Energy & Metals: Next Big Winners of AI Trade?

**SPEAKER_1** (0:00)
What a welcome and our next guest, though, joining us, Ed Siddell, CEO and Chief Investment Advisor at EGSI Financial. Ed, great to have you back on. Good morning to you. As I look across the market action we're seeing today, we've had a nice green day on the board, very different picture from yesterday. You say that you view the economy as being relatively strong throughout the year, but we are seeing growth slow down. So what are you seeing in the data that makes you confident the economy can keep expanding from here?

**Ed Siddell** (0:28)
There's a couple of things. The fact that the economy is slowing down but still growing, we look at that as somewhat positive just because of the mere fact of geopolitical tensions globally, not just with the US but with other countries, and also the US trade policy, the US Supreme Court's ruling on tariffs, which had a negative impact on revenues to the US. However, the economy is still growing.
Really, the big plus as far as the economy goes, believe it or not, has to do with earnings in the market. So we're just talking, I just heard you talk about target and earnings exceeding expectations. That seems to be the common theme across the broader markets. So I think that there's a lot of opportunity and that's showing that consumer spending is really driving the economy along with business investments and heavy machinery and equipment.

**SPEAKER_1** (1:22)
And so let's talk about the consumer since retail is clearly in focus today and this week. How much of this economic resilience is really coming from the consumer and are you starting to see signs that the consumer is running out of room to keep spending? Because we did hear from Home Depot and Lowe's that they are viewing their consumer as healthy but still very cautious about any of these big ticket spends or these big renovation items in terms of the DIY customer. And we've seen sentiments stay near Lowe's. So they have still been spending but are you seeing any cracks here?

**Ed Siddell** (1:57)
Not yet. I think these companies are being very, very smart. They're being prudent. They're really setting expectations going forward. There are things, some of the cracks, if you were to call them that, it's the mounting consumer debt. So that is still a concern for myself. You know, when we're looking at the economy, but, you know, these consumers, they seem to be resilient. They continue to spend.
I think they're being a little bit more cautious to kind of see the outcome of the midterms. But I think we'll see a pickup right around the holidays.

**SPEAKER_1** (2:28)
And you mentioned earnings doing a lot of the heavy lifting. I mean, we got Target this morning, which you highlighted, a beaten raise quarter. But then we saw a move to the downside. And I do want to check on that quickly before I say that we're still holding on to that move to the downside because things have been changing so quickly.
And now they're higher. You know, we're seeing so much of this seesawing reaction to these numbers. And it seems like there's a digestion period that doesn't always feel necessary. Ed, what is that about where we get these very clear, strong reports, and yet we're, I would say at least half of the time, seeing a move to the downside as the initial reaction?

**Ed Siddell** (3:07)
You're absolutely right. I think the markets are being finicky. What I mean by that is, they're beating expectations, but they're not exceeding what's being expected of these companies. So there's a little bit of a downturn, and those provide opportunities, especially, you know, we see it with Nvidia over and over again.
At company after company, they're beating expectations, and immediately after earnings are released, we see a little bit of a downturn. And then they prop right back up again because reality kind of hits home.

**SPEAKER_1** (3:35)
So with earnings carrying us higher here, are the earnings strong enough to keep stocks moving higher if economic growth continues to slow?

**Ed Siddell** (3:47)
That is a great question and it remains to be seen. Some of the things that we're concerned with, when we're looking at PE ratios, they're really, really high. If you look at the Schiller PE ratio over time, it is super high. It's one of the highest since the tech bubble for sure. But again, earnings continue to prop that up. And so I don't know if we'll continue to see the growth that we have over the last couple of years. I think the rest of this year, we're going to finish up positive going into next year.