What's really powered this market are 4 or 5 names, says Aureus' Kari Firestone

A recent article on cnbc.com, our next guest writes that the S&P 500 is increasingly dominated by tech and therefore questions whether it’s still the best benchmark for investors. Carrie Firestone. Carrie Firestone is Executive Chairman and Co founder of Rs Asset Management as well as a CNBC contributor. What I what I want to really ask you about, I mean benchmarks are nice. You got to decide whether you want to be long the market and and go all in or or whether you maybe aren’t as aggressive. So I I kind of wanted to talk macro. You can talk about why you think maybe there’s other ways to play it, but that’s just assuming that you want to play it and that you’re long. Here’s here’s what my point is, 2023 was much better than people thought. I think 2024 given that the backdrop with the Fed and inflation and I mean real near term worries about how we handle this. I I think you need to really. I think the risks have increased beginning of 2023. No one was bullish. Everybody hated it, but it was a great year. We were bullish. Yeah, you were bullish. Is it the same? Is it going to repeat in 2024 or are there some significant headwinds like 30-4 trillion in debt and stubborn inflation maybe no rate cuts? Is this the time you want to be in the market? Yes, I think you do want to be, you always want, you always want to be, it’s the degree to which one be in the market. And in fact we’re up 9% roughly so far this year, the markets up 26% since the end of October. So the market has moved forward despite really the Hawks about interest rates. They’ve been right. If you listen to some like Roger Ferguson, he’s the person who said no cuts now, no cuts, You know, that’s been correct. But the market has continued to power higher because earnings have been good. Now I agree there are risks. There are more risks this year than last year, 100%, but that doesn’t mean you can’t have a decent market and we’re having a decent market. The question is whether the market is the same as what we used to call the market. What’s really powered this market are four or five names. It’s not the whole market. They talked about how good earnings are. The earnings for the big tech names are up about 40% in the first quarter and the rest of the market is negative a couple of percent. And that’s going to be true throughout the year. The end the estimates keep going up for the tech names and estimates are not going up for the rest of the market. So you have to be careful what you think of as the market. So the SP 500 is more like the NASDAQ used to be, correct. You know 43% is in tech communication services and Amazon that’s 43% of the market. And I’ve looked at this for years because I find it fascinating. I used to say, I mean, I still say Apple and Microsoft, the two top names are 14% of the market, 13, 1/2% of the market, the bottom 300 names and the S&P 500 the same size. And that was not true. If you look back in history, the two top names would be, you know, 6%, seven. Does that make you nervous? Yeah, just the tech itself, it makes me nervous that we are so exposed. It’s not that it doesn’t represent the market. Of course, the SP 500, it’s true. It’s identified as the biggest public companies that are profitable in the United States. And So what you buy is truly those companies. However, those companies are more concentrated and those industry sectors are more concentrated. Maybe everybody doesn’t want that much exposure. I’m not talking about what we discuss as the SP. I’m saying people in their fur on K when investors in our business, these choices 9% is, is more than the average stock return in a year, correct? Yes, 7%. So we already have nine, we already have nine. So if you wanted to be cautious and sell, I understand that. But you know for most people if they’ve owned the big tech names, they’ve gains, they’ve big gains, Do they really want to take those capital gains? But yes, if you, if you think the capital gains rates are going to go up next year. Yeah. And if you’re Stan Druckenmiller and you’re looking at your gains from NVIDIA, Yes. If you’re Warren Buffett and you’re looking at the gains from Apple, yes, Yes. Because those guys, you know, they, they think about the whole big picture and they’re in the market actively. But most people who get out don’t necessarily get back in. You know, the average mutual fund does much better than its average investor because the fun continues and the investor sells at the wrong time and buys it. Well, we might not get any help from the Fed and inflation might stay sticky and 9% is above the long term average anyway. But then the wild card is AI. Maybe we get another, I don’t know how many points of percentage gain because AI is transformative. So maybe that gives it to us, of course. But as we know, NVIDIA is the only one who’s really making any money in AI. Everybody else is spending money on AI. If you looked at what is the biggest change from what we expected in the first quarter, it is how many billions, 10s of billions of dollars the big companies are spending on AI. You know, 40 billion here this year, 50 billion here. It’s really unbelievable the size of those numbers when you think about those 10s of billions that are just in capital spending on AI technology and research. What what I also think is is fascinating right now is that if you were to say let’s invest some money in an equal weighted S&P, you know, index, equal weighted S&P 500 and the tech names were to come down 10 percent, 20% to take some risk off the table, you can have lots of companies that can start to perform better than it might be a different way of looking at, you know, we tried to ask Buffet this question over the weekend. He didn’t exactly answer it. Yeah, you know, he’s long been performed to the S&P 500. The question is, would you look at a different way of measuring that that doesn’t take, Yeah, tech so much into account? What, what’s good you? You leave gains on the table. Sure, when tech takes off. Correct. But Warren Buffett has the only stock in the top ten that is basically, you know, financial insurance. He has been able to command a spot there because of how well he’s run his business, but also because of technology, because of Apple more than anything else.