Key insights
- A U.S. Bank strategist suggests stocks can continue to climb despite headwinds like a hot CPI report and geopolitical tensions. Key drivers cited include robust consumer spending, business investment, and the ongoing benefits of past Fed rate cuts. The strategist emphasizes consumer resilience as the most critical factor, with upcoming retail sales data being a key indicator. Strong corporate profit margins, particularly in large-cap tech driven by AI, also support a bullish outlook.
U.S. Bank Asset Management Group National Investment Strategist Tom Hainlin joins Josh Lipton on Market Domination Overtime to discuss the key forces that could continue driving stocks higher despite a hotter-than-expected CPI report, escalating tensions between the U.S. and Iran, and a recent sell-off in technology shares.
the big drivers, consumer spending, business investment, kind of the continued flow through of Fed rate cuts from 2024 and 2025. Um, $50 billion in in extra tax refunds that have accrued to uh consumers this year. We think that still holds up and it still keeps the economy moving and still forms a basis for earnings growth and then stock prices to move higher as a result.
So those variables. So earnings growth, you know, consumer resilience, the AI trade. Is there one of those variables, Tom, that matters more than most?
You know, we kind of got them all, Josh last, starting last week. We maybe the five horsemen, you know, Broadcom, we had the hot jobs report last week, and then all you noted that we've got the flare up with the US and Iran, the hotter than expected CPI print where headline inflation is above wages for two months in a row. And then we've got SpaceX uh coming up perhaps on on Friday. But, you know, I think what we're watching most is the consumer and and the the resilience in their spending. That's 70
called 70% of the economy. That's that's a big gauge for us. We get retail sales next week. That'll be an important indicator to see. We know consumers are spending more on gas and and and you know other energy costs, but are they still able to spend on restaurants and hotels and travel? That would be important next week.
benefits of just investment in technology writ large. So whether it's AI or or robotics or or you know other productivity tools, you know, corporate profit margins in in the large cap, S&P 500 index are 15% on operating margins. That's one of the high, you know, near highest on record. So I think companies are just doing a great job of being productive, being efficient and and that's that's leading to, you know, less revenue needing to derive more more more uh earnings growth. So I think it's really a a margin story as much as it is just an AI story.