Jessica Rabe

Foreign.

Josh

This episode is brought to you by federated Hermes. Active ETFs are changing the way portfolios are built, giving advisors more flexibility for their clients. But not all ETFs are built the same. Federated Hermes puts the investments in their active ETFs through a ruthless vetting process, gaming out a wide range of market scenarios so only the strongest survive. The result? A suite of 12 active ETFs spanning the full stock and bond market. Whether you use them as core building blocks or tactical allocations, you'll get the strategies you want in a convenient ETF wrapper. Simply put, Federated Hermes has the active ETFs to help you build portfolios designed to last because they've been vetted for it. Explore the full lineup@federatedhermes.com US ETFs are subject to risk and may lose value. Federated securities Corp. Distributor before investing, carefully consider the fund's investment objectives, risks, charges and expenses. Read this and more information in the prospectus or summary Prospectus available@federatedhermes.com US welcome back. It's an all new edition of what did we learn on today's show? We're going to answer the one of the biggest questions facing the stock market today. How much more time will investors give the hyperscalers before they turn negative on capex spending? You guys, I actually think this is the question because this is where all the earnings growth is coming from. Okay. I'm here with Nicolas and Jessica Rabe, my friends and the co founders of DataTrack Research, and the authors of DataTrack's Morning Briefing newsletter, which goes out daily to over 1500 institutional and retail clients. Nick and Jessica also have their own YouTube channel, which you can find a link to in the description below. Guys, welcome back. Somehow it's halfway through the summer. Hope you're enjoying yourselves.

Nicolas

So far, so good.

Josh

All right.

Jessica Rabe

Thank you for having us back.

Josh

Yeah, no, always, always my pleasure. And a treat for the audience. So, Nick, we're going to start with you. I guess the headline is this time is different, at least a little bit. But this framing of this being the biggest question facing investors, I really think this is the key to the second half. If we think that all of a sudden capex announcements and actual spending are not going to be greeted with the same amount of enthusiasm as they have been over the last couple of years. It changes an awful lot about what we think will work in the stock market and what we think may not work. You broadly agree with that idea, I think.

Nicolas

Absolutely.

Josh

Okay.

Nicolas

I couldn't say better myself.

Josh

All right, so tell us what we need to know.

Nicolas

Okay, so let's pop up the first slide because this is kind of a three point discussion and it really goes back to something we've been talking about with clients for the better part of one to two years now. And this is really underpinning not just the capex question, but literally every single important part of the market, including valuations. So let's just dig in right into it. The title of this first slide is this time is at least a little bit different. And the framing here is over the last 15 years we've had a recession in the US for just over two months, 1% of the time during the pandemic crisis. In the prior 15 years we had recession 14% of the time. In the 15 years before that it was 13% of the time. So we have had literally no recession for the better part of 16 years now. And that is highly unusual. Aside from two months into the pandemic, which will put an asterisk on, it's been a remarkable long string of growth. And it's not like we didn't have a lot of reasons for the economy to go into recession. 2011, Greek debt crisis. 2015, global growth scare. 2018, 19, first you had a Fed policy mistake and then you had tremendous tariff and trade uncertainty. 21, 22, an inflation surge. 22 Again, the oil price spike from the Russia Ukraine war and 500 basis points of Fed rate hikes. 2023, regional bank failures. 25 and 26, huge trade policy shock last year and an equally huge oil shock and Mideast war this year. I've been doing this 30 plus years. I can tell you any one of those would have snapped us into recession literally overnight over any one of those catalysts. And yet we didn't have a recession. And so the big takeaway is something feels different. And I covered the autos, I covered cyclicals in the 1990s and I was acutely aware of recessions, I studied recessions, we looked at it from an industrial standpoint. And this period feels very anomalous to someone like me who's been doing this such a long time that that recession framing kind of stopped working. And the question is why? So let's pop up the second presentation slide. There's a lot of possible explanations for this and I'll just run through, I think, what is the most likely, five or six, and they combine up to probably a pretty good answer. The first is we have a very services based economy in the US Much less cyclical than the old manufacturing economy that we had in the 70s, 80s and 90s. We transitioned to services. Services are less cyclical. People need to have their hair cut and need health care and go to restaurants much more than they do need to buy a car or a house. Secondly, the US economy has become a lot less energy intensive.

