Would it be actually a good thing at this point to have a recession?

So I don't think I want to be on tape saying recession is a good thing, but I understand the logic associated with that.

So maybe we use the word consolidation or pullback, something like that.

I do think it would benefit the market.

to see a little bit of a washout and some of these areas that have gotten overbought bring things back down to earth a little bit then we can kind of have a nice restart and that's what you're referring to and i think that could be an option one of the things though to get that recession we have to see the fed continue to hike rates and i know right now we've got two more hikes i think priced into the market one in december and one in march however I do think you have to price in now, and we'll have to look and see over the next couple of days what this looks like.

But you now have, following that election, you're going to have less, I think, stimulus in 2027, not necessarily just because of the sweep that we saw.

But I think it's because you look at 2026, we had the one big, beautiful bill.

So having had that pause, Do we now get the classic, the midterms are over, we see a rally, and like see Santa Claus come before we get to where we see more of that struggle in 27? Yeah,

Tell us about your views on it now.

Yeah, so originally when we look into it, we really like it because of its business itself, right? It's dependable items that people use consistently every year, every quarter.

And we like that, something that generates consistent revenue.

But it's been struggling.

And at the beginning of the year, like you said, it's down about 50% this year.

A lot of that coming from that whole SaaSpocalypse scare that we had, where it wasn't just Intuit.

I mean, it was Adobe.

Tell me a little bit more about that.

Victoria, what do you think? I mean, would this be a big market moment if we saw more of these postponements, delays pulling all together?

together?Look, Leslie, at kind of what's been driving this economy, it is all of this AI related information, right? It's the CapEx component coming from that.

It's the data centers.

We've seen that rotation in the market and those sectors kind of take the lead previously.

So if all of a sudden that's pulled away, I do think it gives the market a little bit of a pause.

I think it's gonna be time for people to say, "Wait a minute.

If we're not gonna have that tailwind to the market, who is gonna step up? What sector is gonna step up and take the lead if it's not gonna be energy, if it's not gonna be tech, and we're not gonna have that CapEx?" Then I think you start wondering more about the pipeline that's coming with inflation, with higher prices.

Maybe if that does slow down a little bit, that could provide a, a better case for, for Treasuries.

Victoria Fernandez, what does it mean for rebalancing? Do you less rebalance and let tech go, or do you have increased scrutiny on rebalancing a portfolio?

Think it's gonna be more of the latter, Tom, and I think that's because of what we're talking about in regards to these correlations.

I mean, every day a stock can change, right? I mean, we've seen that with Microsoft.

We've seen it with SK Hynix.

We've seen it with a ton of names.

You have to be able to be tactical.

So little bites at the apple is what we're saying.

Um, what's your view of kind of how corporate America is delivering on the earnings front?

How much do you agree with what we've heard from some regional Fed presidents, which is that companies are asking for action as they see both the momentum increase in tandem with prices?

Yeah, you know, Lisa, it's- it's an interesting topic, because you always have people when oil prices come down, they wanna know why they're not, you know, moving fast enough to- to bring oil prices down, and yet at the same time, they wanna know why these oil companies aren't investing more cash.

Why aren't they drilling more? Why aren't they doing more things? Um, a- and they have to have the free cash flow to do that, and I know their balance sheets are really strong right now.

Energy is the best performing sector, um, that we've seen so far this year.

So I think there's an element here that the energy companies are really kind of sitting on their hands a little bit, because they know that when the Middle East conflict is resolved, they're going to see that drop in prices.

Look how quickly we saw prices come down almost, what, 25, $30 a barrel for Brent and WTI when we had the memorandum of understanding, and we've seen it go back up in the last few days.

I do think there's gonna be a lot of volatility here.

Is that a fair assumption, a fair conclusion?

How much do you agree with what we've heard from some regional Fed presidents, which is that companies are asking for action as they see both the momentum increase in tandem with prices?

Yeah, you know, Lisa, it's- it's an interesting topic, because you always have people when oil prices come down, they wanna know why they're not, you know, moving fast enough to- to bring oil prices down, and yet at the same time, they wanna know why these oil companies aren't investing more cash.

Why aren't they drilling more? Why aren't they doing more things? Um, a- and they have to have the free cash flow to do that, and I know their balance sheets are really strong right now.

Energy is the best performing sector, um, that we've seen so far this year.

So I think there's an element here that the energy companies are really kind of sitting on their hands a little bit, because they know that when the Middle East conflict is resolved, they're going to see that drop in prices.

Look how quickly we saw prices come down almost, what? 25, $30 a barrel for Brent and WTI when we had the memorandum of understanding, and we've seen it go back up in the last few days.

I do think there's gonna be a lot of volatility here.

