with you and your viewers.
Remy Blaire: Well, of course, we were just talking about how we are in the final quarter of 2026, and seasonality always comes into play, especially as we head into year-end. So give us a sense of where we are right now, especially since we saw plenty of volatility in Q3.
Tim Anderson: Yeah. Well, you know, we’ve gotten through a tough stretch on the calendar, as you just mentioned, and we’re probably going to have some favorable activity into the end of the year. Most of the economic indicators on the overall growth and economic data on the economy are very positive. We’re going to have some key inflation reports over the next couple of days. And the last big inflation data point we had, on PCE about ten days ago, really was very constructive and kind of got the probability of a rate hike by the Fed at the end of the month down below 20%. I think it’s very likely not to happen. Whether or not it happens in December will be a function of what kind of data we get between now and then.
So, look, the Dow has maybe underperformed the S&P a little bit over the last six weeks. But oil stocks are doing well because oil prices are high, and tech is doing well because they’re growing at such a strong rate that, you know, 5% yields, 5.5% yields, just don’t really matter to them. Even though a few years ago, people used to always talk about, oh, yields are up, tech stocks are really going to get hit. That’s really a macro, very high-level CIO decision on asset allocation at a very macro level.
I just think we’re in a sweet spot, you know, where we’re probably going to have some positive activity into year-end. And earnings are going to be very heavily focused on, starting with the financials, today and in the next couple of days. And then when we get into tech, the question will be, well, these earnings are great, but are they sustainable?
Remy Blaire: Yeah, that’s a big question, isn’t it?
Tim Anderson: That’s what, you know, a lot of people will use as an argument to maybe challenge the durability of the rally. But it sure looks pretty good to me.
Remy Blaire: Yeah. And you mentioned what we’re watching in terms of earnings, the macro front as well as tech growth, because when we’re looking at some of the gains, especially within the Nasdaq 100 and S&P 500, there is a concentration. And as we head further into earnings season, we’ll continue to hear from some of the hyperscalers as well as those AI plays. But what do you think are some of the potential risks to, say, higher year-end double-digit percentage gains for the majors this year?
Tim Anderson: I guess, you know, if we get a real escalation in the Middle East of some conflict between the Houthi group that’s in Yemen and Saudi Arabia and other Arab countries there. I don’t really think that’s going to happen, because I think when push comes to shove, we will get involved, and most of the level-headed-thinking Arab countries will get involved and be highly incentivized to just end this Houthi irritation once and for all. So I think that that will go away.
I think that the Iran thing will get resolved as we get closer to year-end. Not resolved, but look, the IRGC is going to have absolutely no choice but to either fight to the end, which they may very well do, or capitulate and give in. They’re probably going to do the former, but that will be a positive.
And then I think, clearly, if we were to get worsening inflation data, that would hurt large pockets of the market. Some of the tech stocks might shrug it off. Clearly, if you’re growing at 20%, 50% or higher, you don’t really care what interest rates are. But any guidance we get out of Q3 earnings going into ‘27 will be really critical for people that are really looking out on the horizon.
I just don’t think that you’re going to hear from too many people that there’s a lot of memory or that there’s a glut of semiconductor chips, you know, which would be a corollary to what we saw with fiber and the internet bubble 25 years ago, because we’re just not there yet. And so I think that most of the surprises in the market landscape are going to be positive rather than negative.
Remy Blaire: And we are counting down to the inflation figures that you mentioned, including CPI and PPI. And you highlighted what we saw in PCE several weeks ago, two weeks ago. And we did see those rate hike expectations come down for the October Fed meeting. But of course, we still have December, and that is after the midterm elections. So given the fact that we’re looking at elevated bond yields as well as elevated oil prices, what do you think are the key takeaways, and what do you focus on as we head into those final weeks?
Tim Anderson: Well, elevated oil prices are clearly a factor. And even though they’re not a core element in some of the inflation numbers, higher oil prices do affect a lot of other items that may be encountered in inflation. But I think we’re going to have very gradually easing numbers in the housing and shelter component of a lot of these inflation numbers. And, you know, look, obviously if oil spikes to the 120, 150 level, that’s going to be a big issue.
Yeah, I really don’t think that’s going to happen. I don’t think the market expects it to happen. I think that when the military conflict issue going on in the Middle East, including the Iranian issue, gets resolved, one way or another, oil prices will come down. I don’t think it’s an oil supply issue. There have been a lot of reports in the last two weeks. The oil coming out of the Gulf, either by pipeline or by boat, is at pre-Iran conflict levels.
Now, we are heading into, you know, the winter, the heating oil season. That’s going to affect people in the Northeast a lot more than a lot of other parts of the country. So it’s not a global thing, but there’s very high population in the Northeast part of the country, so it will affect that area.
And, you know, earnings, and guidance out of earnings, any questions that these financials get as to, do you see an impact on the consumer, will be very closely followed. And, you know, we’ll just have to see what we get from that as this week goes on and we get into other key sectors reporting earnings and giving comments on guidance.
Remy Blaire: Yeah. And of course, we’ll be paying attention to earnings coming out from other sectors. We heard from Johnson & Johnson earlier today, as well as UnitedHealth and even Domino’s. But we are paying attention to some of that guidance, as well as earnings reports coming out from the tech names. But you mentioned the consumer. And when we’re talking about the American economy, many have referred to it as a K-shaped economy. What would you say to viewers out there who are watching prices rise, and seemingly the cost of everything seems to be creeping higher?
Tim Anderson: Well, I think that the cost of everything is still elevated from the very high years of inflation that we had post-COVID. And so those prices have not really come back to pre-COVID levels, and I think it’s very unrealistic to expect that they eventually will. But I don’t really see a lot of inflationary numbers, ex energy, flowing through the economy in that area. In fact, I mean, there was a story about eggs being down 60% from where they were at the beginning of the year. You know, that was a big concern as a key food item for a lot of people at the margin a year ago. Clearly, airline prices are up. That’s a derivative of oil.
And, you know, I think, look at what we saw from the last PCE report. Core inflation, 3.3, 3.0% year over year. So if it’s not at the Fed’s target, it’s heading in the right direction. And I have felt for a long period of time that the 2% target by the Fed is, I’m not going to say it’s completely an arbitrary number. I’m sure they will say that they have hundreds of researchers working on it at the Fed to see what the ideal rate is. It may be the ideal rate, but it might be a little bit unrealistic to think that we’re really going to get there. But if we could be headed in that direction, it’ll take the pressure off them hiking rates.
Remy Blaire: Well, Tim, we will have to leave it there for today, but always great talking to you. Thank you so much for joining us today, and thank you so much for all of your insights.
Tim Anderson: It’s always a pleasure speaking with you.
Remy Blaire: Thank you, Tim.
