We could be at peak earnings growth, says Strategas’ Jason Trennert

>> LET'S BRING IN JASON TRENNERT, CHAIRMAN AND CEO OF BAIRD STRATEGIES. I HESITATE TO PUT THESE WORDS IN YOUR MOUTH, BUT I'M GOING TO ANYWAY. I HOPE IT'S ACCURATE. THE ONLY THING HOLDING THE MARKET TOGETHER AT THIS POINT IN YOUR VIEW, IS EARNINGS. I MEAN, IS THERE ANYTHING ELSE? I MEAN THAT'S A PRETTY GOOD THING TO BASE EVERYTHING ON ISN'T IT. >> WELL I MEAN IT IS A VERY GOOD THING. RIGHT. AND AND BUT IT'S NOT I WOULD SAY HIGHER LONG TERM AND HIGHER SHORT TERM INTEREST RATES ARE NOT AN ABSTRACTION. I MEAN YOU HAVE TO OBVIOUSLY THE DISCOUNT RATE IS A BIG PART OF THAT EQUATION. SO THE EARNINGS ARE A BIG PART. BUT ALSO THE INTEREST RATES ARE A BIG PART. >> PEOPLE HAVE BEEN POINTING OUT THAT THAT THE MARKET HASN'T EVEN GONE UP AS MUCH AS EARNINGS HAVE, RIGHT. THEREFORE THE MULTIPLES HAVE. >> ACTUALLY MULTIPLE ACTUALLY DECLINED. >> WHICH IS WHAT YOU WOULD EXPECT IN A HIGHER RATE ENVIRONMENT. SO I GUESS THE NEXT STEP FOR YOU AND YOU ALMOST START SOUNDING WORRIED, BUT YOU STILL HAVE AN 8140 S&P TARGET FOR FOR BY WHEN THE END OF NEXT YEAR. >> THE NO. I WOULD SAY IN THE NEXT 3 OR 4 MONTHS, SOMETHING LIKE THAT. I THINK WE'LL GET THERE. BUT JOE, I JUST THINK MY OWN OPINION IS THAT THE REASON WHY MULTIPLES HAVE COME DOWN INITIALLY IS BECAUSE EARNINGS HAVE BEEN SO GOOD. I DON'T THINK THE MULTIPLES QUITE HAVE REFLECTED THE INCREASE. THAT COULD STILL HAPPEN IN SHORT RATES AND LONG RATES. SO THAT'S WHAT I'M A LITTLE CONCERNED ABOUT. AND I ALSO THINK THERE'S A CHANCE WE'RE AT PEAK EARNINGS GROWTH. WE'RE NOT AT PEAK EARNINGS. BUT WE COULD BE AT PEAK EARNINGS GROWTH JUST BECAUSE THE NUMBERS HAVE BEEN SO OUT OF SIGHT THIS YEAR. >> WE I GUESS WE NEED TO KNOW THE BIG QUESTION. ARE WE AT THE HIGH END OF THE RANGE FOR THE TEN YEAR. OR ARE WE AT THE LOW END OF A NEW RANGE FOR THE TEN YEAR. >> SO I'M MORE INCLINED WITH THE LATTER RATHER THAN THE FORMER, THAT WERE THE LOW END OF A OF A HIGHER RANGE? I THINK PART OF THAT IS SIMPLY BECAUSE THE FED IS MOVING AWAY FROM THIS FINANCIAL REPRESSION QE ERA. AND I THINK I THINK CHAIRMAN WARSH IS VERY SERIOUS ABOUT THE 2% TARGET. I GET ASKED THAT A LOT. YOU KNOW, CAN HE REALLY BE SERIOUS? ABOUT 2%, WHICH IS WHAT I KNOW HE'S SERIOUS ABOUT THE 2%. AND SO THAT'S A DIFFERENT ENVIRONMENT. JUST TO THE EXTENT TO WHICH, AS YOU KNOW, WE'VE BEEN SUPPRESSING INTEREST RATES FOR A LONG PERIOD OF TIME. AND I THINK NOW WE'RE GOING TO LET THEM FIND THEIR NATURAL LEVEL. >> THE OTHER THING THAT I GUESS YOU'D TAKE ISSUE WITH IS THAT THERE ARE POSITIVE UNDERLYING TRENDS FOR, FOR INFLATION THAT WE SAW, YOU KNOW, NOTWITHSTANDING THE WAR IN IRAN AND NOTWITHSTANDING WHERE OIL IS, AND IT COULD DEFINITELY START SEEPING THROUGH TO THINGS, YOU