SoFi head of investment strategy Liz Young Thomas joins Julie Hyman and Josh Lipton on Market Domination to discuss the macro-level factors affecting the market and what they mean for investors’ earnings expectations.

Young Thomas says the bull market has more room to run but notes, “We have to keep in mind that we're in a usually volatile period, and obviously, leading up to an election brings in all kinds of uncertainty.”

She lays out the macroeconomic conditions the market faces during third quarter earnings. “What we're seeing right now in both the stock market and the bond market is that people have decided that a soft landing is all but secured, and at least we're comfortable with the idea that GDP growth has stayed strong. Inflation, although is coming in a little bit hotter than expected, [is] still reasonably under control, and we haven't seen these big cracks in the labor market that many feared either. So the way that the data is showing right now is that things are good… The stock market continues to celebrate that.”

“There has been some confusion in stocks about whether or not we want the Fed to be dovish, or we want them to be hawkish… What I would say big picture is on any given day, though, don't get married to what the market is expecting the Fed to do because it swings so easily, and we still are hanging on each of those data points, particularly the labor data points, as the rest of the year progresses.”

With the market focused on the macro issues, Young Thomas zooms in on the lofty earnings expectations investors have come to expect, saying, “This could be just a period of time where earnings growth is a little bit less inspiring compared to the past. But if we're in this normalization process, a normalization in rates, a normalization in inflation, normalization in the labor market, you don't get to pick and choose what normalizes. Everything has to normalize with that because it is all connected.”

She adds, “If earnings growth comes back down to earth for a while, only to pick up later, that is typically what has been the expectation. So we're seeing analysts sort of pull back on strong growth expectations for the next few quarters, and then they pick back up again in the latter half of 2025.”

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This post was written by Naomi Buchanan.