00:00 Speaker A

Keith, coming out of the block with you. Read off of this, uh, PPI index this morning is that it’s the first sign that producers are going to pass on meaningful inflation on consumers in the months ahead. So does this completely, I guess, end this narrative that we’re getting a bunch of rate cuts into next year because this is what the market has been trading up on?

00:33 Keith

Yeah, well, first say always great to be with you and the crew. I don’t think it really up ends the overall rate cut story, but we’ve been in the two rate cut camp already. I think as we heard from Treasury Secretary Benson and others, we’re talking about 100 or 150 basis points. I think that makes that case a bit more challenging, at least on a short term. But if you look at this morning, the market is still pricing in more than a 90% chance of a rate cut in September and high odds of two cuts later this year. And I will also say we’ll have a more another inflation report before the Fed meeting. And the most important date is probably going to be September the 5th, which is the next labor market as well. So, again, I want to overreact to anyone report. And maybe the final part of this, really, we’ve just started to see that tariff revenue come in the last two months. So it makes sense that you’re going to start seeing it in the actual data.

02:08 Speaker A

All right. For a second, Keith, I’m going to forget that we got the PPI index. Forget that even got it today. Forget, let’s just pretend it’s yesterday and the markets trading higher because we got a tame CPI earlier in the week. You did some interesting research looking back on how stocks have tended to react when they hit records. What did you find?

02:36 Keith

Yeah. Well, often, especially for investors that have been here for the last 15 or 20 years, like when we make new highs, people get very nervous. But the data actually suggests new highs are actually very normal. And then when we test out the forward performance after you make new highs, it’s actually a year out, you’re up on average around, you know, nine and a half percent, which is basically saying that’s around the average returns in general. So, I mean takeaway is as long as the new highs are supported by fundamentals, you should not be nervous. Doesn’t mean we can’t see some hiccups along the way. We should expect those, but the underlying trend still deserves the benefit of the doubt. And what you mentioned early in the show, one thing that’s really notable about this recent move up, the forward earning trends for the overall market are also at a 52-week high or an all-time high, and that’s been supportive of these, uh, of these markets.