Josh

Oil shocks. Wait, Nick, can we back up on that first one?

Nicolas

Absolutely.

Josh

Chart off for just a moment. Let me ask a follow up question. It is absolutely true that a services based economy is less cyclical simply because the overhang of high inventories in an industrial, more production based economy is the thing that, that tips you into recession. When people stop ordering more parts or more finished equipment or whatever it is, they start discounting what they have. Profits fall, employment falls. There's like a whole daisy chain of things that flow from that. If we're less reliant on physical sort of inventories, it takes away one of the key drivers of what starts a recession in the first place. Do I have that? Is that the right cause and effect?

Nicolas

It is, and I'll give you a little, little sort of auto framing for that. So the typical dealer keeps 60 days inventory on the lot because they know that customers want to come in and buy a car right away. So you get six days inventory at a certain selling rate, the selling rate goes down by 50%. All of a sudden you have 120 days of inventory and you stop ordering from the factory because your dealer lot is already full and now over full. Given the level of demand, that reduction in production means immediate layoffs at the automotive level, not just at the assemblers, but all the parts, all the suppliers around them. And it cascades extremely quickly. I can't. In the 1990 recession you saw initial claims go from 300 to 500 a week in a matter of weeks after Iraq invaded Kuwait and oil prices spiked. It's an immediate effect.

Josh

It used to be suppliers don't wait. They don't wait to see. Ah, maybe this is just a dip. They say we have too many people.

Nicolas

Yes, we have too many people. We are spending too much on Capex. We don't have the cash to spend on Capex. Every auto supplier I covered in the early 90s was close to bankruptcy. Chrysler was essentially bankrupt, all because of an oil price spike. That was it. That was the whole story. It was amazing.

Josh

Okay, let's go back to the slide.

Nicolas

Okay, so less energy intensive economy means oil shocks cause recessions less frequently. Now my personal theory is that US companies are Also better managed. They use technology more effectively and more efficiently. It's just a better managed system. And on top of that, US workers are now more educated, better educated than in past decades. They have greater mobility. So if they lose a job, they're more likely to find a new job. At a more macro level, fiscal and monetary policy has become very responsive to shocks. And the latter monetary policy corrects really quickly. So Powell made a huge policy mistake in Q4 2018. He reversed course, literally 01-04-2019, because he saw the Vix go to 36 and the stock market do an immediate bear market. He knew he was wrong. So that's another one, Lynn. We have a tech enabled gig economy that acts like a buffer, a bit of a buffer now for the labor force. If you lose your job, you can get a gig job until you find your next full time job. And then finally, and I think a lot of folks watching this will be waiting for this point. So let's give it to them. US government spending has created a lot of incremental baseline demand. Deficits to GDP run at 6% now. They ran at 3% from 1979 to 2010. So there is more government spending providing a baseload for the US economy. And that's an important feature. I would however add this has had no effect on interest rates. 10 year yields right now are the same as they were in 2002, 2003, 2004 when deficits were 60% of GDP or budget. The entire debt load was 60% of GDP versus 122% now. So it's not like the market's making

Josh

it a lot more. It's sort of like a magic trick. We are spending at twice the level of in terms of deficit to gdp and yet the rate at which the government can borrow is unch. And that. And that's. I guess they call that a deus ex machina. So when the, when the ancient Greek playwrights had difficulty coming up with an ending, they said, oh, and then Apollo comes down, right? Athena. Athena pops out and you know, saves the day. And it's like, all right, so we've sort of had this like slow rolling deus ex machina in the form of problem in the economy. No worries, more government spending and we're able to pull it off without a higher cost and that. We don't know if and when that changes. But I think that's a big one. Even though you saved it for last.

