Fully valued market needs fundamentals as leadership broadens, says Citi’s Drew Pettit

Frank Holland (Anchor) 00:00.070

drew i want to start off talking to you about some of the things we're seeing in the markets gold and silver at highs financials it highs we're seeing materials and some other cyclical sectors outperform tech what does that say to you about investors going into twenty twenty six

Drew Pettit (Director-U.S. Equity Strategy) 00:13.670

so look looking at the equity market action i think investors aren't afraid of risk right now look we're in a later stage of the bull market we expect volatility we expect more volatility a lot of good news is priced in it's going to whip saw stocks up and down quite a bit but

Drew Pettit (Director-U.S. Equity Strategy) 00:29.910

we still think investors want to buy risk and there's two types of risk they're they're going to own growth around the secular AI story and cyclicals because you get some leverage to the real economy hanging in there in an earnings growth inflection which we've been waiting for

Drew Pettit (Director-U.S. Equity Strategy) 00:45.070

for years so to us look it's it's risk on people like buying risk and right now the most leverage to that at least short term is cyclicals all right when you

Frank Holland (Anchor) 00:53.670

get to your word of the day it is symmetry what symmetry are you seeing out here

Drew Pettit (Director-U.S. Equity Strategy) 00:58.150

it's funny the symmetry we're seeing is forward looking returns and while symmetry might feel like a good word it's actually bad because equity markets over time tend to have asymmetry to the upside but when you've priced in over ten percent compound annual growth and earnings

Drew Pettit (Director-U.S. Equity Strategy) 01:15.030

for the S and P five hundred your upside and downside for the year ahead at least to us looks a little bit more balanced so risk is going to be a thing in twenty twenty six we're going to have to wait our way through it and when you have those big upside days expect pretty

Drew Pettit (Director-U.S. Equity Strategy) 01:31.670

symmetrical downside days in the year ahead still with the tilt to the upside given our seventy seven hundred S and P five hundred price target all right i want

Frank Holland (Anchor) 01:40.150

to get to your pick it's boston scientific in the healthcare space why are you so focused here on a a med tech company as opposed to more of a pure play healthcare company

Drew Pettit (Director-U.S. Equity Strategy) 01:50.980

so it's interesting this has been a really nice way to kind of balance the the AI related tech out there a little bit more physical tech and look it's a company that got hit by tariffs has had policy headwinds but when you actually look at its performance it's been absolutely

Drew Pettit (Director-U.S. Equity Strategy) 02:09.660

great the company is hitting on a bunch of products within its portfolio it's expected to expand gross margins by half a percent net margins by a full percent and actually get efficiency up as well and then when you look at all of its investments in the capex and R and D it's

Drew Pettit (Director-U.S. Equity Strategy) 02:25.110

spending it's getting great incremental cash returns there so it's checking a lot of boxes for us as a way to play accelerating growth into next year all right speaking

Frank Holland (Anchor) 02:34.030

of checking the box i got to ask you about the santa claus rally that beer would officially start tomorrow we had ryan dietrich on the show earlier he says we've missed the santa rally the last two years but we've never missed two out of the last three years ironically enough

Frank Holland (Anchor) 02:45.790

the eagles division winners in the last two out of three years but i only want to focus on the santa claus rally are you a believer that we're going to get get that

Drew Pettit (Director-U.S. Equity Strategy) 02:54.190

i'm a bill lieber frank not an eagles guy but look short term i'm not really sure where we're going to trade to be honest with you we've seen a little bit of volatility but we're in this bit of a news vacuum here look sentiment 's high if you don't get new news you tend to get

Drew Pettit (Director-U.S. Equity Strategy) 03:09.630

these grinds higher but if we get any news maybe around inflation some retail spending anything to kind of dense sentiment in that vacuum of liquidity you can get a lot of choppiness so to us not sure if we're get it or not but again longer term fundamentally we're positive