In this Jarvis Update episode, Brian Dress (Director of Research at Left Brain) and CEO/CIO Nolan Langford discuss why they consider the U.S. equity market to be in a bull phase and what that means for investors. They begin with a market recap, noting modest gains in the S&P 500 and Nasdaq (≈0.6% over five days) and a strong 4.1% weekly rise in the Russell 2000, while highlighting a hotter‑than‑expected CPI report (January CPI up 0.3% MoM, 3.1% YoY) and Treasury‑yield volatility (10‑year yield peaking at 4.32% then settling near 4.2%). Langford explains the difference between Wall Street and Main Street definitions of a bull market, emphasizing sustained upward trends rather than short‑term technical thresholds. The hosts then shift to personal‑finance reminders: 2024 IRA contribution limits ($7,000, $8,000 if over 50), the importance of rolling over old 401(k)s into IRAs, the irrevocability of Roth conversions post‑TCJA 2017, and the need to satisfy required minimum distributions before converting to a Roth. The first substantive topic is a “1990s Nasdaq history lesson.” They recount the 1995‑2000 internet‑driven bull run, where the Nasdaq rose about 565%, and draw an analogy to today’s AI‑driven market, suggesting AI could surpass the internet’s impact. They compare the two eras in terms of excitement, profitability, margins, and cash‑flow generation, noting that modern AI‑related firms tend to be software‑oriented with higher margins and positive free‑cash‑flow, unlike many unprofitable dot‑coms of the early 2000s. The second topic covers the current earnings season. They cite strong reactions to recent reports from Arm, Shopify, Arista Networks, Uber, Meta, and Netflix, highlighting double‑digit stock moves (e.g., Arm up ~30%). Langford observes that revenue and margin guidance have largely beaten analyst expectations, cost‑cutting and disciplined management are improving profitability, and inflation is no longer a major headwind. He concludes that the earnings beat reinforces the bull‑market case and expects the trend to continue through 2024. Throughout, the hosts intersperse promotional messages about the Jarvis newsletter, investment‑idea services, and contact information. The episode ends with a reaffirmation that the bull market may just be beginning.
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It's a bull market. What does that mean for you as an investor? We answer that question and much more on this week's Jarvis Update. I'm your host, Brian Dress, Director of Research here at Left Brain, joined as always by our CEO and Chief Investment Officer, Nolan Langford. Nolan, welcome to the program.
Thank you, Brian. Great to be here. No more football to talk about for about 6 months. We're gonna have to Push on. We'll make do with basketball, I guess.
Well, special shout out to my Chiefs for getting that third Super Bowl in the last 5 years. And, um, I do want to send my thoughts out to the folks who were victims of that shooting yesterday. I'm just horrific at the parade, but, uh, a great day marred with a horrible tragedy. With that, we'll move on. Uh, first of all, we'd like to ask you to like and share the video if you do find these videos useful, and subscribe and hit the bell for notifications. that way you find out every time we're out with these, and we're out on every other week schedule. We'd love to interact with our listeners, so we'd love to ask you to comment on— with your thoughts on the market, or with your answer to the question, where are you going for spring break? Markets do appear to be accelerating as we move through earnings. We've got two topics for you, as we usually do on the program. First of all, the NASDAQ 1990s, a history lesson. And then our second topic today is going to be earnings season, trends are emerging. Before we get into the meat of the program, we've got a few announcements. First of all, we'd like to ask you to sign up to receive the Jarvis newsletter to receive all of our content. And next week is our February edition of the newsletter, so get on our list by clicking the link below. Also, our goal is to work with clients to help them live their best lives, and we think investing in public securities is one of the best ways to achieve this. Whether or not you currently work with an advisor, we'd love to be a resource for you to help you reach your goals. Helping you make the right moves for your financial future. Call us at the number below, and that's 630-547-3316. For the podcast listeners, we'd love to get you some time on the schedule, see if we can help you to achieve your financial dreams. Also, we've got something for institutional investors. That's our revamped Investment Ideas service. We've got our model portfolios. That's 5 model portfolios with dozens of actionable securities, and we update those quarterly, also backed up by our research reports. Definitely check the link below if you have interest in that service. Let's go to the market recap. We do follow 3 indices here. The first was the S&P over the last 5 days has been up 0.6%. The tech-heavy Nasdaq was also up about 0.6%. And then we were actually seeing an outsized return out of the Russell 2000 that covers the small-cap securities. That was up 4.1% this week. So a huge jump in Russell. A couple of news items that came out this week. The first was the CPI. That's the inflation data, Consumer Price Index. That came out a bit hot in January. Prices went up 0.3% last month. It was expected to be just 0.2%. And then the year-over-year figure was 3.1% against 2.9%, which was expected. So the market did have a little bit of a panic on Tuesday when that data came out, but seemed to definitely recover. And then also the 10-year Treasury note, US Treasury, which everything prices off of in the fixed income or bond market, that rallied to as high as 4.32% this week before relenting down to 4.2%. A little over 4.2 at the end of Thursday. So some volatility in fixed income. Nolan, quick question out of the gate here: what are your thoughts for this week, and does the inflation reading give you pause?