Nicolas

Yeah, and I would say very fair point about the ASX Mackinac ending. An Excellent high school classics education going on there. That's why I learned it too. But I would say that it is predicated on all the prior points on that bullet on that chart. It is predicated on an efficient economy, a strong economy, an intelligent economy, a flexible economy. It isn't just, oh, we're going to become Zimbabwe, which was the old thing that people used to say about high deficits. This is a very robust, large, systematically important economy and it runs pretty well.

Josh

One last follow up question. In US companies are better managed and use technology more effectively. In my opinion, of all the things on your list, this is the most underappreciated point. We look at science and technology and all of these areas where there have been advances over the last 50 years. And it's just a given that we sort of agree things have gotten better in how we build buildings, how we build infrastructure and bridge. Why can't we agree that executives today have had the ability to learn from the lessons of executives in prior decades and not make the same mistakes? Why can't we agree that the science of management, even if you think it's a quasi science, the executives in the 1950s, 60s, 70s didn't have the same literature to learn from that. The executives of the 2000 and 20s have and they can see things that were not smart to do and then they don't do them. They make other mistakes and they'll make new mistakes.

Nicolas

I think people conflate the fact that the average CEO is on the job for like four years before they're fired with the idea that management isn't any good. In fact, management is quite strong. And I, as I, I agree with you. I would argue that is better than it was 20 years ago. I see it just in covering industrial companies. It's better. The CEOs of the big three are better now. They still face a horrible industry, but they're better than the old ones. I think it's just people get confused when they see, oh, the CEO got fired, he must have sucked. Therefore, management sucks. And it's not that way.

Josh

On average, they are better than their counterparts of a generation or two ago. And part of that is because they've been able to learn from the past.

Nicolas

Yes. And embrace that knowledge. Final slide. Why all this matters? Because this is obviously the linchpin to the whole discussion and it feeds directly back up to your capex point at the beginning, Josh, what this means for investors, markets and policymakers. The most important thing is a steady economy equals steady earnings and cash flow growth. That's the way it works. So we have very stable earnings growth. We have very good earnings growth right now, plus 20% in the middle of a cycle, which is amazing, which supports high valuations. This is why the S and p is a 20 times earnings. It is not a function of some irrational exuberance. It is a function of the market looking at the last 15 years and saying earnings are pretty steady, we can pay more for them because we're not going to be disappointed next year with a big recession. It also suppresses corporate credit spreads. So current investment grade spreads and high yield spreads are at multi cycle lows. They're in like the oneth percentile. So the bond market is also saying cash flows are more stable. Secondly, it feeds long term volatility that's below average. The VIX consistently trades below 20, which is its long run average. And it goes there very quickly after a shock because this underlying bid based on a stable economy and stable earnings supports stock prices. It also creates this buy the dip mentality feedback loop that we see among investors. Not just retail, but also institutional. You can buy the dip if you have confidence the economy is going to stay okay. You can't buy the dip if you don't. And that's why buy the dip has become such a mantra in the last 5, 10 years because of the stability. Now getting to the CapEx point, this is super underappreciated. A stable macro environment does allow for much heavier capital investment among public companies and private investors. And that is the entire source of the current AI capex cycle. We would not be investing this much in AI if the hyperscalers look at their businesses which are all cyclical, they all rely on the economy and said oh, we have to budget an incremental 20% cash because there could be a downturn in the next 12 years.

Josh

They're not right. They're not thinking the way the CEO of an industrial corporation may have been thinking 25 years ago. It's a totally different mentality. They're looking at a situation where yes, there are still going to be ups and downs, but not the unpredictability of the 70s, the 80s. It's just a. And let's be honest, many of these people weren't even alive then who are making these capex decisions.

Nicolas

That's true. And you know, that's the bear case. Like oh, they haven't seen a recession, like okay fine, but there hasn't been one. And that's the more important point.

