Carson Group Chief Market Strategist Ryan Detrick foresees a rally in bond and equity markets despite economic uncertainties. With the snapback off correction lows, Detrick notes broad participation as productivity strengthens, jobs growth persists, and earnings forecasts brighten for 2024.
Though admitting all is not perfect, Detrick’s bullish posture stays intact with an "Overweight" stance on stocks amid no signs of imminent recession risks in areas like small caps — which he believes is favorable for investors. If the Fed pivots dovishly, Detrick expects smaller companies to outperform as valuations grow increasingly attractive relative to lagging defensive sectors like consumer staples, utilities, and real estate.
As the 2024 presidential election approaches, Detrick does believe slight market changes will occur across policies, Federal Reserve decisions, and other factors. However, Detrick believes political shifts alone seem unlikely to derail markets.
"There's a lot of other factors, we're aware of that," Detrick tells Yahoo Finance, adding: "But when the fundamentals are there, it is what it is."
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BRAD SMITH: Joining us now, we've got Ryan Detrick, Carson Group's Chief Market Strategist here live in living color with us. Ryan, great to see you in person today.
RYAN DETRICK: This is a great studio. I'm glad to be here, guys.
BRAD SMITH: Appreciate it. We put a lot of work into it here. Look, you put a lot of work into these calls over the course of this year. Some of them unpopular at the time that you made them. Why do you continue to stick by them, and at what point do you kind of reverse or change course?
RYAN DETRICK: Yeah, Brad. You think about-- a month ago right now, we were in a correction. It felt like the end of the world, yet if we look at-- really, the consumer. I mean, I know you guys have talked about it. The consumer.
We're still making 200,000 jobs every month. Productivity is strong. We're looking at all-time record high earnings next year. Things aren't perfect.
Delinquencies are creeping up. We're aware of some of the cracks that are out there. But just overall, it still makes sense to us, when you look at the overall picture of a market that simply is seeing more participation, right?
We all know seven stocks are going up, kind of disagreed about that. But now, we're seeing way more participation just in the last four weeks or so. So again, we can get into some of the more things we see. But we've been overweight since December last year.
People hated that when we did it. We're still there. We still think next year, the bull market is here. And there's not going to be a recession either.
SEANA SMITH: Ryan, when it comes to some of those opportunities that you are identifying right now-- you just mentioned the outperformance, obviously, of the Magnificent Seven this year. Where do you see leadership coming from next year?
RYAN DETRICK: Yeah, you think about it again. A year ago right now, right, tech stocks were getting crushed. Magnificent Seven, most of them were cut in half, if not more.
What do you hate right now? People don't really like small caps as much. Now maybe they do a little bit more because of the rally. But we like small and mid-caps because we don't see a recession.
We also see a Fed, like the great discussion you just had. The Fed is probably done. We've been in that camp. Will they start cutting? Maybe middle of next year.
But again, if you don't have a recession, and the Fed starts to cut-- we think that small and mid-caps and cyclicals, in general, those are the areas we've been tilted to in the models we run for our Carson partners. We still like those areas. I mean, you think about what's cheap. I mean, there's not a lot that's cheap out there. Small and mid-caps are cheap, relative to large caps on a historical basis.
SEANA SMITH: Ryan, if you do, though, see a mild recession-- I know you're not expecting him as some other strategists out there are forecasting a mild recession. Does that at all change where you're seeing the opportunity?
RYAN DETRICK: I mean, sure. It would. I mean, again, we would probably want to shift a little more overweight to the more defensive areas.
But what's the market telling us, right? We're seeing the defensive areas, your staples, utilities, a little bit of real estate, still lagging. And that's normal for a healthy bull market. So until we see that change, it's hard to get overly cautious, I guess I'll say.
BRAD SMITH: Does the political environment that surrounds a lot of central banks, at this point going into a major general election year, not just here in the US. But in certain other developed nations around the world as well. You think about that, how do you layer that into your investment thesis?
RYAN DETRICK: Yeah. I mean, believe me. Central banks matter, obviously. We just had a bunch of hikes. We saw what happened.
And again-- you know, let's talk about the election for a minute, right? I mean, pre-election years normally are pretty strong. Well, when you have a first term President, that's a piece of 20% on average. We talked about this, I think, like, a year ago to be honest. Here, we're up 20%.
When you go to the election year of a first term President-- the last 10 have been higher. So election year has been higher in the last 10 times of the first term President. There's lots of other factors. We're aware of that. But when the fundamentals are there, it is what it is.
Washington can pull some certain levers to keep things moving. And we still think it's not a reason to be worried just because it's an election year. I'll put it that way.