Nothing on inflation really scared me. I know we've seen CPI and a couple of these numbers tick up. Remember, that's just a one-month sort of data point. The Fed has told us as much. Austan Goolsbee, who's a member of the Federal Reserve, is not a voting member, Actually, shout out to University of Chicago, Austan Goolsbee, maybe getting a Nobel one day. But no, no worries there. I think he gave us some dovish comments yesterday, stoked, stoked really a bull market run yesterday, basically said that the Fed is still in a long-term trend to get back to the 2%. And so I think he put investors back in their place. Maybe interest rate cuts are pushed back from March to the second half of the year. But clearly, from an inflation standpoint, I think the Federal Reserve has to be happy with what they see right now.
Okay, Nolan, and you threw out a big term there. That's called bull market. So, uh, could you tell the listeners what is a bull market and why do you think we're in one right now?
You know, there's a couple of definitions. There's a Wall Street and the Main Street definition. All right, let's stick with the Main Street one. If stocks are going up, it's a bull market. If they're going down, it's a bear market. That's just a way to think about it. You know, there's some technical levels like 10 or 20% off the low, or any 10 to 20% from the high. Those are all Wall Street terms. What we care about, and if the stock market's going up and it looks like it's going to be a sustained uptrend, we want to call that a bull market. So interested in what you have to say about a bull market because it looks like we're certainly in one.
Definitely appears so, Nolan. So before we get into our two topics, we want to go into our personal finance section. A couple of things we want to cover for you today. I want to remind everyone again, this is IRA contribution season. It's early in the year. It's good to get your money in early so we can get it invested. A reminder that the limits, the contribution limits, we'll throw them up on the screen for IRAs is $7,000. But if you're over 50, it's $8,000 here for 2024. So take note of those limits. Also want to remind folks, I know a lot of times people change jobs, leave jobs, there are 401(k)s left behind. It's important that you want to take advantage and take control of that money, especially when markets are doing well. So especially to our clients, but also the folks who aren't clients. Take advantage of the time right now early in the year. Look at your old 401(k)s and think about rolling those into an IRA where you have a lot more control over those things. We also want to give you a few clarifications after the last video we did on Roth conversions. First thing that we wanted to mention is that because of the Tax Cut and Jobs Act of 2017, the idea of canceling a Roth conversion after putting it into place is actually no longer available. So keep that in mind. And then the second we wanted to let you know is that if you're a retiree in the situation where you're forced to take a required minimum distribution, or what we call RMDs, you must fulfill those RMDs before you do a Roth conversion. So if you've got any questions about those things, definitely drop us a line and let us know. That's our personal finance section for the week. Let's move into our topics. So topic 1, we're calling NASDAQ 1990s: A History Lesson. So the 1990s was a raging bull market from 1995 to 2000. That was driven especially by the emergence of the internet at that time. Lots of tech companies had huge runs at that time. The NASDAQ itself, we're going to put a chart up so you can see, it rallied 565% from June 1994 to just below 5,000 in February 2000. So it was a huge run, especially for tech stocks. Nolan, for those that don't remember, can you set the stage of what happened back in the '90s?
A picture's worth a thousand words, and then this picture may be worth many thousands. Basically, it was a bull run for the ages. It's not the only one we've had in the country, but certainly the most recent one. It's interesting that you picked the late '90s through 2000. I think most people are just most familiar with the tech crash of 2000, not necessarily the bull market that preceded it. And that bull market turned a lot of working folks who had stock and stock options into millionaires and multimillionaires. The other thing to note is that one was based off of last generation's technology. Which was the internet, brought us wonderful companies like Amazon, who built their business on the back of being able to do commerce electronically, something we couldn't have fathomed in 1995 when we were only barely doing email. And I think it's interesting talking about this topic because now we're in this new bull market, or the Industrial Revolution 4.0, as a lot of people like to call it, built on the back of AI, or artificial intelligence. If AI turns out to be what we think it is, it's going to be multiples bigger than what the internet is. And if that's the case, we're not saying that we could have another bull market that sort of matches those returns, but we certainly want to give investors context.
Thank you for that, Nolan. And we want to, first of all, of course, mention that past results are no indicator of future performance. But we do think there are some analogies that we can draw between the '90s— like Nolan said, that was the internet boom— and now we are here into the 2020s looking at artificial intelligence, which is an emerging technology that, you know, looks like it could be huge. So, Nolan, you've touched on a few of these, but what are some of the similarities that you see between then and now? You talked a little bit about, of course, internet and AI being bigger than the internet possibly, but also talk about some of the things that we saw in terms of profitability of companies back in the '90s and how some of the profitability metrics, free cash flow and that sort of thing, what we see in companies in present day.
