Meghan Shue on Labor Market Weakness, Earnings Season, and Equity Market Strategy

Earnings Season and Market Outlook

• 📈 Earnings season is underway, with expectations for robust earnings growth in 2026, potentially exceeding initial forecasts of 13% to closer to 14-15%.
• 💡 While multiple expansion is unlikely due to rich valuations, the market is expected to look past near-term softness towards continued strong earnings.
• 🎯 The strategy involves being fully allocated to equities, with a focus on higher quality investments within that space.

Labor Market Concerns

• ⚠️ A significant weakness or stalling in the labor market is identified as a red flag, complicated by reduced immigration and inflows.
• 📉 Softness in private payrolls is a particular concern, with expectations for a softer first half of the year followed by a recovery in the second half.

Equity Market Trends

• 📊 Tech valuations have remained relatively stable over the past two years, moving sideways due to strong earnings growth.
• 🔄 A shift is anticipated, with non-tech companies expected to show improved earnings growth, leading to a broadening of equity market participation.
• 💰 The trajectory of hyperscalers using debt to fund capital expenditures needs to remain in check.