The 2 reasons why Lazard's Ron Temple would still buy stocks over bonds

Note: This interview was taped on Tuesday 27 August 2024.

Six months ago, Lazard Chief Market Strategist Ronald Temple shared with us a relatively bold view - the US economy would achieve a soft landing, corporate earnings would remain robust, and stocks would remain the superior alternative to bonds despite the lofty valuations it did (and continues to) attract. We even joked that the view "feels really dangerous". 

Asset Allocation

Why Lazard's Temple would buy equities over bonds even at today's prices

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Well, that once-dangerous view is increasingly looking like the right one. The S&P 500 is up 12% since that interview was published and the Federal Reserve has likely nailed the timing of its first interest rate cut of the cycle by commencing next month. As Fed Chair Jerome Powell put it, "the time has come."

As a result, he is doubling down on his view that bond yields are still too low for where they should be and believes that stocks can continue to rally based on better-than-expected economic growth, lower inflation, and a broadening out in performance. He also viewed the volatility spike in early August as a timely reminder that markets can move down and the importance of putting capital to work in moments when others are extremely fearful.

In addition, he believes that the "Great Rotation" out of mega-cap tech stocks should not be a choice. Rather, it should be reframed as a chance to invest in the best of both worlds.

But, as it is with everything in investing, there are caveats. And the biggest caveat to this bullish call is the one that looms largest in the United States.

In this edition of Views from the Top, I reconnect with Temple to discuss his views on what may happen in markets following the first rate cut, what he gleaned from the August volatility spike, and where he is finding specific opportunities across the investing spectrum.

Timestamps

• 0:00 - Introduction
• 0:41 - Would Ron still buy stocks over bonds today?
• 2:07 - Did the August snap sell-off enhance this view?
• 4:20 - Is the Fed getting its timing right?
• 5:50 - How much credit does the Fed get if a soft landing eventuates?
• 7:20 - Why Ron does not think about Magnificent Seven or SMIDs being a binary choice for investors
• 9:47 - Opportunities outside of equities
• 12:39 - The potential impact of geopolitics on markets is still not priced in

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