Is that a fair assumption, a fair conclusion?

How much do you agree with what we've heard from some regional Fed presidents, which is that companies are asking for action as they see both the momentum increase in tandem with prices?

Yeah, you know, Lisa, it's an interesting topic because you always have people when oil prices come down, they want to know why they're not moving fast enough to bring oil prices down.

And yet at the same time, they want to know why these oil companies aren't investing more cash.

Why aren't they drilling more? Why aren't they doing more things? And they have to have the free cash flow to do that.

And I know their balance sheets are really strong right now.

Energy is the best performing sector that we've seen so far this year.

So I I think there's an element here that the energy companies are really kind of sitting on their hands a little bit because they know that when the Middle East conflict is resolved, they're going to see that drop in prices.

Is that a fair assumption, a fair conclusion?

How much do you agree with what we've heard from some regional Fed presidents, which is that companies are asking for action as they see both the momentum increase in tandem with prices?

Yeah, you know, Lisa, it's- it's an interesting topic because you always have people, when oil prices come down, they wanna know why they're not, you know, moving fast enough to- to bring oil prices down, and yet at the same time they wanna know why these oil companies aren't investing more cash.

Why aren't they drilling more? Why aren't they doing more things? Um, a- and they have to have the free cash flow to do that, and I know their balance sheets are really strong right now.

Energy is the best performing sector, um, that we've seen so far this year.

So I think there's an element here that the energy companies are really kind of sitting on their hands a little bit because they know that when the Middle East conflict is resolved, they're going to see that drop in prices.

Look how quickly we saw prices come down almost, what, 25, $30 a barrel for Brent and WTI when we had the memorandum of understanding, and we've seen it go back up in the last few days.

I do think there's gonna be a lot of volatility here.

Is that a fair assumption, a fair conclusion?

So I... what do you make of it? Because Smith is, is, do you think he's bending with the times, and how important is it sometimes to say, "Hey, maybe my formula doesn't work"?

Yeah, I mean, Charles, look, we know when you're going all in on momentum, you are taking a risk.

You're rolling those dice like you're in Vegas on that 'cause like you said, it can turn quickly.

We've seen evidence of that just in the last couple of weeks.

You have a day where momentum does well, and then you turn around and the next day and it's falling, um, you know, falling down.

So with the fact that we've seen momentum and beta come back pretty significantly as of late, perhaps he's stepping in and doing a whole kind of buy the dip mentality on there.

But I don't think I would put my whole, uh, all my eggs in that basket with momentum right now.

You have belief that that's gonna happen again.

Just elaborate a little bit more if you can, where are you expecting to see weakness?

Yeah.

Well, I think, Jonathan, when you typically have this unwind of momentum, of, um, of beta in the markets, you do have markets tend to go a little bit weaker for the next 30, 45 days.

Doesn't mean you have a huge pullback, but you do have a little bit of a consolidation, and I think we're seeing it within parts of the market.

Maybe we don't see it within the entire market, but there are certain sectors, and you guys have been talking about them, where we've been seeing some of this come down, and you're also seeing, um, within the sectors, not everything is responding the same.

So look, semis, you look at semis, Russell 3000 semi industry group, you only have about 15% of those names above their 20-day highs.

So you had this big peak, you had this bubble kind of formation going on here, and now you're seeing the trends start to come down, and that's some of the weakening that we expect to see in the market, and maybe we'll see it in other areas.

I mean, at what point do some of these bills start adding up and becoming cost-prohibitive?

Does one geopolitical deal actually move the needle on the consumer's stress? Or are those cracks too deep, Victoria?

I think it gives the consumer an opportunity to kind of refill the coffers, right, refill some of those things that have been buffers for them.

So they've been spending down their savings as gasoline prices were much higher and as inflation was higher.

They spent down savings.

There was a lot of liquidity put into the market that helped them.

And some of that might be coming off a little bit, but perhaps they get a little bit of reprieve.

The tax refunds and lower gas prices should be able to help them pull through if we start to see inflation come down a little bit.

Does that resolve the uncertainty or make the picture murkier heading into summer?

What are you seeing that's leading you just to be a little bit more tepid about the state of the American consumer?

Yeah, so you know, Dani, it's really amazing when you think of how well the consumer has held up, um, over the last month, as we've been very concerned about things that are happening.

Um, and you're looking at wages that are really stagnating.

You're looking at the difference between real wage growth and real consumption.

That continues to widen as savings continues to come down.

We had a little bit of improvement in consumer confidence, but it's still very low.

We're back below levels that we saw in COVID on some of those things.

Even if there is some softness in hiring, how do you factor that into your trades at the moment?

