00:00 David
AI, that’s the main character of the market story right now. Anything really going on with the conflict in Iran, that’s not even a secondary story. I think that’s more of a tertiary or fourth story down the road. I mean, right now, the consumer remains very strong. And you look at the average net wealth of the US household in America, it’s about twice the size of what it was just five years ago. And I think the landscape of the entire oil picture that we see here, at least domestically speaking, we’re obviously now a net exporter of oil. So we’re not as hamstrung or tied to energy prices as much as what we were back to say during the 73 oil embargo, during the 1990s or even the 2000s. I mean, the amount of technology that really came out of, you know, the different bases whether it’s in North Dakota or, you know, the Permian basin in Texas, through horizontal drilling, um, through fracking, you know, we’re just not as hamstrung to oil as much as they were. So I think that’s more rhetoric right now than anything because at the end of the day, Josh, this market’s very strong and the simplicities of this market are even better than that. I mean, if you fo follow overall economic earnings and overall economic profitability, the two main factors that tend to historically drive markets over longer period of time, they’re absolutely amazing right now.
01:34 Josh
You do highlight though some potential headwinds in the second half. What what are those, David? What should we have on our radar?
01:45 David
Well, it’s it’s going to be all sentiment driven. We know total return comes from three different sources. It’s going to be yield, growth, and then valuation expansion or contraction. Yield isn’t going anywhere. We’re seeing the absolute, you know, strong economic earnings growth here domestically domestically speaking with the S&P 500. I think if we were to see some type of pullback, which is normal and healthy. I mean, the market sees what three, 5% pullbacks on average over a given year. I think that’s the average since 1942. I think it’s be more sentiment driven. and it would be the sentiment amongst oil staying higher for longer and also kind of the the politicalization of data centers as we head into mid-term elections. I mean, you know, Josh, we did a study here atton said if oil stays at $90 a barrel on average for the year 2026, it’s going to be a headwind to growth of like 4%. So somewhat immaterial when you’re growing earnings at 26% on a year-over-year basis right now. But there might be a sentiment now that we don’t have the one big beautiful bill helping subsidize the cost to consumers that was definitely somewhat made higher energy prices negligible in the first half. That’s obviously not going to be there in the second half. But I think what I’d be focusing more on is, obviously, you know, we had New York come out, we have Cat earnings tomorrow and you know, there’s a lot of rhetoric around, you know, the data AI, data center build out is going to be slower than normal. Even have, you know, governor out of Texas add it, you know, kind of throwing some shade to to data center build outs. So I don’t think any of that’s going away the data center build outs because there’s so many different, you know, um, you know, hold ups that there are already from a supply side, but there’s this aspect that sentiment, I think could weigh on this AI trade because it’s could become politicized, politicized part of me in a mid-term election year.