Josh

They haven't seen one because we stopped

Nicolas

having them so back to the slide to finish up this thought. Two cautious points. The first is strong equity returns, obviously widened the wealth gap, which, which is a huge topic right now. If you are fortunate enough to have saved a lot, earned a lot, saved a lot and invested wisely, you're compounding reliably. At 10% a year, you're doubling over seven years. Anybody who can't invest doesn't have the cash flow to invest, doesn't have that compounding and the wealth gap increases. And the final point, which is kind of where I started my thought process creating these slides, because I was thinking about Kevin Warsh giving testimony this week to Congress. His first, Humphrey Hawkins. He inherits an economy with an amazing proven resilience against shocks, but also one that is prone to creating a lot of inflation more than the Fed's target because underlying demand stays strong. The easiest way to get inflation down is to have a recession. It always happens. It's why we have a 2% inflation target in the first place. Because typically a recession causes a 2 point decline in inflation. That's the 2% number, is that right?

Josh

Yeah, that's where that comes from.

Nicolas

That's where that comes from, yeah. And, and the desire not to be Japan, not to have a Japan, because

Josh

I always thought it, I always thought it came from. Well, 3% would be too much, but 1% would be too little.

Nicolas

So 2.

Josh

So 2. It's good to know that there's more to it than that.

Nicolas

Yeah, I did. I've done the math a bunch of times for our clients and you know, you go back to every recession, back to the 50s and you get about a two point decline more in a bad recession, less than an one, but 2% on average. Right. So you add two to zero, you get two. Yeah. Okay, so one final look at that slide just to finish this up. So Kevin Warsh inherits an amazing system. His job one has to be don't screw it up. His job two has to be figure out how to get inflation down without, without actually pushing so hard. You do create a recession. So the bottom line here is this time is truly different, measurably different in many good ways. It's helped a lot of people, but it doesn't make them more predictable in all ways. And so it's not like, oh, this time is different means that we're just flying into a bunch of denial. What it means is that it's different, but it's not more predictable.

Josh

Okay. Is the right way to sum that idea up that we are recession Resistant, not recession proof. So you can go swimming with a water resistant watch. You shouldn't go scuba diving. And at a certain point there will be an exogenous shock that does tip us all the way over. That's the unpredictability. But like almost by definition, it'll be an unknown. Unknown. And it's probably not gonna be the type of thing that we used to say is consistent with sort of like a plain vanilla recession from the past, which we seem sort of impervious to. Is that fair?

Nicolas

That is fair. And I think the market also thinks that policymakers will step in extremely quickly if there is a shock, as they did in 2020. Monetary policy, fiscal policy. There is a very strong policy put, a proven policy put. And the US Policymakers have a very long track record, an increasing track record of doing it very aggressively and very quickly.

Josh

Yeah, we had a, we had a rehearsal. We had like a fire drill in 2023. They just changed the law. They didn't even vote on it. One day we had an FDIC limit of $250,000 for a deposit account. And then the next day it was unlimited and there was no discussion. We just, policymakers came in and said, what's the problem? There are five banks where people have way too much money deposited and there are a run on those banks. Okay, here's the solution. All of those banks are fine, all of those depositors are fine. And there is no FDIC limit. There may be a stated limit, but we're going to put those banks through a process and they'll be insolvent, but the depositors will not be. And that just became what it is.

Nicolas

Yeah.

Josh

And you know, it's not the Fed or not just the Fed, that's basically the fdic. And so every agency is thinking this way. And so there are solutions to problems that we never before thought could just spring up. But then they do.

Nicolas

Yep, exactly. Right.

Josh

Okay. All right. Very, very helpful. Jessica, what's your take on this idea

Jessica Rabe

for my next section?

Josh

Well, just generally speaking, if you think we should move, let's move.

