Voya Investment Management CIO on Market Outlook and Investment Opportunities

Market Outlook and Year-End Trends

• 💡 The market may continue to grind higher into the end of the year, supported by strong earnings growth.
• ⚠️ While there were some market wobbles, a pullback of less than 5% is not considered significant, especially with major averages near all-time highs.
• 🎯 The lead indicator for the market cycle has moved from optimistic to neutral, but major signs of speculation or investor excess are not apparent.

Economic Indicators and Labor Market

• ✅ Recent labor market data, including jobless claims and ADP, suggests that concerns about weakness may be subsiding.
• 📊 The economy appears to be out of the woods regarding significant labor market downturns.

Factors Influencing Market Tops

• 📉 Major market tops and corrections of 20% or more are typically preceded by aggressive Federal Reserve tightening or significant exogenous shocks.
• ⚡ An example of an exogenous shock was the tariff-related event in April, which came as a surprise.

Investment Strategy and Opportunities

• 📈 Despite the S&P 500 being expensive at 23 times earnings, the equal-weighted index at 17 times earnings offers a more attractive valuation.
• 💰 With the Fed easing, periods like this generally yield high single-digit to double-digit equity market returns over a 12-month horizon.
• 🌍 For investors concerned about the S&P 500, emerging markets and healthcare (which has lagged but is finding its footing) present alternative opportunities.

Assessing Speculative Activity

• 🔍 Speculation is assessed by looking at metrics like put-call volume and investor sentiment surveys; currently, significant speculation is not observed.
• 🚫 Unlike the late 1990s tech bubble, current market growth is not based on concepts without earnings.
• 🚀 The current market environment is compared to 1997-1998, suggesting there is still room for growth, particularly in hyperscale capital spending.