Shannon Saccocia

Her firm went overweight US large caps for the first time in over a year and a half, based on a broadening acceleration of earnings growth beyond the Magnificent Seven. She sees flows returning from Europe, and strength in technology, communication services, energy, materials, and small/mid caps.

Saccocia states, "You should perhaps be extending duration in this environment because there is going to be a response." While the "unanchored" 10-year yield is currently a problem, the combination of an oil shock and weak jobs data will eventually force an economic slowdown or a Fed reaction. "Extending duration" means buying long-dated bonds (like TLT) to lock in yields before the economy slows. Buy long-term treasuries (Duration). Persistent inflation forces the Fed to keep rates higher for longer, hurting bond prices.

There's actually some opportunities in duration right now... you look at what's happening in the high grade bond market... the potential for further curve steepening. With policy uncertainty peaking and inflation challenges being met, high-quality fixed income and duration offer a safe haven and capital appreciation potential as the yield curve normalizes. LONG because fixed income provides attractive risk-adjusted returns and diversification during equity market volatility. Inflation re-accelerates, forcing central banks to hold or raise rates, which would negatively impact duration.

Speaker notes that despite the stock run-up, consensus expectations for 2027 EPS imply a multiple of only ~19x. While fears of an "AI Bubble" exist in the credit market, the equity valuation for the market leader remains reasonable relative to the "off the charts" demand from hyperscalers. The fundamental demand corroborates the price. Long fundamentals, as valuation is not prohibitive for a bellwether. "Sell the news" price action despite a beat; broader market rotation out of tech.