I'm glad you brought that up. There's a couple of similarities and then there are some differences. I haven't heard a lot of the common media actually refer much to the tech stock boom of last generation, which is probably a good thing because, you know, most people probably aren't thinking or investing that way. And a lot of artificial intelligence stocks have rallied greatly, and I think people are wondering, hey, has it gone too far too fast? One of the similarities is excitement. You know, back in the late '90s, what we were all worried about is the Y2K switchover. We were going to come in January 1st, 2000. None of the computers were going to work because of the infrastructure we had was based off 2-digit codes and not 3-digit date codes. And so you had a lot of rush to secure all of this equipment back in the '90s. And that's part of why you've seen that bull market accelerate as we got later in the, in the decade. But the bottom line is, is based off of a lot of excitement. We had this new technology. We could do email. You could order things finally. And it ushered in e-commerce. I mentioned Amazon and a bunch of other companies, equipment makers, Cisco. But there's a couple of, uh, other differences between then and now. One is when people think about the froth of 2000 and the big crash we had, it's mostly with these unprofitable pets.com sort of businesses. Everybody put.com in their name because they knew it was going to get them a higher multiple. And not only did they not have a good business plan, most of these companies didn't have revenue. So it was a lot more shaky, speculative type of time. There was another group of companies, the Intels, the Ciscos of the world. Those were profitable, but they were mostly equipment companies, smaller margins. They were profitable. Today what you have, a lot of companies, especially the ones that are leading the technology market today, one is they're profitable. So you have not only revenues, but you have not only reported earnings, you've got actually cash and free cash flow growth. Two, a lot of businesses today are— the margins are higher. They're no longer equipment companies. They're like software-type companies. So you get a higher margin, more profitability, and cash flow should grow faster.
Yes, Nolan, I think you're right. It's important to give context. We think that maybe it's a bit of an analogous situation, what we see today relative to what we saw back in the '90s. So we want to just give investors some sense of the possibilities or potential that we might see in the market today. Things have moved quickly in the last few months, but it may just be the beginning of a great bull market. So with that, let's move to topic 2. Topic 2 is earnings season. There are trends that are emerging. Now, in recent earnings reports have come from Arm Holdings, ARM, Shopify, SHOP, Arista Networks, ANET. Some have been good, some have been bad, some are kind of in the middle. What is new from this quarter relative to quarters that we saw back in 2022 and 2023, we've seen some pretty extreme stock reactions and for the most part in the positive. I'll throw out some examples for you again. Arm, which we saw in the last week. We saw Uber this week, UBER. We saw Meta a few weeks ago, META. That's the old Facebook. And then also quite a few weeks ago, we saw Netflix, NFLX, with quite a huge reaction to earnings. Nolan, what trends are you noticing the most in earnings season?
It must be either analysts are way off in their forecasting of earnings numbers or investors are just straight offsides. Typically double-digit moves on earnings. And some of these things we've seen have been mid-double, like Arm was up 30%, you know, on earnings, right? Not the only one. It's very unusual. I think from an opportunity standpoint as an investor, you have to sit back and think maybe there was some mispricing and people are starting to play catch-up. But you're right about this earnings trends. Overwhelmingly, I'd give them a thumbs up. We're getting fourth quarter earnings releases. We maybe have a week or two to go. We're on the downside of it. All in all, I'd give it a big thumbs up. Revenues are held in much better than analysts projected. More importantly, company margins are holding in. So you're hearing a lot about more job cuts. We've heard about more again this week. That helps companies with their margin, their bottom line. And so you're getting companies now that are a lot more disciplined. Inflation is actually not a headwind anymore and, and are cutting costs. So they're very much attuned to what investors want to see, increasing profitability. And also growth. Brian, I'd give this earnings season a thumbs up. I mean, we'd leave out the banks.
Yeah, it reminds me of that old, that old acronym, UPoD, under-promise, over-deliver. We've seen a lot of that in earnings season this time. And the last question for you, how does this quarter's earnings season and what we've seen play into your bull market case?
I think it bolsters the case. You know, a lot of these earnings estimates, they're all based off of year-over-year comparison. In the growth sector, the last 2 years were lower your expectation years. I think the bar has been set fairly low. You mentioned Arista Networks earlier, phenomenal earnings. Just so you guys know, they do the connections, the routing gear, Ethernet connections that you would use in the data center. So I consider them the modern day Cisco Systems, but all the routing and networking that gets done in a data center. You're using the Arista Networks equipment in order to do it. Faster things need to go in the data center, more you're going to need the Arista chips. So anyway, they reported earnings, about 30% growth for 2023, but this year they're guiding 10 to 12% growth. The market took it pretty well, and I think you're starting to see that across the board. Companies are starting to really lower the bar to something that they know they can not only step over, but they can leap over. And investors are rewarding the results. I expect that to continue throughout 2024.
Yes, Nolan, there's a lot to be excited about here. We're out of time. We want to thank everyone for being with us. We think it's been a really strong earnings season. We think we're in the throes of a bull market, but it may just be the beginning. So thank you for being with us, and we'll see you again next time.