Jessica Rabe

Sure. Yeah. Let's launch into the next session. Just looking at time here. Okay. So last time we were on, on June 8, we showed that tech had just outperformed the S&P 500 over a 50 day window to a statistically extreme degree. And we flagged that as a warning sign for the audience. And that was right. Since then. Thanks. Since then, tech has underperformed the S and P by 1.3 percentage points since we were on. So Say we thought we'd update that chart and then talk about what we expect for the AI trade in the, in the back half of this year. So just starting with that updated chart which shows rolling 50 day price returns between the S&P 500 tech sector using the XLK ETF as our proxy and the S P from 2015 to the present, when the blue lines above the x axis text outperform the S P by the point shown on the Y axis. So getting straight into it, you could see on the right of the chart that Tech beat the s P by 29 percentage points over the prior 50 trading days on June 2, which was over a 6 standard deviation event and the most extreme reading in this data set by a wide margin. And since then, the Tech sector is down 6.3% versus a loss of 60 basis points for the S and P, lagging by a total of 5.6 points again since it got to that extreme on June 2nd. So, but we also think it's constructive to look at Tech's 100 day returns versus the S& P. We also have that chart all the way back to 1999. So that's about four and a half calendar months. So it's long enough to smooth out daily noise and consider structural returns across several market cycles. So you'll see also on the right side of this chart that Tech outperformed the s P by 2525 points over the prior 100 trading days again on June 2nd. And that was over a 3 standard. That was over 3 standard deviations above the 27 year average of 1.2 points. And it's only happened 0.7% of the time over this time frame. So it's very rare. And we can look at the last two readings we saw to see, to see kind of help frame what could happen next. So the first was 41 instances from December 1999 through April 2000. Tech's average outperformance reached 30.9 points. And every single time the following 100 days saw tech underperform and by an average of 10.8 points. And then the second was during May and June 2023, a much smaller sample at just 3 instances. And the pullback was mild, under 1 point. But that's because it was right off the 2022 bear market lows and just as excitement around AI was taking hold with the launch of ChatGPT. So overall we think the, the lesson here is that what actually broke the, broke the back of tech in 2000 wasn't valuation. It was a Fed. So we had sequential hikes in February, March of that year, then another 50 basis point hike in May and that pushed policy rates to new cycle highs. And today of course new Fed chair Warsh has struck a notably hawkish tone and 2022 already showed us how brutally a hiking cycle can reprice high multiple growth names. Of course we do have a solid labor market that remains the offsetting factor to that but we obviously need to find flag it as a key risk here. So overall we, we do remain long term bulls on us large cap tech. But at these statistical extremes like we flagged last month believing in further strong near term gains we think is betting against us 27 years of history. So the way we frame it is a hundred trading days from that June from June 2nd when tech hit those extremes takes us through about late October. So we think it is reasonable to expect Tech's relative return to pull back closer to its longer run average of 1.2 points over this period. And that may feel like a tech bear market but we do think it is a healthy pause in. In the. In a longer secular story.

Josh

And it's. And it's relative. Yeah, it's relative. So you could get right, you could get into a market environment where health care and financials which are two pretty big sectors obviously not as big as tech but all of a sudden people just have a preference for those stocks for six months. Doesn't mean tech has to fall 20% but you could just see relative underperformance and it would satisfy the mean reversion that that chart that you showed implies.

Jessica Rabe

That's an excellent point. Yes, it's on a relative basis.

Josh

I'm very good at this.

Jessica Rabe

Really you are. And that actually leads into my next point versus very well. So in the meantime. Yeah we do we agree we think there will be rotation within also tech from a mechanical more so than a fundamental perspective. So if you just throw back up that graphic. Thank you to so to yeah. So to set up this discussion this graphic compares the MAG8 and the S P500's top five semi stocks by their weightings, sell side analysts, 90 day earnings estimate estimate revisions, expected earnings growth valuations and year to date returns. So just go through it pretty quickly here. Over the past 90 days the Mag8's current and next year EPS estimates increased by an average of seven and a seven and a half and 4.8%. But for the top five semi names they're up an average of 36 and a half and 33%. So that's nearly 55 and seven times more. And this was not just one or two names carrying the groups. All five of the largest semis saw double digit upward revisions to next year estimates and that momentum is also showing up in earnings growth expectations. The Magates implied EPS growth over the next year averages 23%. For semis it's the average is 61%, so nearly triple. And then naturally that's introduced evaluation premium for most of the semi names. So excluding Tesla, the MAG8 trade at 25.2 5.9 times forward earnings semis average 52 and a half times and that's an almost 27 point premium over the MAG8.

Josh

Double yeah, double yeah.

