AI Summary
5 min readThe Market's Contradictory Signals: Stocks at Records, Yields Near Highs
The S&P 500 hit a record close in early October 2024, yet the 10-year Treasury yield was simultaneously trading above 5.3% — its highest level since 2002. Normally, rising yields crush stock prices. But as John Maurey, Chief Investment Officer at NFJ Investment Group, explained to host Ed Elson on Prof G Markets, this time the usual relationship broke down because of something unusual: earnings were growing at nearly 38% for the S&P 500. To put that in context, the only other times earnings growth has exceeded 30% were coming out of recessions — after COVID, after the 2009 financial crisis. "The market has actually gotten cheaper, even though it's hitting all-time highs," Maurey said, noting the S&P trades at about 19 times forward earnings, below its five-year average.
Why Stocks Can Rise With Yields
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What you'll learn
- 1 (03:18) **Why the S&P Hit a Record High Despite Soaring Yields** - Ed introduces the central puzzle: stocks are ripping while bond yields are near multi-decade highs, and welcomes John Maurey, CIO of NFJ Investment Group.
- 2 (03:50) **The Earnings Powering the Rally** - Maurey explains that forward earnings growth of ~38% is the key driver, making the market cheaper despite record prices.
- 3 (05:06) **Are the Earnings Durable?** - Ed questions whether the massive earnings growth is sustainable, and Maurey argues it's a broad-based boom, not a narrow AI bubble.
- 4 (07:09) **The Narrowing Market Concern** - Ed pushes back, noting that since August, the equal-weight S&P is down and over half of S&P companies are in a bear market.
- 5 (08:46) **Is the Tech Dominance a Concern?** - Ed asks if the reversion to a top-heavy, tech-driven market is a worry, or if it's a non-issue.
- 6 (10:57) **The Circular Financing Risk** - Ed introduces the key risk: earnings are being driven by big tech companies recycling revenues among themselves, which may not be sustainable.
- 7 (11:43) **Validating the AI Trade** - Maurey elaborates on the circular financing risk and the need for independent demand validation.
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Guests on this episode
Show Notes
Ed Elson is joined by John Mowrey to unpack the market’s current dynamics and where he thinks stocks are headed next after notching fresh records. Then, Robert Armstrong returns to break down the state of the housing market, what it will take for conditions to improve, and whether now is the right time to buy a home. Finally, Ed shares his take on the closed Paramount and Warner Bros. Discovery deal.
John Mowrey is the Chief Investment Officer at NFJ Investment Group. Robert Armstrong is the U.S. financial commentator for the Financial Times and author of the Unhedged newsletter.
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