Fundamentals are confirming the recent price advance in stocks, says CFRA's Sam Stovall

Kelly Evans (Anchor) 00:00.350

will the street continue into next year you just heard the confidence on the AI front what about the SP more broadly let's bring in sam stovall he's the chief investment strategist at cfra and sam this would you describe it as a melt up into year end i mean when you take the

Kelly Evans (Anchor) 00:14.350

performance of the S and P in conjunction with the metals and other winning trades it feels a little bit that way what do you think

Sam Stovall (Chief Investment Strategist) 00:20.950

hey kelly happy holidays well certainly this year has been surprising in terms of its resilience we declined nineteen percent in only about two months normally it takes four months to go from peak to through and then another four months to get back to break even but we did that

Sam Stovall (Chief Investment Strategist) 00:39.990

again in in about three months so very very quick recovery and we're up seventeen and a half percent through last night but i think as the prior guests had indicated the earnings have been rising as well so we've been seeing an eleven percent gain in earnings this year expected

Sam Stovall (Chief Investment Strategist) 00:58.630

to see more than fourteen percent next year and a fifteen percent advance in twenty twenty seven so it appears as if the fundamentals have been confirming the price advance so

Kelly Evans (Anchor) 01:10.190

what do you foresee lurking around the corner are semi analysts just told us literally by these names nvidia and broadcom right now you're going to miss it they're going to take off in it which is it's hard to believe but not that hard to believe but to continue a run like the

Kelly Evans (Anchor) 01:25.790

run we've been on right we're all looking around to say what are we missing you heard analysts go on the show and say the first time you know one of these major hyperscalers or something tells us there's a little bit of a demand issue the whole trade like everyone's still

Kelly Evans (Anchor) 01:37.870

worried about what could go wrong

Sam Stovall (Chief Investment Strategist) 01:40.310

absolutely but if the market goes up eighty percent of the time on a total return basis you pretty much have to be totally convinced that something 's going to go wrong to want to step away from this market and if you look to history indicating that following an up year you want

Sam Stovall (Chief Investment Strategist) 01:59.000

to let your winners ride into the new year communication services technology industrials are the three best performing sectors in twenty twenty five and the strategy of owning the best following a good year owning the worst following a bad year has added three hundred basis

Sam Stovall (Chief Investment Strategist) 02:18.070

points per year to the markets return and have beaten the martin seventy percent of the time so with semiconductors having posted forty five percent gains in earnings this year and expected to show a sixty four percent rise in earnings in twenty twenty six i i think it indicates

Sam Stovall (Chief Investment Strategist) 02:36.910

that there are still upside potential those are

Kelly Evans (Anchor) 02:39.110

great stats what about the whole year it's year four correct next year of the bull market do you put much stock in that and does it have sort of a signal is that a a sign that you know we're going to keep going strong is it a sign that the gains could peter out or again how how

Kelly Evans (Anchor) 02:54.950

many times does it matter i guess whether the market goes on three or four years i'm only saying so many of the traditional patterns have been broken this cycle at least the ones in recent decades so does it matter if we're heading into year four and if so what does it tell you

Kelly Evans (Anchor) 03:08.710

yes

Sam Stovall (Chief Investment Strategist) 03:09.070

it does matter because traditionally the trip up years the third year we successfully navigated the third year and are now in the fourth year and historically when that has happened bull markets have lasted about six years i think history is a great guide it's obviously never

Sam Stovall (Chief Investment Strategist) 03:26.510

gospel but it gives you sort of a weather vane approach as to what will likely happen in the year ahead i don't think that we're going to end up with a four peat meaning four consecutive years of double gains we have only had that happen one time since world war two we did of

Sam Stovall (Chief Investment Strategist) 03:43.390

course have one time of a five peat in the late nineteen nineties so only two instances since world war two with this kind of consecutive gain i think would be hard to expect but i still believe that we're likely to see mid to high single digit gain so my target is seventy four

Sam Stovall (Chief Investment Strategist) 04:05.030

hundred for the end of twenty twenty six it's

Kelly Evans (Anchor) 04:07.870

fascinating and for you know i'm sympathetic to the idea that AI could be as transformative as the internet so you go well if you believe that do you foresee few a few more years of double digit S and P gates i don't know

Sam Stovall (Chief Investment Strategist) 04:20.870

yeah i think what's the old joke what's the difference between an all weather radial tire and a thirty percent total return well one 's a good year the other is a great year i think we end up with a good