KNOW, TO, TO CORE AND HEADLINE, OBVIOUSLY THAT'S WHAT HAPPENS. BUT LIKE THE JOBS REPORT, DIDN'T YOU SEE ANYTHING THERE THAT MADE YOU THINK THAT THAT, THAT MAYBE SOME OF THE FED'S WORK MIGHT BE HAPPENING WITHOUT? >> I THINK, YOU KNOW, I THINK IT'S A LITTLE TOO EARLY TO TELL BECAUSE THE FED JUST TIGHTENED A COUPLE OF WEEKS AGO. SO I THINK THE THE CHANGES IN THAT ARE NOT GOING TO THE EFFECTS OF THAT HAVEN'T REALLY BEEN SEEN YET, ESPECIALLY ALSO WITH LONG RATES THAT RATES WENT UP SO QUICKLY, SO FAST. I THINK YOU HAVE TO GIVE IT A LITTLE TIME. NOW. WHAT'S DRIVING THE GROWTH, AS YOU KNOW, IS AI. AND THAT'S THAT SEEMS TO BE INTEREST RATE INSENSITIVE. SO AND THEY GENERATING A LOT OF CASH FLOW. AND SO ALL OF THAT IS GOOD. WHAT WORRIES ME IS THE STUFF YOU CAN'T SEE LIKE IN THE PRIVATE MARKETS, PRIVATE EQUITY, PRIVATE CREDIT. BECAUSE I THINK THERE'S A LOT OF MARGINAL INVESTMENTS THERE THAT ARE HIGHLY LEVERED. AND THAT'S REALLY KIND OF WHAT WORRIES ME. >> SO THAT'S WHERE YOU THINK THAT THE THAT WOULDN'T BE THE FIRST TIME. THAT'S WHERE THE PROBLEM STARTED, WOULD IT? >> YEAH. EXCEPT THAT NOW IT'S MORE. >> WHAT IS IT? THE TIDE GOES OUT. >> I DON'T KNOW IF. >> IT'S EVERYBODY'S IN A SPEEDO. >> OR SYSTEMIC. >> YEAH. OR WORSE. EVEN WORSE THAN A SPEEDO. >> YEAH. >> WHAT'S WORSE SONG. YEAH. >> YEAH, SOMETHING LIKE THAT. BUT I DON'T I DON'T KNOW, I THINK THAT THAT IS USUALLY WHERE THEY, THEY SHOW UP. BUT I ALSO SAY THIS ENTIRE ECOSYSTEM OF AI SPENDING IS IT'S RATHER CLOSED. YOU KNOW, IT'S, THERE'S A LOT OF FUNDING THAT'S GOING ON BETWEEN ALL OF THE HYPERSCALERS AND THE SOFTWARE COMPANIES, ALL THE THINGS THAT ARE TRYING TO TAKE ADVANTAGE OF IT. SO LISTEN, I DON'T WANT TO BE, YOU KNOW, A NERVOUS NELLY HERE, BUT I ALSO THINK THE HYPERSCALER ISSUE, I WAS JUST IN OHIO LAST WEEK. I THINK IT'S I THINK IT'S A REAL ISSUE. I THINK THE REPUBLICANS AND I'M A REPUBLICAN ARE ARE NOT TAKING IT SERIOUSLY >> BECAUSE IT IS WORRYING A LOT OF JUST REGULAR PEOPLE. IT'S NOT JUST GINNED UP BY CHINA, IN MY OPINION, ALTHOUGH I'M SURE THAT'S PART OF IT, BUT IT'S A REAL ISSUE. >> AND WHAT WAS IT EARLIER IN THE SHOW SAID AS SOON AS THE ELECTION'S OVER, EVERYBODY'S GOING TO BE BACK. LET'S GO DATA CENTERS. IN OTHER WORDS, IT'S AN ELECTION. >> YEAH, I THINK THAT'S PARTLY TRUE. BUT I ALSO THINK POLITICIANS ARE POLICY ENTREPRENEURS, TOO. I MEAN, THERE'S NOT A LOT OF PROFILES IN COURAGE DOWN THERE, RIGHT? AND SO SOME OF THE SOME OF THESE ELECTIONS THAT ARE COMING UP ARE GOING TO GIVE A VERY STRONG SIGNAL ABOUT WHAT'S WORKING AND WHAT'S NOT WORKING. AND IF IT WORKS TO BE ANTI DATA CENTER, THERE'S GOING TO BE MORE PEOPLE THAT ARE ANTI DATA CENTER. >> WE HAD GENE MUNSTER ON AND WE DECIDED WITH HIM AND HE'S OBVIOUSLY A TECH GUY RIGHT. WE DECIDED WITH HIM THAT THE