Jessica Rabe

And the and the stock prices already reflect all this too. So like the five semi names are up an average of 168% year to date. The Mag 8 is up just 4 1/2% year to date. So our takeaway here is that earnings revisions have been the entire story this year. The single thing separating winners and losers inside tech. But after triple digit advances this year for all of the S P's top five semi names, the bar for them to keep outperforming is just far higher than it was six months ago. And semi valuations like we just showed now sit well above the mag 8. So we do think the logical call here is to expect the second half of 2026 to see tech's year to date laggards play some catch up. Once again this is more mechanical than fundamental, but the more a handful of names run, the more concentrated any tech portfolio becomes in them and the more likely that money needs to stay in tech, the more likely that money needs that money that. Sorry, the more likely that the money that needs to stay in tech start spreading into other names with lower valuations and decent fundamentals. And we do think the mag 8 collectively lower multiple combined with still solid expected earnings growth is the obvious place to go. The only question is whether valuation alone is enough of a catalyst to cause this rotation or if or if investors first want to hear what the hyper scalers have to say on Q2 earnings calls.

Josh

All right, so the obvious question here then, and this gets back to the original question, we actually have seen less enthusiasm for the types of capex spending that was the dominant story in 2025 so far. Throughout 2026 the stock prices of the spenders are not reacting to the upside. And in many cases like Meta and Oracle, we're starting to see some limitations being considered. Based on stock price alone, these companies are being told By Wall street, we're not convinced that continuing at this pace is in our best interest and we're selling our shares. So now you have this separation. And I was talking with Michael Sembalis from JP Morgan about this last week. He was pointing out that in early 1999, the Internet Service provider stock started going down, which was sort of a referendum on how confident investors were in the build out of the original Internet. But while that was taking place, the suppliers, the beneficiaries of the capex, those stocks kept going up. That's your Dell computers, your Ciscos, your Intels. And the way he thinks about it is that was the early warning sign. When the share prices of the spenders are no longer reacting positively, it's only a matter of time before the component suppliers realize that they've run off the cliff and they look down and they see, they see nothing but a mile below their feet. Like, I think that is the thing most people are afraid of for the semi stocks and the AI Capex darlings. You guys probably have a view on that. It's a little bit outside the scope of what we're talking about today, but what do you think?

Nicolas

I mean, can I just jump in for one second?

Josh

Yeah, please.

Nicolas

The 99 example is like straight up my wheelhouse because I was trading at Sac those stocks at the time. There's a missing piece of that analysis and that is that it was the B2B companies that took over leadership at the very end of that cycle. So the Commerce ones of the world that had a whole different way of playing the Internet and the value of the Internet. So it was not immediately clear, like, oh well, the ISPs are rolling over, therefore the cycle's over. And that's an early warning sign. No, it was investors looking at second and third and fourth order effects. And I remember vividly, like sitting with the guys at Commerce One, the guys at GM talking about what B2B was going to do for the entire industrial base. So it wasn't that the energy in any way diminished, Honestly, it was, the energy shifted and as Jessica said, that the, the real catalyst for that implosion, and we talked about this on the last show, the NAS was down 30% over the course of a couple of weeks from the highs. The cause of that implosion was 110%. What Jessica said, it was the Fed. It was the realization like, oh my God, the cost of capital, the cost of capital and the access to capital was going to go away very quickly. And that was really the cause So I take, I take symbolist point, but I would just say like having lived through it, it's only a piece of the story.

Josh

Okay. I think that's a really important distinction. And, and I was trading too, and I remember all those stocks Itwo and Marc and I was in them. I had my head handed to me when the party stopped too, just like everyone else. But you're right, there was a news story that took over from the consumer Internet and all of a sudden AOL was no longer a momentum name, but Commerce one was. And it was like a new phase for the Internet bull market.

Nicolas

Yeah. And that was a story for 20 or for 2000, 2001 and 2002 that was supposed to be the next five year cycle was enterprise adoption.

Jessica Rabe

I think to your point though, Josh, on semis, is this like what are the odds over the next 90 days we're going to have or over the past we're going to have another earnings revisions of plus 30% over the past 90 days for semis? Like once again, that's a high bar. So think some, some breathing room.

