S&P 500 will rally through 2025, but tariffs could change that

Seaport Research Partners managing director and chief equity strategist, Jonathan Golub, joins Morning Brief host Julie Hyman to discuss the trajectories for the "Magnificent Seven" (MAGS) and the S&P 500 (^GSPC) and how tariffs could eventually break up the market rally.

To watch more expert insights and analysis on the latest market action, check out more Morning Brief.

Video Transcript

00:00 Speaker A

So, if you are looking at this bifurcated market, do you want to buy the whole S&P 500 or do you really want to overweight the groups that are doing better on an earnings basis?

00:09 John

I I'm I'm laughing at your question because when you're buying the market, you're kind of are buying a tech basket.

00:15 Speaker A

I mean you are overweight. Okay. But like do you just but do you just buy the tech, for example?

00:19 John

It's a really good argument. If you if you if you said, I'm I'm going to buy, let's say a growth index fund or a growth um mutual fund or what have you,

00:26 John

15 years ago compared to buying the broad S&P, you would have done dramatically better. And if you look at, you know, if you think about the idea of American exceptionalism, it's not everywhere. It really is in the tech suite, maybe some areas in in healthcare or biotech, but

00:36 John

if if you look at the non-tech portion of the S&P and then you compare it to the rest of the world, it kind of looks relatively similar. And then you have this, you know, 40 or percent or 50% of the market that is just delivering, it's not that the that the prices and the stocks are going up. The companies are doing something really special.

00:54 John

It's showing up in their revenues, it's showing up in their earnings, and that's the story. It's not speculation. And um I think it's going to continue. I I don't see any reason why

01:05 John

in the next 3 to 12 months that that's going to turn. And if you look at the numbers the way they're coming in and who's beating estimates and how the market's responding, um there's there's just every signal is that this is going to continue.

01:21 Speaker A

So John, really quickly then, if you don't see any reason why it's not going to continue, is there anything that could slow it down? What would be the roadblock? If you had to pick a risk, what would it be?

01:32 John

Oh, I mean there's always there's always lots of things. I mean, if, you know, we we had um, you know, and and we'll see what happens with the with with the tariff discussion in the Supreme Court, but um, economists broadly expected these tariff issues to have a big impact on the economy and it's had virtually no impact, not virtually no, but very, very little. And it's possible that it is having an impact, it just takes a, you know, an extra several quarters for it to play through.

01:54 John

So you could have the economy turn weaker. I I don't think that if it's a little bit weaker, that's going to affect how we implement AI across our entire economy and society. But if if you did see the unemployment rate start to pick up, you know, companies would would change their spending behavior.

02:12 John

The um and you I think you covered it in your last segment, the employment situation is pretty tepid. It's really strange. We have a a pretty good economy if you measure it, measure it the way that we do if if we're looking at markets and then if you look at jobs, jobs are weaker.

02:26 John

It's possible that we could have negative job growth once the government opens up and starts reporting these numbers again. And, you know, that could cause corporations to cut back on spending.

02:37 John

Do I think that those are going to happen? No. Do I think it's a real risk? Absolutely. And and we're, you know, we're we're really, we're tracking it.

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