So which one do you think is the bigger, uh, kind of factor when it comes to the action that we're seeing today?

Yeah.

Well, obviously what we've been seeing is that kind of decline of momentum and high beta together.

So I think what people are saying are, "Where can we go that kind of hedges that tech trade? What would be the antithesis of the momentum and the beta?" And so I think you're seeing elements like healthcare, or at least specific parts of, of healthcare.

Um, you're seeing pharma, biotech.

Those are the areas that we would look at.

You're seeing some elements go into financials as well, into energy.

How does inflation factor into this market? How does it, how does this whole situation factor into the Fed with new chair Kevin Warsh taking that seat?

Is that likely? Or, "No, we're just gonna assume this can't go on for that long, so it won't."

It's likely if we do not see any kind of measurable improvement in the situation, I would say by the end of June, um, because if you look at when we walked into this Iran war, we actually had, um, crude supplies at very high levels coming in, which has actually saved us a little bit.

It's one of the reasons oil has stayed, you know, kind of where it is around that hundred dollar mark and not gone sufficiently higher, and we've also had a lot of strategic reserves that have been released.

But you're right, that is gonna run out pretty soon, and we've had CEOs of Chevron, of ExxonMobil, that have come out and said, "Be careful, because if this doesn't, um, get resolved pretty soon, we're gonna have a hundred and fifty dollar oil." And I think that could happen.

At some point, the market is gonna say, "Wait a minute, we've been doing this way too long.

We thought we would be able to get through this okay, but now we're starting to see inflationary pressures work their way through from that headline number down into the core number." And that's, I think, when it's gonna happen, Chuck.

When people say, "Oh wait, my food prices are higher, significantly higher because of this.

If we see rate hikes and we see oil above a hundred and twenty-five percent, at that point as a market strategist, are you planning for recession?

And now, even though we've had five weeks of selling and now six weeks of gains, what do you think about a name like Cisco today after the bell? Yeah, you

know, it's interesting.

We've really kind of had two different markets going on, the tech market and everything else.

So when you look at a name like Cisco, you mentioned, you know, revenues are supposed to be about $15.5 billion.

That's up 10%.

So there are expectations that it'll be pretty good numbers.

The earnings at the high end of the guidance, that's real good.

You know, how do you sort of evaluate the valuations on some of these stocks or and or something like the Nasdaq or the triple Q's? Well, we've

What is priced into this market regarding this Trump-Xi summit?

I'm not sure there's too much priced in, and I don't think there's a lot of expectations actually that we're gonna get a lot coming out of this.

I think people say there's not gonna be a lot of practical elements coming out of it.

There'll be talk, there'll be some headlines, there'll be more discussions to follow, but I don't think we're going to have big market movers coming out of this unless the whole group of CEOs [laughs] that are going actually have some kind of news, they're signing deals, they're promising things, and there's a change in regards to tech distribution to China out of the US.

That could be maybe the largest headline that we see.

So let's talk a little bit about tech, 'cause this is a market that seems to be, as you put it in your notes, uh, operating on two different economies simul- simultaneously.

It seems like it.

We have our AI economy and everything associated with that.

It was headlines they moved us into the green when it comes to the S&P, the Dow, and the Nasdaq.

Yeah, I think that's exactly it, Frank.

I mean, it was headline driven and concern around the price of oil.

When we heard that the strait was going to be closed, we saw what happened there, and especially, um, last night, overnight, looking at what the price of oil did and how that drove the S&P down below that December low.

We were getting to the point where we were gonna have to be concerned about that 200-day moving average.

But I think another important component of this is look what it did to bond yields.

We were up last night over 420, so almost to the top of that four to four and a quarter range that we have been in for so many months, and now we're back down.

Is it still a high-risk bull market? Is it still a bull market?

So down in the energy, uh, land, Victoria, somebody's gonna call up today and say, "Go to cash." How do you respond to a Crossmark client afraid?

Yeah.

Luckily, we haven't gotten those calls yet, Tom, but we don't really wanna see our clients go to cash at this point in time, and really because it's this rotation that we're seeing in the market that we think tells us there's still strength ahead.

When you're looking out on a six, 12-month investment horizon, we're not changing what we're doing for our clients right now.

We're staying invested in those companies that we like.

You know, we always talk about the strong balance sheets, the good cash flows.

These are the companies that we've been invested in.

What are your thoughts on those numbers?

But what are you talking about? We usually use it in reference to a person, but what are you talking about?

Yeah, well, I think the market kind of has its own personality these days.

We can talk about it as a person, and I think it's a great description of what we're seeing.

When you talk about a person, it's sudden mood changes, things changing for an individual in the way that they look at things.

The market is doing the same.

