Ritholtz's Josh Brown: Outside of large caps, there's enough positive breadth in the market

It does take us to our talk of the tape with the backup in yields and in expectations for rate cuts mean for this market, this record setting run in stocks. Let’s ask Josh Brown. He’s the Co founder and CEO of Ritholtz Wealth Management with me here at post nine. It’s good to see you been asking all day really for the last several days whether the playbook for investors needs to change as expectations on rate cuts are firmly reset. How would you address that for the calls that you might be getting at Ritholtz? So look, I think the big thing that’s happening right now is we’re washing out some of the excess enthusiasm that we came coasting into the month of April. If you, if you remember what we were talking about late February and throughout the month of March is the broadening of the rally. And truly it was broadening. It even eventually got found its way into small caps, which is a group that honestly can’t get arrested even though stocks were going up. And now we we get a little bit of a washout of some of that enthusiasm, but a lot of big charts are still intact. And what’s really changed here on the internals is the percentage of stocks that are in their own individual bull markets. 39% of S&P 500 components are currently above their short term moving average. 50 day moving average, OK that number was 90% coming in to April. So it’s a it’s definitely a correction ish thing happening for small and mid cap, large cap there’s not a lot of damage. Apple’s actually one of the worst names in a 15% drawdown. Most large caps are still intact. They don’t look as bad as Apple and I think if you were to pull semiconductors out of the equation today we might even be green. Are we, are we moving back to a stay big and don’t go broad market. So over the last month or at least month to date at your point Russell’s down 7 1/2%. But if you look at other things that are impacted by a backup in rates, real estate’s down 9 1/2%, dividend aristocrats down 5, staples down four, utilities down 3 1/2. So I do I need to rethink the whole thing right now? No, because those those draw downs that you’re quoting to me or off of new highs in many cases like not not necessarily real estate, but the dividend stocks for example, you’ve had new highs in these segments and these are stocks that have gone up anywhere from 20 to 50% since the bottom in in in October. So I don’t think that A5 or a 7% pullback is disastrous and in fact you would probably expect it to be part of the healthy bull market. So I don’t think we’re in this moment where we want to rethink. I think what we do want to do right now is remember semis are 9% of the S&P, 520% of the NASDAQ 100. And let’s look at what ASML actually said. It’s not great, but it’s highly company specific. They beat on earnings, but they missed on sales. Q1 sales were already forecast to drop year over year, but this was a much worse outlook on booking. And booking is how these companies make their numbers next quarter and the quarter after, etcetera. Q1 bookings €3.6 billion, the forecast was 5.4. It’s an ASML story now. Intel gets hit, video gets hit. And again, remember, semis are a huge part of the S&P. They were never 9% throughout my entire career. And so you’re going to have this outsized effect at an index level. But when I look at my my screen, I have green, I have tickers that are that are higher, defensive stocks are doing their jobs, they’re acting defensively. Utilities are up a lot right now. I have pharma names that are up. So I don’t think it’s this across the board rethink. I still think we have enough positive breadth away from large cap that the the entirety of the story remains intact. I just think it gets a little bit harder just zero in for another moment on on dividends because they’re so near and dear to a large swath of our viewing audience. I think and you know we are coming off of a tough year for dividend stocks and the narrative coming in was OK, rates are coming down South, dividends are going to be good and they’re going to have a good comeback. And now if rates are going to back up maybe not so much. Maybe those who really spend the time looking for the dividend stocks to get that income are going to have to rethink at least that part of the market. So as you know Jenny and Jenny Harrington and I thinking of Jenny, we have AI don’t know seven-year blood feud running. I disagree with the premise of let’s identify a specific dividend yield and then hope we like the stock that’s attached to it. I I just don’t think the majority of investors are targeting in on a yield. And then working backwards, I happen to think the better companies pay dividends, not usually the highest dividends but the dividends that are most consistently growing from one year to the next. And oftentimes when we’re talking about dividends, we’re talking about quality, number one and we’re talking about companies that are also in addition to paying out of dividend yield, doing a decent sized buyback. That story I also think remains intact. We should see $1.2 trillion worth of buyback activity worldwide. It’s actually growing overseas faster than the dividend activity is recovering here. You would you would you would be understanding looking at companies in 23 and 22 slowing down with the buybacks and slowing down with the dividend growth. There was a lot of uncertainty and people just weren’t sure how they would fare in a higher interest rate environment. Now we’re in one, we’ve been in one and for a while. We kind of know we’ll be in one for a while to come and companies are still looking opportunistically how they can return cash in the most shareholder friendly fashion. I don’t think that theme is going to be extinguished this year.