Let's take a pulse check of the markets now and assess the assess whether the S&P can sustain its momentum following record highs. Let's look at Polymarket odds on where the S&P 500 will close at the end of this year. Under 6,000 is currently the most likely among prediction markets traders at 33%. My next guest's price target for the S&P this year, 7,000. Let's bring in now Thomas Carroll. He is Stefel's Vice President of portfolio strategy.

Tom, it is good to see you. So, okay, let let's so your target for the SPX this year, 7,000. Uh, Tom, that that has to be one of the probably one of the lowest on the street versus your your uh peers there. So maybe start there. Um, how come, Tom? What what are you seeing perhaps that maybe others don't?

Hey Josh, well, first off, thank you for having me back on here. Um I think the last time we spoke, uh since then, we have seen a 10% correction followed by a rally back to all-time highs. We saw oil go from $60 a barrel to 120 and now back to 100.

Uh investor sentiment has completely flipped. You know, even a couple weeks ago, I was asked if I needed to cut my price target. Now I'm being asked if I need to raise it. So it's been a breathless start to the year, but we're pretty comfortable where we stand as as things are.

Uh when we talk about this this kind of valuation compression you see there, Tom, can we quantify that? I mean, how how much compression are you forecasting?

Yeah, well, that's our main concern, you know, we're we're we're we're seeing a pretty strong start to the earning season so far. Uh but that was to be expected. We had a pretty uh strong forecast coming this year of roughly 15% earnings growth year over year, uh which is very strong. And now it is true that roughly half of that is from semiconductors.

But as you said, our overall concern is the fact that we are growing into the multiple, which is causing the market to level out in this low 7,000s range, which is what we continue to expect.

You point to yields and credit, Tom, as key pressure points. Which one, I guess, uh which one worries you more right now, Tom?

Well, I think just if we look at the past month of price action, I think credit's probably the larger driver of markets at the moment. Uh you were talking about, you know, this gross stock rally that we've seen over the past couple weeks. Well, a lot of that has to do with the war risk premium coming out of the credit market. So when we initially had the oil shock, the credit spread, which is the yield that is charged by corporates above US Treasuries, it it tracks the S&P 500 valuation very closely.

That fell very sharply because of the risk premium from the oil shock. However, once the market began to see ships move back to the straight Hormuz, all of a sudden that risk premium began to fall quite a bit and we saw the valuation in the market uh move back up and gross stocks are always the most sensitive to the valuation expansion and we saw us move right back to our price target. So, we think that is going to be what we're looking at more this year is continued uh chop with that corporate credit spread keeping the valuation down and hitting our price target.