Transcript:Caroline WoodsRobert Schein is chief investment officer of Blanke Schein Wealth Management joins me now. Robert, great to have you back. Thanks so much for being here.

Robert ScheinGreat to be with you.

Caroline WoodsSo, Robert, the market keeps hitting fresh highs, thanks in large part to the eye trade. What’s your view on AI right now and what do you think the market is still misunderstanding about the trade right now.

Robert ScheinYou know a lot has been talked about the and trade. Is it real. Is it not. Is absolutely real. The question is what inning are we in if we’re talking about baseball season right now? You know, I believe and we believe that it’s still in the national anthem stage versus the first, second or third inning. So that puts us back to more opportunity across the board, even outside of the eye trade.

Robert ScheinI specifically is going to add so many efficiencies across corporate America. It’s not even it’s not even funny. I don’t think that what the misunderstanding is right now, to be honest with you, is not only the investors, but even in corporate America is actually has a great comprehension of the efficiencies it’s actually going to create. We saw this back in the late 90s, and I think we’re here once again.

Robert ScheinAnd that’s why we’re seeing markets so strong. We’re seeing the eye trade so strong. I believe that’s going to continue.

Caroline WoodsBut is it still early innings for winners like Nvidia and alphabet? If investors still aren’t invested in those names is it too late?

Robert ScheinIt’s actually not too late. Believe it or not, we just have to watch. And pick your pick and choose your spots in terms of when you get into these names. Like earlier this year, we had the first quarter the S&P gave back and all these names were, you know, definitely, sold off. We added to for some clients that didn’t have exposure to that.

Robert ScheinAnd that’s what investors should actually do, as if the market is just be patient when the market provides opportunity. Continue to add to your portfolio for the eye trade.

Caroline WoodsAnd we aren’t seeing all of these names actually as winners within the eye space. A lot of the software names are big losers so far this year. So what’s the market misunderstanding with software, and do you think it’s actually creating opportunities in some of the beaten down names and which ones.

Robert ScheinYeah. Software like ServiceNow. And some of the other, CRM names that we’re seeing, those are going to continue to work out. SAS is going to continue to, to play out and basically play catch up. You’re going to need the software overlay on top of not only just the chip demand that we’re seeing. And I know that software has been hit specifically in the last six months.

Robert ScheinBut I think if you watch some of the earnings reports, some of these software companies are making a tremendous comeback. And that comeback is real.

Caroline WoodsIf investors look beyond some of the obvious eye names, where should they be paying more attention to right now?

Robert ScheinSome of the other sectors? You know, actually, if you look at the SP 500 after the first quarter just reported outside of tech, which had tremendous growth, double digit, you know, 28% growth on the tech side, you also have to look at consumer discretionary. That was the second, leading sector in terms of growth, which is counterintuitive with regards to all the geopolitical that we’ve had, higher, higher growth oil prices, higher interest rates.

Robert ScheinThe consumer is actually staying, very resilient and hanging in there. So consumer discretionary is a space that investors should take a look at. Is continuing to stay in there and continuing to produce, pretty good opportunities.

Caroline WoodsLast time we spoke, you actually said you expected leadership to broaden away from tech. Although right now it seems like we’re seeing a pretty concentrated market. Are you standing by that call? Do you expect to, continue to see a broadening out?

Robert ScheinYeah. The broadening out in the S&P 500 earnings is in specific sectors. The other ten sectors if you will. We’re seeing that across the board. We’re seeing efficiencies that who knows if it’s a efficiencies or just you know, quality management in other sectors. So outside of tech. Yeah, there is really encouraging underneath the surface of the S&P 500 to see this rally actually be legitimate, which it is.

Robert ScheinAnd we’re seeing all of the earnings, all of the tech, outside of tech, if you will continue, that trade.

Caroline WoodsSo you you’re a S&P 500 price target at year end is 8000. What is it that gets us there and what’s the path going to look like?

Robert ScheinYeah, the 8000 number is you know, who knows if we hit it before December. But there’s a high probability that we will simply because the momentum is real. Again, like I said before, outside of tech, the broadening out other sectors are participating. A lot more efficiencies in businesses, great management, high quality, across the board. And you’re seeing other, you know, sectors like financials, even healthcare are participating, which is a very positive sign for the markets overall.

Robert ScheinSo that’s how I see we see the S&P getting there.

Caroline WoodsWhat’s the biggest risk that the market isn’t pricing in right now with stocks near all time highs.

Robert ScheinThe biggest risk for the market right now is inflation reemerging. I think that’s the risk. On the or the concern on the Federal Reserve side. Right. They have a June meeting coming up, a new fed chair, where whether he wants to lower interest rates or not, we’re going to have to watch the labor market. Number one.

