This market is still a buy, says MJP Wealth's Brian Vendig

Key Concepts

• Market Outlook: Bullish, with a focus on earnings growth.
• Valuations: Acknowledged concerns, but earnings are seen as a primary driver.
• Earnings Growth: Projected at 13% EPS growth year-over-year for 2026.
• Investment Strategy: Emphasis on mid-caps and small-caps, value, and cyclicals, moving beyond mega-cap tech.
• Market Concentration: Concerns about retail investor exposure to tech innovation.
• Diversification: Recommended, especially as the market bounces back.
• S&P 500 Target: Potential for 7,000-7,100 by year-end.
• Seasonal Trends: Anticipation of seasonal tailwinds into year-end and midterm election years.
• Sector Focus: Healthcare and consumer staples are highlighted as areas of interest.
• Government Shutdown: Expected resolution within a couple of weeks, with economic impact as a driving factor for resolution.

Market Analysis and Investment Strategy

Brian Vendig expresses a bullish sentiment on the current market, despite concerns about valuations. His primary rationale is the strength of earnings, which are exceeding expectations. He projects a robust 13% year-over-year EPS growth for 2026. Vendig advises against solely focusing on growth, advocating for a balanced approach that includes value and cyclical stocks, particularly as government stimulus might re-engage consumer-focused sectors.

Mid-Caps, Small-Caps, and Diversification

Vendig presents a "controversial take" by favoring mid-cap and small-cap stocks over the dominant mega-cap tech and AI narrative. He argues that while mega-cap tech is not "dead," the earnings growth potential in mid- and small-cap segments is significant. He points to the concentration in the large-cap space, driven by mega-cap tech, and suggests looking beyond this to areas that will benefit from favorable tax policies and a more neutral stance from the Federal Reserve. This strategy is framed as participating in an economy that is "bending but not breaking."

Market Concentration and Retail Investor Exposure

The conversation touches upon the impact of market concentration, particularly the dominance of tech innovation. Vendig believes this concentration matters, especially for retail investors who may have excessive exposure to tech. While acknowledging that tech trades are not over, he reiterates that "earnings drive markets" and anticipates higher earnings growth participation from sectors outside of tech in the coming 12 months. He recommends diversification as the market recovers.

S&P 500 Outlook and Seasonal Factors

Vendig forecasts a potential upside for the S&P 500, suggesting a target of 7,000 to 7,100 by the end of the year. This projection is based on historical patterns emerging from government shutdowns and the current earnings growth trajectory. He also anticipates a couple of percentage points of seasonal uplift towards the end of the year. Furthermore, he notes that midterm election years often present opportunities in sectors beyond cyclical names, leading him to highlight healthcare and consumer staples as areas poised for increased investor interest.

Government Shutdown Resolution

Addressing the possibility of the government shutdown persisting, Vendig expresses confidence in its resolution. He cites growing friction and the increasing economic losses incurred on a weekly basis, along with concerns about traffic delays and ongoing debates, as factors pushing for a resolution. He predicts that "brevity on the shutdown" could be achieved within the "next couple of weeks," specifically mentioning the "first half of November."

Conclusion

Brian Vendig's perspective is that the market remains a "buy" driven by strong earnings growth, projected at 13% EPS growth for 2026. He advocates for a diversified investment strategy that includes mid-caps, small-caps, value, and cyclical stocks, moving beyond the concentrated mega-cap tech sector. This approach is supported by the expectation of favorable tax policies, a neutral Fed stance, and an economy that is resilient. Vendig anticipates a potential rise in the S&P 500 to 7,000-7,100 by year-end, influenced by seasonal trends and the resolution of the government shutdown, which he expects within the next couple of weeks. He also highlights healthcare and consumer staples as sectors to watch.