A lot for investors to be happy about with the economy, says State Street's Michael Arone

Summary

Michael Arone of State Street Investment Management tells Power Lunch he is uncomfortably bullish on the S&P 500 despite elevated valuations and tight credit spreads. He cites fiscal stimulus, easing monetary policy, strong earnings, a resilient consumer, deregulation, and AI spending as bullish supports, while warning that midterm election years and policy headlines could drive more volatility. He also says the VIX below 14 was too low and expects volatility to rise, though the broader bull market remains intact.

• Michael Arone is uncomfortably bullish on U.S. equities despite high valuations.
• He sees fiscal stimulus, monetary easing, double-digit earnings growth, consumer resilience, deregulation, and AI spending as bullish ingredients.
• He warns the margin for error is small given tight credit spreads and complacent volatility.
• He says midterm election years are historically more volatile, with average intraday declines of 19% vs 12% in other years.
• Arone calls the VIX below 14 too low and too cheap, expecting headlines and policy uncertainty to inject more volatility.
• He cites a 1998 analog and cautious investor sentiment as reasons the rally can continue.
• JPMorgan fell despite an earnings beat, which he attributes to credit-card policy risk rather than fundamentals.