Introduces Mike Wilson and references his past view that labor market may have bottomed and economic slowdown was rolling sector by sector.
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Mike Wilson
Confirms rolling recession call, notes labor data (payrolls/layoffs) rate of change peaked/bottomed in April when market bottomed. This narrative means Fed has more room to cut than people think, and rotation into underperforming market parts is call for 2026.
Asks why a non-weak labor market gives Fed more opportunity to cut.
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Mike Wilson
Fed will realize data is lagged. Revisions show significant labor cycle is over. Best confirmation is median S&P company earnings growing ~10%, best in 4 years.
Mike Wilson
Fed will notice need for rate cuts to support financial leverage parts of economy (housing, consumer goods, lower-end consumer). Risk is creating an asset bubble if they cut into good earnings cycle.
Asks about inflation concerns given 3% lagging numbers.
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Mike Wilson
Accelerating inflation is a feature. If inflation doesn't reaccelerate next year, his call is wrong. Accelerating inflation is good for earnings of lagging companies. Fed won't be raising rates, likely adding liquidity, which is good setup for equities.
References administration view that affordability handled by wage gains faster than inflation plus productivity, asks if possible.
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Mike Wilson
Policy change (BBB, tariffs) aims to reduce consumption, increase investment, leading to better productivity. Immigration suppressed real wage growth for middle/lower income; AI may suppress upper-end wages, rebalancing real wages.
Asks about S&P next year numbers, references 17% earnings growth.
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Mike Wilson
17% earnings growth with unchanged PE gives another 10-15%. Pricing off 2027 suggests 10-12% more growth if no slowdown. Risk is inflation comes back forcing Fed to react.