Lance Roberts Predictions

[14:14] historically speaking, from October the 1st through December 31st, in a year where the market is up 10% at least through the middle of the year and in years where the first quarter was a negative return and the pos and the second quarter was more than a 10% rate of return, both both of those have been put to have been met. The fourth quarter tends to yield about a 6.6% average rate of return in a midterm election year.

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[16:56] your confidence is highest in predicting a strong end of the year in the red line here, which is the equal weighted uh S&P. And I would guess I would say your default expectation is the yellow line should also do okay. Um but but probably m maybe not as strong as the red line. So you're you're shifting more your portfolio from growth to value to try to ride that that sector rotation. Correct. That's that's exactly right.

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[9:35] we get anything that pulls in inflationary pressures back, a drop in oil prices, that should pull yields back, that should all feed into those more interest rate sensitive sectors and at least give you a decent trade. Not necessarily a long-term hold, but at least for now, kind of a decent trade setup.

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[23:53] RAA I still believe believes that bond yields are much more likely to trend downward over the next couple years.

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[17:55] in any combination of government. The returns for the S&P over the next 12 months have been positive. Right now, it's shaping up that Democrats will take the House and the Senate, and you'll have a Republican president, which is the lowest expected rate of return out of all the possible combinations.

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[26:16] expected real returns on stocks is going to be somewhere between -2 and 2% over the next decade, right? So I can buy a 10-year Treasury at 5.3 and nearly double my rate of return on stocks for the next decade. That's just what valuations tell you.

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[27:26] This could be another two or three years out. I suspect more of once we get to the to the 2030s is probably where we're going to start to see the next secular period.

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[4:12] I don't think the Fed hikes and, you know, there's kind of three reasons that I don't think the Fed hikes next week. Now, does I'm not saying they won't hike any all this year, right? But I don't think they hike next week.

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[15:30] If I'm looking over the next three to four years, I might be a little bit more cautious only because there we are we are very extended above long-term means. We're going to have a correction of some sort over the next I would say within the next five years.

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[17:04] if you take a look at where the market is today you get a reversion to the mean that takes you back roughly to 2000ish 2500ish on on the S&P. So that's that's a pretty meaningful correction from 7,000.

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[20:43] there's a lot of support for this continuation of the bull market over the next year or two or three. Now eventually that that spending is going to fade and when that spending fades a lot of this earnings are going to revert to the mean.

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[22:35] starting next quarter, earnings growth rates will start to slow because of exactly what you said. It's just the law of large numbers.

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[35:33] In 2025 free cash flow was like 175 billion. In 2028 you're going to be 180 billion and in 2029 you're going to be over 300 billion in free cash flow. So that cash investment returns back to free cash flow over the next three years and it not only increases it, it almost doubles the rate of free cash flow those companies were making before they started these capex investments.

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[0:30] if you're expecting a 10, 15, 20% decline. I think that's getting rung out of the market because of this consolidation, but a correction back to the 50-day moving average, maybe the 100 day moving average, which would be 3 to 5%. Certainly isn't off the table right now.

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[13:16] my takeaway is is that the Fed's probably not going to hike in September. Could they hike by the end of the year? Absolutely.

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[7:36] eventually at some point in the next year or two the data center construction will end. We will have built out most of the data centers. Most of that stuff will end. And then you turn into the re revenue generation side of the data centers.

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[9:11] when we start to see that switch then we'll switch our holdings in our portfolios more towards the hyperscalers and and you know the guys you know the Microsofts, the Amazons, the Googles, the guys that are benefiting from the actual data center revenue. That's where you want to have your money invested then.

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[29:37] next year we're going to start to see those earnings estimates that that sorry that growth rate of earnings start to slow down. So a lot of the impetus... the rate of change will slow and that should start to slow down the rate of change in earnings

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[27:37] retailers like Walmart are certainly starting to show that the consumer is coming under pressure... the retail consumer is starting to come under pressure. I I would tweak that a little bit. I I think the retail consumer has been under a fair amount of pressure for a while. I think that what you're talking to is it's showing that they're really starting to to crack.

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[0:11] Get get a one or two% correction over the course of a couple of days, hold, you know, retest that breakout support and then find some buying impetus that would come in and then then move back up and set a new high. That's pretty much going to give you a really good indication the bull market's still intact probably through year end.

