S&P 500 to 8,200: Where to Invest Before the Next Leg Higher

[00:00:00]Joining me now to kick off the week is Mark Gibbons, CIO of Gibbons Capital Management. Mark, great to have you here.

[00:00:05]>> Thanks for having me.

[00:00:06]>> All right, so uh coming off the long holiday weekend, S&P 500 only about a percent and a half away from all-time highs. What's the real state of the market right now? Do you look at this as another leg higher or do you look at it as uh you know, prepare for more volatility?

[00:00:23]>> I guess I look at it as consolidation before another leg higher. So we're in this period before earnings, you know, start being reported. So we have a couple weeks here or so before we, you know, we hear start hearing from Delta, you know, the banks, etc. And but the the overall earnings picture looks really good. So uh, you know, Q1 we were looking at about 30% earnings growth.

[00:00:42]Uh, Q2 we're looking at over 20% earnings growth. So the story that corporate America is telling us, you know, looks very, very positive. We still have the AI buildout going on. The consumer now doesn't have to worry about gas prices at the pump. So we are making a lot of good progress here >> and we do actually have micron earnings this week. Is that the next real test for AI?

[00:01:03]>> Yeah, I would say it's kind of a miniature test but it's going definitely going to be a test uh about the memory trade and obviously Micron has done you know exceptional this year. Um and actually you know some of some of the memory players probably still have quite a bit of room left to go. um you know, analysts are still trying to catch up their price targets to what's fundamentally happening on the ground with those companies. So, it's a little bit of a test and then we're going to get the real test when we start getting Q2 earnings.

[00:01:30]>> Would you buy Micron ahead of earnings up 320% year to date?

[00:01:35]>> We do own a little bit of Micron right now. Uh I'm not going to buy it uh pre-earnings release, but we do own a little bit of it. We have some exposure there to the memory trade. Uh we have exposure, you know, to the broader AI buildout trade. So connectivity uh you know GPUs, CPUs etc. >> What would you buy in the AI space right now?

[00:01:52]>> Gosh uh looking at the space in totality uh I really like connectivity. So you know talking about a name like Kredo Technologies. So you know they basically provide cables that come in at a better you know cost point uh better energy efficient point than many of the traditional optical providers. So I think uh you know they're a pretty good company. Uh I also like AMD right now. I know it's had a stellar run as well, but I don't think the CPU piece of the data center buildout is really fully priced in yet. Uh so I think those kind of companies uh with their compute power and maybe maybe traditional compute needs are still being undervalued.

[00:02:27]>> Okay. So you talked about maybe potentially some consolidation ahead of the next earnings season. So that means we could potentially see some red arrows, right? But ultimately you have an 8,200 price target on the S&P 500 by year end. Last you were on, earlier this year, you had an 8,000 price target. So, what makes you even more confident now?

[00:02:46]>> The delivery of the earnings. It's all about the earnings. So, when you see numbers close to 30% on Q1, you see the 20% for Q2 and you see 20% built out over time over the coming quarters. I mean, it's just it's power powerful earnings growth. And when you look at, you know, valuations, we're not talking about really stretched valuations. So, I think we're currently trading around 21 times the S&P 500. So, uh, the earnings really tell the story there.

[00:03:11]>> Yeah, I I saw your notes. You say this is a difficult market to poke holes in.

[00:03:15]What could ultimately prove your 8200 price target wrong?

[00:03:20]>> I would say it would have to come from the inflation front. So, there are some things coming down the pike um, you know, have existed really uh, at least partially due to the Iran war conflict.

[00:03:30]Um, so I would say if we're talking about, you know, rate hikes and multiple rate hikes in the Federal Reserve, I don't think that's what's going to happen. So, I'm more in the camp of we're probably going to be playing this out flat the entire year as far as the Federal Reserve is concerned. I don't think they're going to raise rates. I don't think they're going to probably cut rates. Um, but again, I would say a Federal Reserve reaction to inflation later in the year is probably the biggest hurdle get over, but I think that's going to be a smaller hurdle than most people think.

[00:03:56]>> So, you don't think we'll see any right hikes or cuts for the remainder of this year?