This week is a perfect example, Frank.

Look at the changes that we've seen in this market from day to day based on headlines out of Davos, based on things we've heard out of Japan.

It's PNC, a regional bank.

On this conversation, Victoria, how do you feel about some of the big tech names and specifically the divergence that Mackenzie was talking about? Does it present opportunity for you?

Yeah, I think you definitely have to start looking at the tech space, not as just, you know, one big group that you can just kind of pick any name in there and you're going to do well.

There's definitely going to be some divergence between those names as McKinsey was talking about.

You've got to look at those that you think will actually have a return on the investment from the CapEx component that they have.

And I think you also have to start looking at maybe the second derivative of the AI play.

What are those companies that are actually going to put it to use the best Those are the companies that I think you can look at investing as well.

So tech will be a little bit trickier, although, Sarah, they are expected to be almost 50% of the EPS growth in 2026.

How do you expect it to impact the economy overall next year?

What are you thinking in terms of the big themes you're anticipating from some of those sectors that you mentioned?

mentioned?Yeah, I think everyone's going to be looking at the CapEx, not just for those AI names, but across the board.

That's really a driver, I think, of some of the optimism that we have is this increase in CapEx, some of that due to the OB3 bill that was passed and the tax advantages associated with that.

But we know CapEx helps growth, it gives you increased productivity, increased profitability, so people will be watching for that CapEx component.

I think we're also gonna be looking at those retail names to see how does that consumer continue to spend? We know there's this divergence and it's gonna be focused on the high income consumer.

Will they continue to support the economy with their spending? So, we'll be paying a lot of attention to that, and really what the expectations are for profit margins.

Whether you're looking at EPS growth, revenue growth, or profit margins, those numbers are getting really high for 2026.

What are you expecting from the administration to make sure they keep that growth continuing?

When you're talking to clients, how do you talk to them? What are the criteria to pick winners, potential winners at least at this point?

Within AI themselves? Yes.

So we're actually underweight, a lot of the AI names versus the benchmark, and we're trying to spread things out a little bit because we don't want to put all of our eggs in that basket.

Start looking maybe at some of the secondary players in AI.

Who's actually going to put AI to work the best going forward? We've had a lot of talk about health care today.

Maybe it's health care that's going to use it really well, or manufacturing, other type of industrial names.

I

so what's the thesis? Is this a trade-down play for higher-income people who are going to trade down to this? If you're worried about these two things, why pick something that's directly reliant on the strength of the consumer and the labor

Yep, yep.

... on EPS growth, right? And revenue growth close to 7%.

Uh, again, we look out and we go, but...

If the consumer is starting to slow, they, the consumer doesn't have to fall off a cliff, but if the consumer's slowing, and we saw real spending come out at being flat, um, last week, then you're looking at less spending, you're looking at revenues coming down, you're looking at margin compressions.

All of these things tells us that we should see earnings start to pull back-

What is the, what is the behavioral change in CrossMark clients from a 3.6% money market fund?

Yeah, I think clients before were okay letting cash sit around.

They didn't feel that opportunity cost so much because they were earning, um, higher rates in that money market.

So how do you feel like the economy and the markets are positioned into next year?

yeah Mike I think definitely we can look and say okay we've gone through this soft spot in the economy we saw that five to six percent pullback and we look at things you know that are not doing well we looked at weaker ISMs like you mentioned we look at a weakening labor market We had concerns around credit, especially private credit, concerns around AI, breadth deteriorating, all of these elements that we've been focused on the last few weeks, especially showing us that we've had this slowdown.

But all of a sudden, there's these little green shoots that I think people are trying to grasp onto.

So you look at something like spread starting to tighten a little bit.

weekly jobless claims not showing the same type of information that we're seeing from ADP.

You're seeing seasonality components.

We're seeing holiday sales start to do pretty well.

So would you be looking into those types of sectors?

Have you ever seen a freak out like this one, over a 2 to 3% pullback on the S&P 500?

Yeah, I mean, yes, we have seen these pullbacks before, and it was what you were just talking about.

When we have that breadth deterioration in this market, when you have this internal weakness kind of bubbling under the surface, but at the same time, you have this, for lack of a better word, you have this exuberance, you have this, um, sentiment that is extremely bullish, at some point, those two worlds start to collide and you see this pullback.

But look, Jonathan, we are still not that far below all-time highs really when we look at the markets as a whole.

So I still think there's probably some room to see more pullback, especially when you're seeing small caps down as much as they are.

We know the tech stocks kind of led this rally.

We see them leading the pullback we're having here.

Is this gonna be the reverse of that? Retail selling and then eventually institutions chasing that as well or are they stepping in to actually pick this up?