Why Stocks Keep Climbing Despite Inflation and Global Uncertainty

**SPEAKER_1** (0:00)
Jeff Mortimer, CIO, Elixium Wealth, and Pat Nerney, Head of Investment Solutions at Dynasty Financial Partners, both with me now.
So I'll start with you here, Jeff. Some of your thoughts. You did note that the big picture, you still feel like this market is climbing the wall of worry, but now we've had four prints, two PPIs, two CPIs, that are not showing raging inflation, quite the opposite. Some of your thoughts, Jeff.

**Jeff Mortimer** (0:26)
Wonderful.
I think the softer prints, I wouldn't call them dovish, but certainly a little bit below expectations, certainly gives the Fed the chance again in their September meeting. Now, we'll get August date as well, so we've got to go through another month of this. But these prints clearly to me, I don't want to say take September off the table, but certainly can point in that direction. I think you've seen markets react that way.
You've seen the markets again over the last few days, returning back to the AI trade, returning back to sort of pushing all stocks higher, focusing on earnings, focusing on the earnings that we've just come through an extremely strong earnings season. I know we're about 90% done, and so I think that's what it allows the market to do, kind of clear that out of the way. Now, we still have the war in the Middle East. We still have a lot of issues with oil potentially. So there are still some potential spikes to inflation, but it seems to me that these two prints again allow the market to focus back on earnings. And I just I want to point out that it's important for investors to understand where we are in the market cycle. I've done research for over 30 years on sort of where markets are. They can be in nine different states. The state that this market is in, it is in a mid cycle bull run. And this is pre inflation, right? Inflation doesn't quite happen yet. Markets at this point in time tend to climb a wall of worry. So you can throw a lot of potential events at a market, but they resiliency, amazing resilience. And I think you're seeing that. We had a very bad July in some of the AI to stock, some of the tech names, but you're seeing a wonderful recovery in a lot of those names as we have started August.

**SPEAKER_1** (2:12)
Yeah. And we'll get back to that mid cycle bull run. Wanted to know more about what dates you're really thinking about when you look at the big picture. Pat Nerney, you were looking at assets overall, saying it's a green light for assets in the big picture, risky assets here in this market. Why would you say that after we got it in our numbers? What drives that?

**Pat Nerney** (2:34)
Yeah, for us, we were extremely aligned with Jeff and his team as well, where this kind of cleared the table for what was, one of the unknown risks was if we got a hot number here, we seem to have been in a fragile state the last week or so. With a nothing burger on CPI and PPI, I think we're seeing the market go back to risk on. We think the rate hike is off the table.
You know, oil and the Iran conflict is still out there. We also have a Jackson Hole coming up here with a bit of uncertainty around it, and that has kind of been the theme of the new Fed. But at least here, the market seems to be shaking off a September rate hike, and we seem to be risk on.

**SPEAKER_1** (3:27)
And our likelihood now after the PPI print is 32 percent for the likelihood of a hike in September. That's down from yesterday morning, which went to 38 percent after the CPI. And prior to that, it was at 43, just from yesterday morning. Two weeks ago, it was above 50 So, you know, you can see the trend here on what's happening. Jeff, I wanted to get more into where you say we're in this bull market in the mid cycle.
You know, is this a secular bull market? How, when do you think, you know, when you look at when it started and how long it can really run? What drives it? Can you give me a sense of your dates that you have in mind?

**Jeff Mortimer** (4:09)
I tend to look at 12 to 18 months out. It's hard to know sort of when markets will end, but I will tell you in a mid cycle move, they can stay in this state for years.
It's a state in which a resiliency, again, a wall of worry is over, I believe it's overused on Wall Street. People use that anytime the market goes up on any bad news. But this is, again, the state that we are in. We got in this state about a year ago and have been here for about a year. It has been a very good time to be an equity investor, a very good time to have bought any dip, a very good time to have stayed long your positions and added to them on weakness. We think that continues. I can't predict when this will end, but if its history is any guide, it's 6, 12, 18 months from now. There is another gear after this one potentially, in which markets will continue to rise and the momentum factor will continue to play a large role in that market if we are to get to that next gear.