[00:04:01]>> I think that's the most likely outcome uh is no no hikes, no cuts. uh you know, kind of play it simple. You know, Wars just got in there. He's starting to implement his agenda. He wants to look at, you know, more forward-looking metrics than the Federal Reserve has traditionally, you know, looked at. So, I I think that's I think that's a pretty good bet.

[00:04:18]>> We'll also be getting the results of the bank stress tests this week. Do you think that financials could continue to be this catch-up trade? It obviously had been an underperforming sector year to date, although it's been doing well this month.

[00:04:33]>> Uh I I do think so. Uh so you know we hold positions in uh you know banks like uh Goldman Sachs uh JP Morgan PNC. What we really like uh probably the most is Goldman Sachs. So we're talking about you know a company that's only trading at you know 18 times forward earnings and look at the runway they have for it's coming into the capital markets. We just got the uh SpaceX IPO uh went you know went off without hitch. We're looking you know down the pike. We're looking at you know Open AI. we're looking at Antropic uh and a lot of other names um in the AI trade that are going to be coming to the public markets. So we like the fact that you know that Goldman is going to be playing in that space and then on top of that you have companies like you know Nvidia, Google that are trying to go to those capital markets and raise additional capital be it through equity or be it through debt.

[00:05:18]>> You mentioned SpaceX going off without a hitch aside from the fact that it is quite a bit lower than where it was just a few days ago. So is SpaceX at 170 a of an opportunity here?

[00:05:30]>> I think it could be longer term. Um so you know it is it's going to be probably trading a little bit volatile uh because it's a brand new company. People are still trying to price it. I mean if you look at metrics like a you know price to sales I think we're looking like 125 or something like that. So on traditional metrics it's really hard to value. Um you know if you have a longer term time frame um it may be a good time to get in.

[00:05:52]>> Meanwhile energy has had a tough month.

[00:05:55]oil is below $80 a barrel, but it's still the second best performing sector year to date behind technology. Do you look at that as an opportunity or what price does oil have to be for it to be a buying opportunity for you?

[00:06:09]>> You know, uh we don't have very much exposure in the energy space. It's not some uh some place that we're looking to, you know, put our capital to use, but if I were, I'd probably be looking at places that are trying to rebuild facilities in the Middle East, something like that. Um but you know what we're mostly concentrated on right now are you know uh tech uh you know communication services, financials, industrials that those kind of areas of the market.

[00:06:32]>> Do you expect it this to continue to be a techdriven market or do you expect investors to ultimately be rewarded for you know kind of broadening their exposure?

[00:06:41]>> I think it's still going to be a techdriven market but I am also going to caveat that with uh that I do think you know it's going to broaden out but tech's going to lead. So you kind of get the best of both worlds. So there's other places to go. Um, but it's going to be led by tech.

[00:06:55]>> So for investors with extra cash right now, what do you tell them?

[00:07:00]>> Uh, I would say, you know, the buildout of the data centers is not going to be stopping anytime soon. That's obviously a place to make sure you have exposure to. Um, so that's that's really key right there. Um as far as other areas uh you can go to um you know banks uh financials we discussed earlier um you know industrials lots of good uh spots in the communication services space. So u but I would say the core part of your portfolio um should be you know have some uh uh touching to the AI trade.

[00:07:32]>> Okay. And if we do get some consolidation over the next couple weeks like you might be expecting uh what's top of your shopping list? Give me a few names that you'd be buying aggressively on a pullback.

[00:07:44]>> I'd be buying aggressively on a pullback. Um, you know, I think Nvidia itself is really just, you know, it's not being paid attention to in the markets. Um, it's trading at a relatively low uh valuation. Obviously, we know the buildout story. Obviously, we know the GPU story and that continues to roll on. So, I don't think investors are fully valuing that company. Um but you know some of the other players I think the CPUs uh you know it's it's a different part of the data center it's more traditional um but I think they're just starting to come online. So you know there are names out there like um AMD there are names out there like Intel even an ARM holdings. Um so I think CPUs is really going to be a place to go. Um and I think connectivity so coming back to you know uh players like Marll uh Credto technology um so we're talking about the cables and optical um and those solutions that are within the data center >> and just to confirm these are names that you would buy now you'd kind of dollar cost average in or you'd wait for a pullback?