THE RISK IS THAT WE'RE UNDERESTIMATING JUST HOW BIG THIS WHOLE BUILDOUT IS GOING TO BE WITH YOU. YOU'RE READY TO SORT OF THINK THAT THIS HAS GOTTEN A LITTLE AHEAD OF ITSELF RIGHT NOW. >> I JUST, JOE, WHEN YOU SEE. >> THE PRICE OF PERFECTION ALREADY. >> YEAH. I MEAN, WHEN YOU WHEN YOU SEE THE LARGEST WORLD'S LARGEST COMPANY GROWING REVENUES AT 80% YEAR OVER YEAR, WHERE YOU SEE MARGINS AT LEVELS THAT WOULD BE NORMALLY ASSOCIATED WITH. >> BOTH OF THOSE THINGS YOU JUST SAID ARE SO INCREDIBLY GREAT. YOU'RE LOOKING AT IT ASKANCE BECAUSE IT CAN'T LAST. >> I'M NOT. >> LOOKING AT YOU JUST ARE HAVING TROUBLE WITH SUCCESS. >> NO, NO, NOT AT ALL. I JUST I'M TRYING TO. >> YOU KNOW WHAT I MEAN. YOU JUST DESCRIBED SUCH A GREAT A LOT OF PEOPLE. THAT'S WHY IT'S 5.8 TRILLION ALREADY. >> YEAH. NO, LISTEN THERE'S THAT. BUT ALSO THEY HAVE MARGINS THAT ARE, YOU KNOW, ASSOCIATED WITH NARCO TERRORISM. >> THAT'S ALSO GOOD. >> THEY'RE HEROIN. YEAH. BUT THE THING IS HIGH MARGINS. >> ONLY ONE WAY TO GO. >> HIGHER MARGINS ATTRACT MORE. MORE COMPETITION. >> RIGHT FROM THE FROM THE TOP. THERE'S ONLY ONE WAY TO GO IS DOWN. BUT THEN I HEAR YOU AND I'VE SEEN YOU LIKE THIS BEFORE. AND I'VE CHALLENGED YOU IN THE PAST WHEN I THOUGHT AND WHEN YOU WERE WRONG. BUT BUT THIS TIME YOU'RE STILL AT 8140. >> YEAH. BECAUSE I THINK. >> I THINK YOU'RE GETTING IT BOTH WAYS HERE. >> NO, I THINK LISTEN, I BELIEVE STOCKS ARE SOMEWHAT COUNTERCYCLICAL TO BE IN MY EXPERIENCE IS THAT, YOU KNOW, THEY BENEFIT GREATLY FROM LOWER RATES. AND, YOU KNOW, WHEN THE ECONOMY GETS TOO STRONG, IN MY OPINION IT'S NOT PARTICULARLY GREAT. >> BUT IN THE LAST WEEK, JASON, WE'VE GONE FROM MAYBE TWO HIKES THIS MORE THIS YEAR TO MAYBE ZERO. WE'VE GOT BOTH OF THE THE OCTOBER AND THE DECEMBER ARE NOW QUESTIONABLE. >> YEAH I. >> JUST THAT'S GOOD. >> YEAH. I JUST HAVE A DIFFERENT VIEW. >> YOU THINK WE GET ONE ONE IN DECEMBER. >> I THINK SO. I THINK IT'S MORE LIKELY THAN NOT. YOU KNOW I DON'T THINK OCTOBER BECAUSE I THINK. >> BUT YOU THINK ONE HE'LL HAVE TO COME BACK IN DECEMBER. >> I THINK SO JUST BECAUSE IN THE HISTORY OF TIGHTENING THERE'S NEVER BEEN JUST ONE. I MEAN IT'S JUST THAT REALLY DOESN'T HAPPEN. >> THERE MIGHT HAVE BEEN ONCE I THINK ONCE WITH GREEN. >> IN THE 80S AND IN THE 80S, YOU KNOW, THE FED. >> TOOK IT BACK RIGHT AWAY. >> THEY DIDN'T EVEN MAKE A STATEMENT. YOU HAD TO INTUIT WHAT THEY WERE DOING FROM OPEN MARKET OPERATIONS, BUT THEY DIDN'T START ACTUALLY MAKING A STATEMENT UNTIL 1994. BUT SINCE THEN, CERTAINLY THERE'S NEVER BEEN JUST ONE. >> HOW ABOUT THE MIDTERMS? THAT'S WHY YOU'RE DEPRESSED. >> WELL, YEAH, I SEE, I OWN I WILL SAY IN FULL DISCLOSURE, I OWN THE CORSI CONTRACT ON THE REPUBLICANS KEEPING THE SENATE. YOU DO? BUT I'M UNDERWATER. SO BUT I THINK WE'RE AT