Bull market still has legs, chief market strategist reveals why

Key Concepts

• Bull Market Trend: The prevailing upward trend in the stock market, which Keith Learner believes is still intact despite recent pullbacks.
• US Exceptionalism: The idea that the US economy is currently stronger than most others globally, driving market performance.
• Cyclical Sectors: Industries (like Industrials and Materials) whose performance is closely tied to the economic cycle.
• Pullbacks as Admission Price: The concept that temporary declines in the market are a normal part of a bull market and should be viewed as opportunities.
• JOLTS Data: Job Openings and Labor Turnover Survey – a key indicator of labor market health.
• 200-Day Moving Average: A technical analysis indicator representing the average price of a stock over the past 200 days; often used to identify support and resistance levels.
• Capex Spending: Capital expenditures – funds used by a company to acquire, upgrade, and maintain physical assets such as property, plants, buildings, technology, or equipment.

US Market Outlook & Investment Strategy – Keith Learner Interview Analysis

I. Market Sentiment & Current Conditions

Keith Learner, Chief Investment Officer at Truest Wealth, notes a relatively calm investor response to recent market volatility, attributing this to the market’s recovery from the 2022 “tariff shock” which trained investors not to overreact to news. While questions regarding technology and software pullbacks have increased, overall investor sentiment remains resilient. Learner emphasizes that the “weight of the evidence” supports the continuation of the bull market, advocating for investors to “give it the benefit of the doubt.” He acknowledges the historical precedent of market corrections, referencing experiences following the tech crash, the Great Financial Crisis, and the COVID-19 pandemic, where initial panic eventually gave way to recovery.

II. US Economic Strength & “US Exceptionalism”

Learner’s firm’s latest “Market Navigator” report (February 4th) highlights “US exceptionalism,” asserting that the US economy is currently outperforming most of the globe. This strength is attributed to factors including anticipated economic upticks, incoming stimulus, and existing tax cuts. This positive outlook is reflected in market indicators such as small-cap and transportation stock highs. The report, totaling 89 pages, details this analysis. He specifically points to wage gains and tariff stability as contributing factors.

III. Downside Risks & Labor Market Disconnect

Despite the optimistic base case, Learner acknowledges potential downside risks. A key concern is a perceived disconnect between strong GDP numbers and a weaker labor market. He cites the recent JOLTS data, revealing the lowest job openings since 2020, as evidence of this disconnect. However, he anticipates potential improvement in the labor market as the economy moves past last year’s uncertainties and benefits from current incentives.

IV. Political Landscape & Midterm Election Impact

Learner addresses the potential impact of the upcoming midterm elections, noting that historically, these years are characterized by increased political rhetoric and market volatility. However, he stresses that earnings remain the most crucial factor in their analysis. He advises investors to prepare for potential setbacks throughout the year, even amidst a generally positive outlook. He states, “Historically, we see the political rhetoric really intensify and some of that uncertainty tends to manifest itself eventually to into markets.”

V. Sector-Specific Analysis & Recommendations

Learner details specific sector recommendations from Truest Wealth’s research:

• Healthcare: Upgraded in November, despite recent volatility, remains a favored sector due to its prolonged underperformance (approximately 50% over three years) and attractive valuations. He notes a split within the sector, with biotechnology and farming performing well, while life sciences and medical devices are lagging.
• Industrials: Upgraded in December, benefiting from the anticipated economic uptick. Transportation stocks are currently hitting new highs, reinforcing a positive outlook.
• Materials: Lifted to neutral in December, but are showing positive momentum, prompting closer examination.
• Technology & Communication Services: While not upgraded to “attractive,” Learner advises investors to maintain positions in these sectors, emphasizing that they should not be abandoned. He notes tech’s rebound off the 200-day moving average as a positive signal. He also highlights the benefit semiconductors are receiving from substantial capital expenditure (capex) spending, estimated at $1 trillion this year. He states, “move beyond just tech, but don't forget about tech.”
• Energy: Currently positive on the energy sector, but cautions that it may be “a little bit getting overheated on a short-term basis,” suggesting pullbacks could present buying opportunities. He notes the sector hasn’t performed well for a decade.

VI. Technical Analysis & Market Signals

Learner references the 200-day moving average as a key technical indicator, noting tech’s recent rebound off this level as a bullish signal. He also highlights the importance of monitoring capital expenditure (capex) spending, particularly its positive impact on the semiconductor industry.

VII. Synthesis & Key Takeaways

Keith Learner presents a cautiously optimistic outlook for the US market. While acknowledging potential risks, particularly related to the labor market and political uncertainty, he believes the underlying economic strength and positive earnings trends support the continuation of the bull market. His firm’s recommendations emphasize diversification beyond technology, with a focus on cyclical sectors like Industrials and Materials, while maintaining exposure to healthcare and strategically capitalizing on potential pullbacks in energy. The core message is to remain invested, recognizing that pullbacks are a normal part of the market cycle and should be viewed as opportunities rather than causes for panic.