Josh

I have more conviction in the semi capital equipment stocks just because there's such a huge concerted effort within the hyperscalers to build their own chips. And of course that's capital equipment business. It almost doesn't matter who's selling chips at that point for that group, so long as someone is who's making chips, I should say. I understand though, if the big five don't see the same vigor of upward revisions, those stocks will not be acting as well as they do today, regardless. Right. Okay.

Jessica Rabe

I wanted though to just for my last section, I think this is a good time. Just take a step back and look at the longer, the longer arc for tech. Specifically what history says happens in year four of run of consecutive annual gains like the one we're in right now because we're now in year four. The Nasdaq just had three straight years of gains of 20% or more, so 43% and 20, 20, 23, 29 in 2024 and 20 in 2025. And these came after a rough 2022, of course, when the comp fell 33%. So I just wanted to go into kind of what, what history says happens after a down year because it's, it's pretty constructive. The NASDAQ's most common bull run lasts two years after down down year, which has happened four times since 1972. But three to six year runs combined are actually more common. Happening six out of ten instances and we're currently in this camp. So that's in keeping with history. But importantly, the Nasdaq has never stopped rallying at exactly four straight years since the early 70s. So if the comp is up this year, history says it should rally another one to two years. And then for as for what exactly hap what as for what year four actually looks like in these sequences, since that's the year we're currently in. We have a couple points here too. And yeah, thank you, that's perfect. The next graphic. Since 1972, the NASDAQ strung together three straight up years after a down year. Six times. Four of those six times. Year four was also a gain and two times it was a loss. So the the odds are 67% for a fourth year of gains. The average return across all six years is a modest 5.1%. But that skewed lower by 2022. Bear market. If you strip out the two losing years, the average year for gain jumps to 16.8% above the long run average of 13%, 13.3%. But that also is itself skewed by 1998's blowout 40%, with the other three ranging from 6 to 12%. So sorry, a lot of numbers there. But the takeaway here is that below a below average gain in year four is actually the historical norm. And that's because it's really hard to surprise the market into another 20% plus year for three three straight years. So the comp is up 13.1% year to date. So it's running just below average. And I think it's worth noting that both losing years share the same root cause. And it's a reoccurring theme in this episode. A Fed rate shock. So 1994's 3% pullback and 2022's 33% decline both came from the Fed hiking rates and the Comp's current setup. Three straight years of 20% plus year gains after a down year has only happened twice before. So the first was after 1994's 3% decline. Then you had 1995, 1996 and 1997 all delivered 20% plus years. 98, 99 of course, just kept going of 40 and 68% before the dot com finally arrived in 2000. The second was after 2018, 4% decline. You had 2019, 2020 and 2021 all deliver 20% plus year, 20% plus years. Then 2022 brought the Fed driven bear market. So again. So the takeaway here is that history says the NASDAQ should keep rallying beyond this year, barring, of course, a Fed rate shock. There will be more pullbacks like in any bond bull market, but we do continue to treat them as buying opportunities. We probably sound like a broken record, but we do think the 90s comparison is a useful reminder that it's a useful reminder of how much money was left on the table by investors who sold who sold too early.

Josh

Yeah, a broken record, but continually playing the right song. And that's the name of the game of what we're all trying to do with our money, is not be endlessly entertained by variety, but to actually get things right. And so far, you guys have been incredibly prescient and you've kept us in this market and you've repeatedly told us the important things to watch for. And I just want to tell you how much we and the audience appreciate it. So thank you so much.

Nicolas

Thank you.

Jessica Rabe

Thank you so much. We love coming on.

Josh

All right, so guys, once again, if you want to follow Nick and Jessica's own video channel in on YouTube, there's a link in the show Notes below. We hope that you check out datatrackresearch.com and you can be on their subscription list as well, just like I am. Thank you so much, Nick and Jess. We appreciate it. We'll check in with you soon, hopefully at the end of the summer. In the meanwhile, enjoy. Thank you guys for watching. Thank you for listening. Have a great day.