Jeff Kilburg on S&P 500 New Highs, Volatility, and Rebalancing Strategy

Market Outlook and Volatility

• 📈 The S&P 500 is expected to retest all-time highs, potentially in early Q3, despite geopolitical tensions.
• 💡 Acknowledging the market's emotional swings and recent 25% rise from 4,800 to 6,000, the current environment is characterized by positivity from earnings and consumer strength.
• ⚠️ A new volatility regime is anticipated in 2025, suggesting that current market movements may not be sustainable long-term.

The Importance of Rebalancing

• 🔑 The word of the day is rebalance, emphasizing the need to book profits as the market moves higher.
• 🧠 It's prudent to rebalance into this market strength, especially given the emotional trading and hindsight analysis prevalent among traders and analysts.
• 🌍 Global headwinds and geopolitical tensions contribute to the expectation of increased volatility.

Defense Stocks and Industrials

• 🛡️ Defense stocks, such as those in the industrial sector ETF (XLI), have been leading the S&P 500, up nearly 10% year-to-date.
• ✈️ Despite geopolitical tensions, there's no immediate need to trim exposure to industrials or defensive names, as names like Lockheed Martin may see increased interest.
• 📊 Valuations for some defense companies like Northrop Grumman and RTX are trading near or just above the market's valuation.

Mag 7 and Amazon Pick

• 📉 Concerns about overconcentration in the Mag 7 stocks have led to significant repricing and revaluation of these companies.
• 📦 Amazon is highlighted as a top pick due to its recent pullback and strong growth in AWS, which represents a 41% growth engine year-over-year and is valued at $1.5 trillion.
• 💡 Custom chip development and the strategic approach to AWS are key drivers for Amazon's potential.