In Episode 209 of Facts vs Feelings, Carson Group’s Ryan Detrick, Chief Market Strategist, and Sonu Varghese, Chief Macro Strategist, celebrate the bull market turning four. With the S&P 500 up about 128% on a price basis and 131% including dividends since October 2022, the hosts note that no bull market in the last 50 years has made it past its third birthday and failed to reach a fifth. They explain why this one is being driven by earnings rather than valuations: of the 128% price gain, roughly 85 percentage points came from profit growth, and 40 of those from margin expansion, while forward P/E multiples have fallen from about 22x to roughly 19.5x this year as Treasury yields climbed.
From there, Ryan and Sonu unpack the market’s biggest stress points and risks. They look at why triple-C spreads are blowing out while the broader high yield market and loans are holding up, and why that points to an interest rate problem rather than a credit problem. They discuss strong Treasury auction demand, the rapid growth of hyperscaler bond issuance as a share of net Treasury borrowing, and SpaceX’s $150 billion in fundraising and its threat to telecom stocks. Sonu also warns that billions in AI compute contracts begin billing in 2027 to 2029, making 2027 and 2028 the potential reckoning for the AI capex cycle.
The episode wraps with a look at the Russell 2000’s slide against the S&P 500, the dollar breaking above 100 on the Dixie, the case for staying diversified, and a preview of next week’s midterm election episode with Libby Cantrell of PIMCO.
[Key Takeaways]
- The bull market turned four with the S&P 500 up about 128% (131% with dividends). Every bull market in the last 50 years that passed its third birthday went on to a fifth, and year five has historically been strong, with the last fifth-year bear market coming in the 1960s.
- Earnings, not valuations, are driving returns. About 85 percentage points of the gain came from profit growth, including roughly 40 from margin expansion, versus only 33 from multiple expansion. This year, forward P/E has fallen from about 22x to 19.5x, a roughly 15-point drag offset by 29 points of profit growth.
- Triple-C spreads are near 900 basis points, but high yield overall is flat and interest rate-hedged high yield and loans are beating cash. The hosts see a duration problem from rising yields rather than a broad credit problem.
- Hyperscaler bonds have jumped from 1% to 2% of net new Treasury borrowing to about 14% over the last year. SpaceX has raised roughly $150 billion in four months, and its five-year CDS hit a record 200 basis points.
Jump to:
0:00 – Welcome And A Bull Market Birthday
1:34 – Nobel Prize Irony And Fed Mistakes
4:27 – Triple C Spreads Versus Real Stress
10:59 – The Economist Cover And Bond Fear
15:41 – Bond Auctions And Who Buys Treasuries
17:01 – Hyperscaler Debt And SpaceX Funding
23:30 – OpenAI Headlines And Market Breadth
28:30 – The AI Capex Bill Comes Due
35:12 – Dollar Strength Gold And Diversification
37:07 – Bull Market Turns Four The History
42:11 – Profits Margins And Multiple Contraction
51:28 – Small Caps Versus Higher Yields
53:19 – CPI PPI And What We Watch Next
57:14 – How To Support The Podcast
Connect with Ryan:
- LinkedIn: https://www.linkedin.com/in/ryandetrick/
- X: https://x.com/RyanDetrick
Connect with Sonu:
- LinkedIn: https://www.linkedin.com/in/sonu-varghese-phd/
- X: https://x.com/sonusvarghese?lang=en
Questions about the show? We’d love to hear from you! factsvsfeelings@carsongroup.com
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