How 2026's Bull Market Differs from 2022 & Fed's Role to Maintain Run

**SPEAKER_1** (0:00)
It is the market overextended and heading for a crash this year. Not according to Talley Leger, Chief Market Strategist, the Wealth Consulting Group. Talley, good to see you this morning. So you argue that 2026 looks fundamentally different from 2022 And so for those who are worried that there are similar things that could be setting up to happen, talk to us about why you say this time is different.

**Talley Leger** (0:25)
So for context, Diane, in the first half of 2022, I was bearish and it's nice to kind of contrast and compare. But the biggest difference to me now is booming earnings compared to an earnings recession. And that's what you really care about as an equity investor. And of course, there's a host of all assorted other things, like today we've got a generally neutral to, I would say, supportive Fed. We'll hear from Warsh later this week on that score. I think financial conditions broadly are accommodative and we've made a lot of progress on the inflation front as well. So there's less reason, I would say, for the Fed to overdo it and really harm the economy right here, Diane.

**SPEAKER_1** (1:21)
Okay, less reason for the Fed to overdo it. Well, all eyes are looking forward to this Friday, where we're expecting to hear from the new Fed chair at Jackson Hole, the annual financial symposium. What are you expecting on that front, Talley?

**Talley Leger** (1:39)
So, I mean, look, if I were a policymaker and sitting at the table, I would encourage my colleagues to do no harm.
Of course, I'm biased as an investor and practitioner in financial markets, but I think Warsh's approach here, pulling forward guidance really forces us to be more data dependent, and ironically, makes those same financial conditions even that much more powerful. So that old mantra of don't fight the Fed really becomes don't fight the markets, especially the bond market. And I think the news is when you take a step back here, let's just pick on the 10-year Treasury bond yield for a second. Despite the backup in bond yields that we've seen, they still sit comfortably below the pace of nominal GDP growth. And this is a good environment generally for stocks, Diane.

**SPEAKER_1** (2:39)
OK, it's a good environment generally for stocks. And to be fair, we're still closer to all time highs than not, despite the pullback that we saw last week, for instance. Was that pullback healthy in your view, Talley?

**Talley Leger** (2:53)
Well, I mean, look, this is the point in the calendar year. We talk about technical seasonal effects where I think it's reasonable to expect some tactical softness in share prices. But the question is, should we be tactical or strategic? And my answer to that is, as long as that overall operating environment we just discussed is friendly and not hostile, I think you treat these pullbacks as gifts, not punishments, Diane.

**SPEAKER_1** (3:28)
Okay, gifts, not punishment, potentially an opportunity to get in where you were looking for opportunities, things on sale. Talley, let me ask you this. Let's go back to the economic big picture. We had seen some weakness in the labor market recently, and this is one of your points about how this time is different compared to several years ago.
You described that weakness in the labor market as potentially good news for stocks because it takes the pressure off of inflation. But where do you draw the line between, okay, this is okay, this is healthy labor market cooling, and this is something bigger than that?

**Talley Leger** (4:05)
Well, so, and this is a great question. And when you take a step back, and I think that's a good way, the way you framed it exactly, Diane, you can look at something called economy-wide capacity utilization.
And so this looks at the employment rate plus the industrial capacity utilization rate. And it's pretty normal right now. Those two concepts combined right about where you would want them to be, not too hot, not too cold. This is what we mean by a kind of Goldilocks operating environment. And the next step is, well, what does that mean in turn for inflation? And lo and behold, core inflation trends are running right about where you would expect them based on that economy-wide capacity utilization rate. So again, this gets me back to that statement, Fed, do no harm.

**SPEAKER_1** (5:02)
And then speaking of kind of, well, let's take it within the context of the Fed and its mandate. Inflation obviously front and center this week once again. And you mentioned the term, not too hot, not too cold. PCE, what are you looking for on that front?