00:00 Speaker A
Join us now Matt Stucky, Northwestern Mutual Wealth Management Chief equity portfolio manager. Uh good to see you Matt. So, we’re starting to get these kind of Wall Street 2026 predictions and a lot of them are pretty bullish here, not wild, but reasonably, I think. Um and many of them are talking about AI as one of the reasons behind this. So how are you thinking about the kind of setup for 2026 at this point?
00:27 Matt Stucky
Look, I think if we’re contemplating the next 12 months and kind of what’s moving in the markets and kind of how we expect that to change in 2026. We see, you know, the potential for markets and the economy to expand next year. And that’s a good thing if you’re an investor. Um, what’s really driving that is, you know, we’ve been in the last two and a half years of a pretty tight economy and tight markets as a result because, you know, the Fed has increased rates that are constrained by things like manufacturing and housing. and really the strength of the growth was in, you know, companies related to, you know, the continued kind of building of artificial intelligence computing capacity. Um we think it will probably continue into next year. companies will continue to spend on AI. Uh but, you know, we think there’s also an opportunity for things like housing and manufacturing, uh more parts of the economy to start improving next year. And with that, I think it’s coming, you know, broader market participation uh in terms of strength in the next 12 months.
01:52 Speaker A
What do you think will catalyze that widening? because we, you know, the people have been hoping for an expansion that has not really materialized. Is it just the Fed cutting rates?
02:05 Matt Stucky
Well, I think we’ve actually been watching it in the last four or five months and what I’m seeing in terms of the sustainability and uh ultimately, uh whether it gets done or not is earnings uh reviews. And what you’re seeing is for the first time uh in the last couple of years, there’s been some sustained earnings revision strength in things like US small caps and US mid caps. It’s not just the higher Mag 7 drive gain. It is more and more uh segments of the economy and the markets also show you know, some strength in terms of fundamental upside uh. And so, in fact, if you’re looking at some of the strongest kind of earnings growth revision trends over the next 12 months, it’s coming from a small cap. It didn’t come from a big cap even though this is still strong as well. And so, I think it needs to support uh during the fourth quarter and in the first quarter of 2026. And those expectations for earnings growth need to be followed up with actual earnings growth in terms of what’s reported. And so, that for me is the major kala on a sustained rotation, a sustained broadening in terms of markets.