Does the bull market have more room to run? Experts weigh in

Major indexes (^DJI, ^IXIC, ^GSPC) are rallying amid third quarter earnings season. However, questions remain about the sustainability of these gains in the current bull market, which is entering its third year. Schwab Center for Financial Research fixed income strategist Collin Martin and IG North America CEO J.J. Kinahan joins Catalysts to share their market perspectives.

Kinahan expresses optimism about the market's broad-based rally, viewing it as a positive indicator. "We're at a wall of worry. Nobody believes in the rally," he says, suggesting this skepticism could fuel further gains. However, he highlights some sector-specific concerns, particularly in semiconductor stocks. Kinahan points to Intel (INTC) as "an outlier" among semiconductor names, noting the stock's difficulty maintaining momentum.

Martin offers a more cautious view, suggesting that "the market's got a little bit ahead of itself," particularly regarding movements in the bond market (^TNX, ^TYX, ^FVX). However, he remains optimistic about economic conditions, noting that "things are going pretty well."

On the broader economic outlook, Martin believes markets are experiencing a soft landing where "growth is resilient." However, he doesn't anticipate a reacceleration in growth or a significant rebound in inflation. Based on this outlook, he expects measured market gains, especially in bonds: "If we have a strong resilient economy, the yield curve should be positively sloped."

To watch more expert insights and analysis on the latest market action, check out more Catalysts here.

This post was written by Angel Smith

Video Transcript

We're about an hour into the trading day stocks higher as earnings continue to really drive the market action.

The big banks reporting strength and trading activity deal making and consumer spending.

And that's signaling that the economy remains resilient earnings along with the September jobs and inflation reports causing some investors to consider the possibility of a no landing scenario here to discuss what this means for the markets.

We wanna bring in Colin Martin.

He is a Schwab Center for Financial Research, a fixed income strategist.

We also have JJ Kinahan joining us on said IG North America's CEO great to have both of you and JJ JJ.

Let me start with you when we talk about some of the fears.

Some of the worry that had been uh baked into one of the fears I should say out there in the market was their narrowness.

The fact that we weren't seeing broader participation.

We started to see that creep in just a bit and then we had the sell off in some of the global chip stocks yesterday that sparked some of those concerns.

How should investors be thinking about the current set up?

Well, I I think it's been to your point.

Interesting.

And the last, when we saw the rally at the end of August, beginning of September, I thought was really interesting is we started to see the names sort of widen out a little bit and that's always a good sign.

But at the end of the day, the one reason I think this rally can continue is because we're at a wall of worry if you will, nobody believes in the rally.

And so with that, the chip stocks, what I find incredibly interesting and, and, and this makes a lot of sense if I look at the names there, people, obviously the Nvidia's of the world everybody wants to own.

But one of our biggest uh on our tasty trade end, one of the stocks that sp sold the most over the last two weeks has been Intel.

People very bearish on Intel going forward and it kind of makes sense.

You look at the chart.

Yeah, they had a couple of weeks here that have been ok.

But people are not saying, oh, ok, here's another chip stock I have to buy.

They're saying they've had a couple of nice weeks, let's sell it.

And so, uh it'll be interesting to see what the Dow re stacks if you will, if Intel remains in the dow overall.

First of all.

And second of all, as I said, I just think it's really uh surprising that there's one chip stock that's sort of the outlier people run to the other chip stocks when they sell off but not to intel and Colin I bring you into the conversation focusing on the fixed income side of the trade.

We have seen a bit of a pullback in yields again, a bit of a dip lower here today, but we're still holding above that 4% level.

I'm curious, how are you looking at the recent action that we've been seeing within the bond market?

Maybe what that could signal about the volatility or how investors are positioning here for the months ahead.

Well, I think with the recent decline in yields, maybe it showed the markets got a little bit ahead of themselves when we saw the 10 year yield touch 44.1% or so.

But you could argue that the move was justified.

We've seen a lot of strong economic data over the past handful of weeks, which is a good thing.

I think if we take a step back and really look at the state of the economy, things are going pretty well.

You mentioned before the idea of a potential no landing economy, we're still in the soft ending camp where growth is is still strong, the economy remains resilient.

We're not expecting a re acceleration in growth though.

So maybe 2% maybe a little bit more than 2% over the near term.

But inflation should still continue to move down.

If we look at what that's done for the, the, the treasury market.

Yes, we have seen yields surge relatively higher after that strong payrolls report, but we're not expecting a significant move up even more when we look at what the fair value is of the 10 year treasury yield.

We think it's really in that three and three quarters percent to 4% area mainly based on our expectations of where the fed is eventually going to get to.

Once these rate cuts continue.

We think if the fed gets in the 3 to 3.5% range, a positively slow yield curve makes a lot of sense.

Again, if we have a strong resilient economy, the yield curve should be positively slow and we get kind of a landing place uh near 4%.

So we'll probably see some choppiness from here and there given how much focus we're putting on in the, in the immediate here and now data, good data will probably send yields a little bit higher.

Disappointing data might pull a little bit lower, but we'll probably see most yields trade around this 4% level for the near term.