[00:08:49]>> I would probably dollar cost average in.

[00:08:51]So, um, most, if not all those positions are already laid out, but, um, I'd probably dollar cost average in something like that kind of tiptoe, uh, as we go through this consolidation.

[00:09:01]>> Okay. All right. I think this is a great time to transition to our rapidfire round of this or that. You've played before, quick questions, quick answers.

[00:09:08]Are you ready?

[00:09:09]>> I'm ready.

[00:09:10]>> S&P 8,200 by year end. On track or a stretch?

[00:09:15]>> Certainly on track. So, we may get that short-term consolidation, but certainly on track. Second half playbook, tech leadership or market broadening?

[00:09:23]>> I hate to play both sides of the fence, but I'm going to. So, I have you may need to have some exposure outside of the tech trade, but tech is going to lead. So, uh, a little bit of both.

[00:09:32]>> Add risk here or lock in profits.

[00:09:35]>> F1 of the two, add risk.

[00:09:37]>> Deploy cash now or wait for a pullback.

[00:09:41]>> I would be uh deploying a little bit of cash right now.

[00:09:44]Biggest second half risk, inflation or midterm elections?

[00:09:49]>> Inflation.

[00:09:50]>> Large caps or small caps for the rest of 2026?

[00:09:54]>> That's a good question. I prefer I prefer large, although we do hold some small cap exposure.

[00:09:58]>> Gold or Bitcoin?

[00:10:00]>> Bitcoin.

[00:10:01]>> Rate cut by year end. Yes or no?

[00:10:05]>> Uh, I don't I don't think so. It's possible, but I don't think so. I think it's more likely flat.

[00:10:09]AMD or Nvidia?

[00:10:13]>> Right now, AMD, but in they're both great companies and we have exposure to both, but right now AMD.

[00:10:20]>> AMD or Micron.

[00:10:23]>> AMD.

[00:10:25]>> Qualcomm or Broadcom?

[00:10:27]>> Broadcom.

[00:10:28]>> Microsoft or Oracle?

[00:10:31]>> Oracle.

[00:10:32]>> Amazon or Shopify?

[00:10:36]>> Amazon.

[00:10:37]JP Morgan or PNC?

[00:10:40]>> JP Morgan.

[00:10:42]>> Bank stress test. Non-event or catalyst for financials?

[00:10:46]>> Non-event.

[00:10:48]>> FedEx or Carnival ahead of earnings tomorrow?

[00:10:52]>> That's a tough one. I go FedEx.

[00:10:55]>> Tech winner that surged but still looks cheap.

[00:10:58]>> Credo.

[00:11:00]>> One tech name that's fully priced.

[00:11:04]>> Fully priced. Um, I guess maybe you could maybe say SpaceX, at least for the inter room, like I said, it's going to back. It's going to bounce around. It's going to be volatile. It just IPOed, but SpaceX.

[00:11:17]>> If you could only buy one stock today and hold it for 5 years, what is it?

[00:11:22]>> One stock today and hold it for 5 years.

[00:11:25]Um, Nvidia.

[00:11:28]>> One word to describe how you're feeling about the market for the rest of 2026.

[00:11:32]>> Uh, I'm pretty bullish. Maybe not like everybody else out there, but it's hard to deny what's going on in the corporate sector with earnings. You know, we're looking at an economy that's going around 3%. So, um it's it's hard not to look at it as, you know, in a good situation fundamentally.

[00:11:46]>> What makes you boost your 8200 price target?

[00:11:51]>> Uh I would guess higher even higher earnings growth. Uh which is going to be a tough uh but I mean it's just cuz it's already so high. Um but maybe if yeah, if it even accelerates further. All right, we'll have to check back in in with you. That's Mark Gibbons, CIO of Gibbons Capital Management. Thanks so much, Mark. Really appreciate it.

[00:12:08]>> Thanks for having me. If you enjoyed this street talk, check out our Phil interview with Simeon Heyman, where he explains how to diversify in today's