Investing Beyond the IPO Hype & Midterm Markets

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**Ann Berry** (0:29)
For Wednesday July 1st, it's Brew Markets Daily and I'm Ann Berry.
Once the confetti settles, the ticker hits the exchange and the news cycle moves on. What actually happens after an IPO and specifically what happens to those IPO day investors? Well, in May, I welcomed Mona Mahajan to the show. She's a principal at Edward Jones and leads their investment strategy team. With over $2 trillion in assets under the firm's care, Mona has a unique vantage point on what happens when investors buy in on IPO day and how those stocks tend to perform over time relative to the broader market. She also shares her insights into how political cycles move markets very timely as we ramp up to this year's midterm elections. So let's listen back to my conversation with Mona Mahajan, head of investment strategy at Edward Jones.

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**Ann Berry** (1:41)
Talk to us, Mona, please, because you've got a massive amount of capital. Give us the size of capital that you are effectively touching.

**Mona Mahajan** (1:50)
Yeah, absolutely. Look, Edward Jones, $2.5 trillion in assets under care, as we like to call them, 9 million clients and 20,000 plus financial advisors across North America. And we have a client in every county in America now. So it's fantastic.

**Ann Berry** (2:06)
That's fantastic coverage. And what advantage point from which to see not only how the markets are moving, but where people are deploying their capital in response to that. So talk to us about earning season.

**Mona Mahajan** (2:16)
Yeah.

**Ann Berry** (2:16)
Right. We're in the thick of it. 90% plus of the S&P 500 is now reported.
What's your perspective on the trends we're seeing?

**Mona Mahajan** (2:24)
Yeah.
Earning season Q1 has been, in two words, absolutely phenomenal. So we started out the quarter thinking 13% year on year growth. We're looking at 27% annual growth rate for Q1 earnings. For the full year, we're also looking at 20% plus now. So really, when you ask a question or when you think about why are stocks moving in a straight line higher, even with some of the uncertainty, the oil prices, it really is being underpinned by some of these earning trends. And I will say briefly, what we're seeing is the strength in earnings is coming from two areas. The upside surprises are tech and communication services, and on the other hand, energy and materials because of those higher oil prices. So it's really been an AI story on one hand and a nice move in energy on the other.

**Ann Berry** (3:13)
So let's break that down. Let's start with the tech and communication services. Has it been an AI story in terms of return on investment and productivity uplift or, and the answer can be yes to both, has it been headcount reduction?

**Mona Mahajan** (3:27)
Interesting. So probably not so much headcount reduction yet, even though we are starting to see some headlines around that. You can look at survey data. Companies that are laying off are only pointing to AI five to 8% of the amount of time for layoffs, reasons for layoffs. Now, on the other hand, it has been an infrastructure driven story. We know data centers are being built out. We know semiconductors are in very high demand and that's really been one of the key subsectors driving the story and driving the earnings growth higher. We're seeing it reflected in stock prices as well. So not as much even a software AI story, very much a hardware tech infrastructure buildout story on the AI side.

**Ann Berry** (4:08)
And in that piece of it, the infrastructure and the hardware, is it margin expansion through cost containment or is it price driving revenue growth? And this is operating leverage?

**Mona Mahajan** (4:16)