Financial strategist Brian Belski from BMO joins Michael Batnick and Downtown Josh Brown to discuss S&P price targets, financial indicators, the housing market, BREIT, unemployment, and the possibility of a hall of fame bull market on this entertaining episode.
Rising interest rates historically result in a positive one-year S&P 500 performance, contradicting the belief that falling rates are better for stocks.
Real estate sector weight in the S&P 500 at an all-time low, offering opportunities in select names with growth potential like Prologis.
Financials and Industrials show promise in earnings and growth, highlighting potential for significant returns driven by industry performance and long-term trends.
Deep dives
Rising Interest Rates and Stock Performance
Rising interest rates historically have resulted in a positive one-year rolling performance for the S&P 500, with a 14% return during periods of rising rates. This contradicts the common belief that falling rates are better for stocks, highlighting the importance of economic growth and the positive impact on stock returns.
Real Estate Sector Performance and Opportunities
The real estate sector weight in the S&P 500 is currently at its lowest level ever, around 2.2%. Despite this, there are opportunities in select names like Prologis that mimic Amazon's growth and exhibit potential for future gains. Real estate investments have faced challenges but could offer value as the market stabilizes.
Opportunities in Financials and Industrials
Financials are showing promise, with potential enhancements in earnings and growth, supported by a strong industry performance. Industrials are also expected to be a key player, particularly in AI, reshoring, and other long-term trends that could drive significant returns.
Challenges in Private Real Estate Funds
Concerns arise over private real estate funds like B-Read due to inflated estimates impacting returns. Structural issues regarding asset valuation and liquidity pose risks of overvaluation and potential end-to-end concerns, requiring a deeper analysis to navigate potential pitfalls.
Investing in Real Estate and Market Trends
Market trends in real estate investment are discussed in the podcast, highlighting how private real estate funds are compared to publicly traded REITs (Real Estate Investment Trusts). The conversation points out the attractiveness of publicly traded REITs due to their ease of access in the public markets, contrasting the substantial interest in private real estate investments since the financial crisis in 2009. The discussion delves into the factors driving the demand for different real estate investment products, reflecting on the risks and liquidity considerations involved.
Stock Market Dynamics and Favorable Conditions for Stock Pickers
The podcast analyzes the stock market dynamics, emphasizing opportunities for stock pickers in the current environment. It highlights that individual stocks within the S&P 500 are displaying low correlations, suggesting potential for skilled stock pickers to outperform. The conversation underscores a shift from uniform stock movements to more nuanced individual performances, creating favorable conditions for astute stock selection strategies. Additionally, the discussion addresses the notion of a 'return to normalcy' in the market and the importance of navigating stock selection in this evolving landscape.
On episode 141 of The Compound and Friends, Michael Batnick and Downtown Josh Brown are joined by Brian Belski of BMO to discuss: S&P price targets, financial indicators, the housing market, BREIT, unemployment, the possibility of a hall of fame bull market, and much more!
This episode is sponsored by WisdomTree. Visit wisdomtree.com/dgrw to learn more about the WisdomTree U.S. Quality Dividend Growth Fund
Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Josh Brown are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management.
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