Our team attended the Forbes | SHOOK Top Advisor Summit last week. Over two days, we heard from leading investors, economists, financial advisors and industry executives who shared many invaluable insights and perspectives.
Here are our 5 key takeaways:
Sentiment favors continued gains!
As Sir John Templeton famously said, “Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.” Outside of extremes, determining where we sit in this paradigm is more art than science. After attending Forbes Shook, our conviction that we aren’t near euphoria grew.
When a panelist asked the audience of ~800 Financial Advisors if their clients were over allocated to equities with low cash, only about three hands went up. This compared to almost everyone else who felt their clients were underinvested in equities with too much cash on the sidelines.
Focus less on politics
Stock market returns are the same regardless of which political party is in office. The future is uncertain but the path of the market over the long-term is up and to the right.
We are still in a bull market
The Fed is now cutting rates with earnings growth accelerating, creating a favorable investment environment for equities. Despite talk of how expensive the market is today, equities compare favorably to bonds. Long-term treasuries trade at 24x with no growth, while equities trade at 21x with EPS expected to grow at a CAGR of 12% through 2026. Based on these factors, equities do not yet look overpriced.
Nvidia = Still room to run
We had a lot of conversations on Nvidia and heard lots of skepticism and concerns. This is not how peaks are made. The valuation isn’t crazy at 36x next year’s earnings growing at a CAGR of 33% through 2026 compared to the market at 21x expected to grow at 12%. We are early in the AI transformation (Huang says we are 15% of the way through the infrastructure build with inference set to increase a billion times). Early and surly are not the setup for a top.
The market concentration is justified
The top 10 names in the S&P500 make up 35% of the index today but they also make up 30% of the total FCF generated by the S&P500. Once again, we see high valuations and concentrations tied to large and strong fundamentals.
Data source: Bloomberg
The views expressed in this commentary reflect those of Patient Capital Management analysts as of the date of the commentary. Any views expressed are subject to change at any time, and Patient Capital Management disclaims any responsibility to update such views. There is no guarantee that market trends discussed herein will continue. It should not be assumed that any purchase or sale decisions will be profitable or will equal the performance of any security mentioned.
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