Expect the bull market to continue in 2026, albeit with much more volatility, says Kevin Mahn

Andrew (?) 00:00.110

take a look at the futures right now dow off about thirty points nasdaq off about thirteen points the SP five hundred off just about four points notice right now is kevin nine president and chief investment officer of hennion and walsh asset management good morning to you sir

Andrew (?) 00:14.150

good morning

Kevin Mahn (President & Chief Investment Officer) 00:14.670

andrew OK so

Andrew (?) 00:15.390

here we are on christmas eve what do we think two thousand twenty six could possibly look like yeah what

Kevin Mahn (President & Chief Investment Officer) 00:22.350

a year this has been right forty one record closes for the SP five hundred a total return of just over eighteen percent and we reached the three year anniversary of this bull market run so what do i think two thousand and twenty six is going to look like i think it's a

Kevin Mahn (President & Chief Investment Officer) 00:35.150

continuation of this bull market albeit with much more volatility than what we saw in two thousand but

Andrew (?) 00:40.510

does that mean we're living in a you think if we're sitting here together a year from now double digit growth

Kevin Mahn (President & Chief Investment Officer) 00:46.350

i think we have another double digit growth here but i think certain areas of the market have performed much better than other areas of the stock market and if you follow the money that's going to lead to where all of the growth opportunities are and when i followed the money i

Kevin Mahn (President & Chief Investment Officer) 00:59.510

don't necessarily mean where the flows are going but where is the money being spent and we know that the money is being spent on areas such as AI infrastructure aerospace and defense biotech and of course power solutions the all important power solutions that are going to keep

Kevin Mahn (President & Chief Investment Officer) 01:15.630

this AI revolution going

Andrew (?) 01:19.800

some people talk about it broadening out yes to you know all sorts of other things i mean do you think the S and P is just gonna be a mag seven play basically

Kevin Mahn (President & Chief Investment Officer) 01:29.630

no i think the mags seven influence has been weakening three years ago sixty two percent of the total return the S and P five hundred last year was about fifty two right now we're around forty four percent so it is weakening but if you look to areas such as industrials look at

Kevin Mahn (President & Chief Investment Officer) 01:44.190

the cooling solutions look at the data center plays but even beyond that let's talk about healthcare for a second biotech we know that washington continues to pressure large cap pharma to lower their drug prices we know there's many large revenue producing drugs coming off a

Kevin Mahn (President & Chief Investment Officer) 01:59.030

patent and being subject to generic pricing so what are these large cap pharmaceutical companies going to do to replace all that lost revenue potential they're going to have to be acquisitive and that brings opportunities for small capital how

Andrew (?) 02:10.550

important to you sorry i just thought the the the double digit gains yes is that because earnings grow double digits

Kevin Mahn (President & Chief Investment Officer) 02:17.350

i think we're going to get a lot of earnings growth we're going to get additional spending and there's

Andrew (?) 02:20.910

also multiple stories where it is so the multiple stays where it is yeah the

Kevin Mahn (President & Chief Investment Officer) 02:23.790

multiple stays where it is it's going to be still above its five and ten year averages it is rich and i think some of the more rich areas are are ripe for a pullback but that doesn't mean those other areas are

Andrew (?) 02:33.550

just the the market tracks the earnings per share growth and goes up double digits based on and it does that why because of the big beautiful bill or because of the in the economy or yes yes it does it in spite of tariffs it does it because of tariffs i think

Kevin Mahn (President & Chief Investment Officer) 02:50.710

there's multiple tailwinds i think we have deregulation on the way i think we have the prospects for billions of dollars of spend on the AI infrastructure play which will keep that investment opportunity going and we also know that there's going to be opportunities as it relates

Kevin Mahn (President & Chief Investment Officer) 03:05.670

to the market itself in terms of historical dynamics over the last fifty years we've had five times when this bull market has hit its three anniversary all five times that continue to move higher by an average total duration of eight years joe that would suggest we got five more

Kevin Mahn (President & Chief Investment Officer) 03:20.910

years to go of course this time could be different but i do think people

Andrew (?) 03:24.150

are pointing out four point three percent GDP in a weakening labor market means productivity is going up the journal dyson maybe it's is it a i

Kevin Mahn (President & Chief Investment Officer) 03:33.470

i think AI has a lot to do with that if you look at four point three percent GDP growth we have core CPI around two point six percent right now we have wages exceeding above inflation that's signs of a healthy economy but we need the consumer to continue to spend during the

Kevin Mahn (President & Chief Investment Officer) 03:49.030

first half of last year AI infrastructure spending matched the contribution to GDP of the consumer the consumer historically accounts for about seventy percent of GDP growth so if the consumer shifts to servicing all their outstanding debt as opposed to spending the economy will

Kevin Mahn (President & Chief Investment Officer) 04:04.430

slow

Andrew (?) 04:04.710

for consumer she

Kevin Mahn (President & Chief Investment Officer) 04:06.790

like everybody calls it

Andrew (?) 04:08.510

proverbial day every retailer person we have on calls are sheep accurately

Kevin Mahn (President & Chief Investment Officer) 04:15.640

i don't know where to go with that one

Andrew (?) 04:16.840

i'm not going anywhere with that one in my let me ask you a different question which is to the to the extent you have this this thesis for the year how much does it depend on the fed getting any more sort of loose if you will does it does it depend on a new fed chair coming in

Andrew (?) 04:35.200

and saying hey we got to go lower

Kevin Mahn (President & Chief Investment Officer) 04:37.440

i don't think the market should be looking to the fed for any answers in two thousand and twenty six they told us after their last meeting to expect one rate cut at twenty five basis points this year and one more rate cut at twenty five basis points in twenty twenty seven i take

Kevin Mahn (President & Chief Investment Officer) 04:51.150

them at their word perhaps when the new fed chair comes in and maybe get those two rate cuts this year as opposed to one in one but they pulled us their neutral rate is three percent we're only fifty basis points away from that neutral rate of three percent right now so we don't

Kevin Mahn (President & Chief Investment Officer) 05:05.230

necessarily need more accommodation for this economy to continue to grow what's the

Andrew (?) 05:08.990

GDP next year the administration says it can do five you believe five would you be do you believe four is possible

Kevin Mahn (President & Chief Investment Officer) 05:16.750

i believe three is possible i think four is the stretch i'd be very happy to see it but a lot of things have to go right will people be

Andrew (?) 05:24.390

cranky about the economy next year like the like supposedly they are right now people

Kevin Mahn (President & Chief Investment Officer) 05:29.830

seem to always be cranky about the economy people always find reasons to be concerned whether it's the upcoming deadline for the federal government they

Andrew (?) 05:37.710

can't buy groceries they're really

Kevin Mahn (President & Chief Investment Officer) 05:39.950

of course

Andrew (?) 05:40.710

can they buy groceries easier with wages rising

Kevin Mahn (President & Chief Investment Officer) 05:44.270

of course they could so maybe that'll help that will certainly help shelter costs coming down will help lower energy costs all of that helps joe