Keith Lerner on AI dominance and market breadth (with Matt Miller)

Asks about what could stop the nine-week winning streak in equities.

Matt Miller

Keith Lerner

Bull market deserves benefit of doubt; nine-week streaks historically lead to double-digit gains a year later 80% of the time, though odds are against further gains this week.

Since 1950, there have been 10 other nine-week winning streaks; 8 out of 10 times the market was up with low double-digit gains on average a year later.

Notes that major concerns (higher rates, higher oil) look subdued.

Matt Miller

Keith Lerner

Market has come to grips with Middle East outcome expecting some type of agreement; AI is the dominant theme driving 70% of S&P gains, over 95% in emerging markets, and 40% of small-cap returns.

Small-cap tech is up 50% this year.

Asks about breadth of the rally given concentration concerns.

Matt Miller

Keith Lerner

Rally is concentrated in tech but broader than credited: S&P, emerging markets, small caps, mid caps, and equal-weight index are all at record highs with forward earnings estimates also at records.

Only about 60% of S&P stocks are up this year, so there is bifurcation underneath, especially in retail.

Asks about US equity bias vs international outperformance last year.

Matt Miller

Keith Lerner

Still team USA for strongest earnings momentum; upgraded emerging markets after a decade of underperformance; developed markets face challenges from higher oil and weaker growth.

Central banks in developed markets are looking to increase rates.

Asks about Europe's lack of energy sources as a problem.

Matt Miller

Keith Lerner

GDP estimates in Europe are coming down since Middle East tensions; ECB mandate focused on inflation is a constraint; tech has done well in Europe but is not a big enough part of the index.

Japan is doing somewhat better recently, but US and emerging markets are better on a relative basis.

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