AI represents a multi-year secular bull market opportunity, says Edward Jones' Mona Mahajan

For more on the markets, let's bring in Mona Mahajan, she's Senior Investment Strategist at Edward Jones. And you are positive you you think bull markets last longer than bear markets in are we halfway through? Are we 1/3 of the way through? Yeah, it's a good point, Joe. Look, if history is any guide, we we ran the numbers recently. The average S&P 500 bull market lasts about 5.6 years. It's up 192% even if you take out the last two big ones, 4.3 years and 125%. We're about a year and a half into this bull market and up about 50%. So, you know, history tells us we could have some time. We could also have some price appreciation on our side. Not going to go up in a straight line higher. We know that. But do we use that volatility to our advantage and and you know, use it for opportunities to invest in better parts of the market? Absolutely. Does it have to be tech? Does it have to be led by tech? Do I have to own tech? It is. Is there any other economy worth investing in? You know, tech is going to be part of the story for the next three to five years at least. We know a eyes in its infancy. We think it's a multi year secular bull market in AI. But diversification is important. We think as AI will start with the enablers, the infrastructure players, it will spread to the sectors that benefit from the efficiencies, Financial services, healthcare, your manufacturing will have robots, you know, involved in it. So there will be other sectors that participate, but we think we need to see that balance. We also think earnings growth, it was all about tech Q1 and maybe even Q2. By Q3 and Q4, you will see other sectors start to play catch up in earnings growth. That'll be a catalyst for the branding as well. Do we need to count on Washington for for anything or at least not to? We never count on Washington, but we don't. I'd like to count on not to get to 50 trillion in the next four years or something. Yeah. You know, it's a good point. Look, we're in an election year. Elections do tend to cause some volatility. The debt will have to be addressed in some way. Either taxes move up a little bit or spending moves down a little bit or a combination of both. But you know, we think for now the deficit, it is elevated. But you look at Japan, 200% debt to GDP versus US at 100%, they've gone through their period of stagnant growth, stagnant inflation. We haven't gotten there yet. Growth in this economy has been pretty good. Inflation of course is moderating now, but generally speaking, the elevated level of deficits, yellow flag, but hasn't really been a red flag for us thus far. So the the US economy is, is going to do what it's going to do regardless of the political backdrop. Then we think fundamentals as as we all know drive it and you can see that from history as well. You know, there tends to be volatility prior to Election Day. Afterwards we tend to do pretty well. We're in your four of a four year election cycle. That tends to be the second best year of a four year election cycle. And so you know, that that test gives us some comfort regardless of who guts in that mean, because most of your points are are positive across the board. Any worry about I mean, the the debt doesn't have to grow for for debt service to make it make it hard to, you know, to keep for commercial real estate to to roll debt over. Even the government's got to roll it over. None of that's going to be an impediment, just maybe a damper, but but it won't derail anything. You know, to your point with the government spending more on interest payments, it's spending less on productive things like R&D and infrastructure overtime that weighs on potential growth of an economy. And of course we are seeing pockets of weakness in areas like small regional banks that have exposure to commercial real estate. Has it been systemic thus far? Not so much. And, you know, our positivity probably comes more from what we're seeing in the numbers in real time, which is a consumer that's holding up a labor market that may be cooling, but the Fed looking more and more poised to start cutting rates. And so it's it's not a bad backdrop for long term investors. And inflation was a supply chain after effect more than a money supply problem. Yeah, certainly the supply chain was a big part of the goods inflation and that's almost worked itself out. Of course, the services component is what we're watching for next. We haven't seen meaningful cracks lower, but we're starting to see signs that, you know, the unemployment rate has ticked up, that job openings number has ticked meaningfully lower. The good news is supply of Labor is increasing. Demand of Labor is moving lower. It creates better balance, but probably will show up in wage gains more than anything. So softer wage gains, That's a softer wage gains. So you figured we do get to 2%, we get to the feds target someday. We get close. You know, we for this year are looking for sub 3% and probably, you know, we'll get somewhere in the two 2 1/2 percent range over the next 12 to, you know, 24 months or so. The Fed sees it by 2020, but they've also increased their long term forecast now to 2.8%. So they clearly see the direction of travel being a little bit stickier than we what we've gotten in history. Would you advise clients to to go abroad for, for investments or can you do it here solely? Yeah. You know, we think a large chunk of it is here in the US We've seen the exceptionalism. We talked about the AI story. All those names are housed here in the US, but a lot of those companies that are abroad, they are financials, they are healthcare, they are they are manufacturing. All those companies that may benefit one day from the AI trade valuations are better. And by the way, the Eurozone economy looks like it's coming out of a slump and so interesting setup certainly a part of your allocation could be for diversification purposes alone in in those regions. So when the Soviet I think of them as the Soviet when Russia sends you know warships to Cuba or China, you know goes into Taiwan. None of these you're just like none of that. None of that is probably there are some big issues in the world are are they not but you can't what are you what are you going to do You're not going to hide under your bed. You have to do politics hard to handicap to your point tends to manifest itself most through the commodity markets. We've seen that certainly Russia, Ukraine, some of the more recent conflicts as well. But all we've seen is a temporary spike in WTI commodities. And then what happens is US comes out with more supply or we find a way to get supply to our allies and then we see some, some cooling. And by the way, that the real tail risk is the escalation. If there is some meaningful escalation, there's some meaningful downside as well. Hopefully we're not going in that direction. One last thing to think about, do you, do you, do we go full bore with the transition, the, the energy transition? Are we going to be able to manage that effectively? I mean, we, it, it's just had maybe it's three steps forward, 2 steps back, but it's definitely had a couple of steps back. Yeah, it's a great point. We don't have the infrastructure yet in place and people are feeling that they're not buying the EVs because of that. Prices are still pretty high on the electric vehicle side alone. We need to manage that process, but you know, we, we do think that there has to be at least to your point, a couple more steps forward in that direction just for long term sustainability. And so clean energy will be still a balance with traditional energy. What's comforting to us, a lot of the traditional players are starting to do a lot more in the clean space. Even utility companies starting to do a lot more in that space. There are opportunities we we think forming in both sides of the space. So that's that's the nice part for investors.