Latest / Markets with Megan: A Quick Financial Markets Update / Tech Giants Propel Bull Market Amid Growth Disparities | Episode 181 | 10-15-24

Transcript

Tech Giants Propel Bull Market Amid Growth Disparities | Episode 181 | 10-15-24 · Markets with Megan: A Quick Financial Markets Update

• 0:00
  Megan Horneman: So over the weekend we celebrated an anniversary, and this is the anniversary of the current bull market.
• 0:05
  Megan Horneman: It's Tuesday, October 15th, and we just wanted to kind of give a recap of what we've seen over the past two years and then, from a bull market perspective, what we expect going forward as we enter year three.
• 0:17
  Megan Horneman: So let's look at some of the impressive factors we've seen since the bull market started on October 12th of 2022.
• 0:25
  Megan Horneman: The S&P 500 is up almost 70%.
• 0:29
  Megan Horneman: Now, it hasn't been as broad-based as we'd like to see because if you look at, for example, the Russell 2500, which is mid-cap stocks, they're only up about 40%, as well as small-cap stocks, they're also up about 40%.
• 0:42
  Megan Horneman: So we haven't seen as much participation broadly across the market cap sectors.
• 0:47
  Megan Horneman: It also hasn't even been that diversified in the large cap space.
• 0:51
  Megan Horneman: When you look at the S&P 500, the market cap weighted index is outperforming the equal cap weighted index by about 22%, and that's because the returns have been made up about five different names.
• 1:05
  Megan Horneman: These five names, which are NVIDIA, meta, broadcom, microsoft and Apple, they've made up 96% of the total return we've seen since this bull market started in 2022.
• 1:17
  Megan Horneman: The other thing is this has been primarily PE expansion, so people are paying more for those earnings, for these high tech and high growth and tech names.
• 1:29
  Megan Horneman: About 75% of the total return has been made up of PE expansion, while only about 12% has been made up of actual earnings growth.
• 1:37
  Megan Horneman: Now, when you look at this bull market and how it measures up in comparison to last bull markets, we looked at 15 different bull markets since 1932.
• 1:46
  Megan Horneman: And what you tend to see is the median average return as we start to enter that third year is about 55% and we've been up again, as I mentioned, about almost 70% in this bull market.
• 1:59
  Megan Horneman: Now, how much further can we go?
• 2:01
  Megan Horneman: What we tend to see if you just look at history, that is, in year three the bull markets start to lose steam.
• 2:07
  Megan Horneman: So if you look at those 15 of the 15, 10 of the 15 make it to year three.
• 2:13
  Megan Horneman: Only four of the sorry in four, only five of the 15 made it to year five.
• 2:20
  Megan Horneman: Excuse me.
• 2:21
  Megan Horneman: Now, when we go and look at the returns, what you tend to see is the average return in the first year is about 34% and that compares to what we saw in this bull market, which was 22%.
• 2:32
  Megan Horneman: So we lagged a little bit in the first year.
• 2:34
  Megan Horneman: However, this second year.
• 2:36
  Megan Horneman: The average return you tend to see is about 10% and we've been up 32% this year.
• 2:42
  Megan Horneman: Now year three, as we mentioned, is when the returns start to lag and the market's up about 5%.
• 2:49
  Megan Horneman: But, as we mentioned, less and less of these bull markets make it to year three, four and five.
• 2:54
  Megan Horneman: So what do we see going into this third year?
• 2:57
  Megan Horneman: We think, obviously, returns can be muted if you just look at history, but there's also a lot of risks that are mounting in this third year of the bull market.
• 3:06
  Megan Horneman: Not only do we have uncertainty about the flexibility that Fed has, we have a presidential election coming up, we have geopolitical tensions that continue to broil the markets and then let's not forget that we have, from the economic standpoint, that economic growth is expected to slow as we go into 2025.
• 3:25
  Megan Horneman: That's all we have today.
• 3:27
  Megan Horneman: We'll be back with more economic data Tomorrow's a big number.
• 3:30
  Megan Horneman: We'll get the retail sales number, so we'll be back tomorrow with some more information for you on the markets.
• 3:35
  Megan Horneman: If you like this podcast, please hit that subscribe button, hit the alarm button, share this with friends or colleagues, and if you'd like further history of our podcasts, you can go to marketswithmegan.
• 3:47
  Megan Horneman: fm.
• 3:48
  Megan Horneman: Thank you.