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[19:41] I think there's a very high probability we get a 5 to 10% correction somewhere and maybe we've started that. Who knows? Um, but that's just going to but any downturn in the prices is going to be factoring in this depreciation kind of conversation.

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[14:25] In 2027, that's the transition year. 2028 we go back to 185 billion as all this capex is now starting to generate revenue because remember in 26 and 27 we're building the data centers we're investing the capital we haven't generated the return yet... and by 2029 we're to 387 billion in cash flow which is well past the peak.

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[19:49] I've been saying for the last couple months that I think August, September is our big risk for a correction. Uh we're close to triggering a sell signal on a momentum basis. Relative strength is weakening here.

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[21:44] We haven't actually fostered off into the productivity side of that yet. That's probably another year out. So I'll probably update this in the next year or so

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[3:42] we think the odds are more likely that the Fed is the next thing the Fed's going to do. We don't know when it's going to be, but we'll likely cut, not hike. And the market right now is expecting a hike.

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[9:17] there's a real probability that the time we finish up this year, we're going to be closer to 1.8 to 2% GDP growth versus 2.3 to 2.6, right?

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[24:06] if you're playing the infrastructure development trade, that's got another year, 18 months to it, maybe two years, but that's going to end. And that whole infrastructure side of the trade is going to go away, and you're going to have to move to the revenue generation side of of the trade.

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[16:55] S&P 500 earnings are expected to grow north of 20% and and you know, that's all fine, but you know, when you take a look at the five hyperscalers, they're talking about spending, I'm looking at my notes real quick, 760 billion this year. They're going to only expense about 211 billion of that. So, the depreciation bill that nobody's paying attention to is coming due over the next couple of years, and that's going to impact earnings growth as well.

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[0:18] I think your big risk is in semiconductors. Those stocks have gotten way ahead of themselves right now. There's a lot of concentration in that sector. I would be careful with that sector. I would take profits. I would hedge um and then kind of let this market kind of work its way through.

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[19:40] what's going to happen to semiconductors in the notsodistant future is going to be a very major reversion back to its mean.

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[27:55] In theory, this is six months. In theory, that's $2 trillion of net inflows by the end of this year. I don't think we get there, but that's the annual that would be the annualized pace of

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[5:33] we're certainly going to have a pullback in the market. So what this is is this is a Fibonacci retracement. And and if you're not fi familiar with Fibonacci retracement levels... a retracement of you know back to kind of the 50% retracement level which you would kind of expect after such a big advance. Not saying that's got to happen but and that's where the previous breakout high was. So it' be a retracement of the previous breakout. That's about a 7 and a half% decline from here.

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[28:37] the fundamental underpinnings of the market suggest markets will be higher by the end of this year, but you're going to have a correction most likely between now and and then.

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[10:24] This is what's called a parabolic move. This is not sustainable... your first correction point is at $320 a share. You're at 600. You're talking about a 50% correction just to get to your first level of support. and and the 50-month moving average is the long-term running support of this rally... this is about a 75% decline in the markets just to get back to that moving average, which it will most likely do.

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[30:28] we're getting towards the end of that secular bull market period. Valuations are elevated. We've got a lot of exuberance in the markets. um you know there's a whole variety of demographic issues that are going on with the economy that are going to lead up to having this period of low returns for a decade or two

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[26:28] I think we can actually start to see the peak of the mountain on these passive capital flows. is like I don't know exactly when it's going to happen but I think it could be within a couple years like singledigit years we get to the point where those um those passive flows start to diminish you know first in in their rate of increase but then they actually start to to decrease

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[15:10] Germany which was already struggling just barely above recession levels anyway. This is almost assuredly going to push Germany into a recession.

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[6:09] what markets are expecting, this will be a fairly short-lived event and then we're going to get back to business of growing the economy.

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[30:25] So, you can see this market rally back above the 200 day moving average next week. Uh get back to 6720, 6750 in there, that wouldn't be surprising at all.

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[25:48] we're going to get a rally maybe starting in the next week or so that goes through April and then we're going to get into summer, which is premidterm elections. I'd expect a lot more chop and volatility during the summer, get through till we get through the midterm elections and then a rally into year end.

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