Robert ScheinAnd number two, watch the inflation. Is inflation basically, entrenched within all across the economy. And is it just one time inflation that’s going to hit the consumer with regards to oil prices because the geopolitical issues or do we have, you know, higher interest rates for longer. That’s the biggest concern for the market right now. And underlying that is the inflation concern.

Caroline WoodsSo we already saw that uptick in inflation with the CPI and PPI report which will likely, you know, show up in the PC report that we have on tap as well. So how much could that spook the market. And do you think it could provide a a downturn. And would that be an entry point then.

Robert ScheinWell it’s going to take a couple of just outside of just one day or one month reading, inflation, to actually show us if inflation is, is still going to be the boogeyman, if you will, moving forward. But I think businesses have been very efficient. You know, most don’t really talk about this. And I think we’ve seen this play out more and more.

Robert ScheinYou know, Covid what we went through for all companies was actually the probably the best thing to get us to where we are today, simply because of the efficiencies that we’re seeing in across every business channel and across every sector. And I think right now, companies are doing a lot more with a lot less. And that efficiency is really the key.

Robert ScheinSo is it inflation? Is it being passed on to the consumer? A lot of companies, in fact, if you look at the S&P 500 right now and look at the cumulative earnings calls, if you will, which we do for our clients, inflation wasn’t the number one question moving forward or even brought up in the earnings reports.

Robert ScheinWhen when these companies report it. So it’s it’s sort of subsiding a little bit from S&P 500, companies. And they are really dealing with, how volatile the economy is, but how quickly they can adapt to it.

Caroline WoodsOkay. So before we get into some of your top stock picks, what is the strategy then for the everyday retail investor given the risks, but also given where markets have already run, what should they do now?

Robert ScheinWell, like for us with our investors we always keep, dry powder. We always keeps cash on the sidelines. Obviously it’s earning a three and a half, 4% while we wait. But for investors, it’s important to be patient. We always know that the news cycle, the business cycle and everything could change in a 24 hour news span that we’re in right now.

Robert ScheinSo there always is going to be an opportunity if you have dry powder. So we always keep maybe 5 to 10% on the sidelines for great opportunities moving forward.

Caroline WoodsOkay. So let’s talk about some of those opportunities. We asked you to bring some of your top picks here at Palantir is on your list. That’s a beaten down tech name. What makes that a compelling story.

Robert ScheinStrong leadership. The the space is second to none. And they’re the leader in the category. You know, moving forward, they have been, beaten down. But I think right now it’s best opportunity for investors, given where we are in terms of the Palantir positioning, stock price as well as market position.

Caroline WoodsOkay. Also on your list, Ivanova a power play. This one’s obviously already had a huge run up a year to date, up about 60%. Why would you still be a buyer here?

Robert ScheinEnergy constraints. You know, anything from the I demand, is it’s an insatiable demand right now. And GE Renova is in the heart of the middle of that. And they have the ability to take advantage of even not only this year but many years to come with regards to that play.

Caroline WoodsOutside of tech. You’ve called Eli Lilly the next Nvidia. Explain what you mean by that.

Robert ScheinIt’s already in the trillion dollar club. I call that years ago. But if you look at the total addressable market for the GOP, one sort of craze that we’re seeing, their most recent, you know, phase three trial, that was just released, in terms of that information for Eli Lilly is going to be the the mother of all, you know, GOP one if else if you will.

Robert ScheinThe results are even better than what we see of the products on the market today. And again, the total addressable market is absolutely incredible. Eli Lilly is the leader in that space and will continue to be not only this year but years to come.

Caroline WoodsYeah, Eli Lilly up about 16%, in May, although only up about 1% year to date. You also on Blackstone. Why do you think private markets still have upside from here.

Robert ScheinYeah, private markets have been beaten up. Blackstone is leader in that space. And also, you’re going to see the democratization of private equity, across the board. And so as we see, the democratization in, Blackstone will continue to provide opportunities for the individual investor to to basically get into that space long term. So, you know, it’s priced very appropriately today.

Robert ScheinExcellent management. And long term, it will be a long term winner.

Caroline WoodsOnce a stock or even a sector that you think investors still fundamentally misunderstand today.

Robert ScheinIt’s a good question. Let me think about that. Like.

Robert ScheinI think the stock or sector, I you know, I would look at the small cap sector right now, that’s misunderstood at this moment simply because it’s in in limbo. Are we gonna have lower interest rates, which could help and accelerate? This has been the kickstart, you know, stop and start for the last 2 or 3 years in anticipation of lower interest rates.

Robert ScheinThe mid and small cap sector should actually take off. It actually is catching a bit this year in fact the last couple of months specifically. So what is that? What is that, you know, sector of the economy. What is that sector of the market actually telling us right now? It’s telling us that inflation is maybe overdue for basically coming down a little bit.

Robert ScheinYou know, it may tell us that interest rates are going to be lower later this year. And if we do see that small caps will rise as a result of that. It’s been again, a trade and misunderstood for basically the last two years. But we’re seeing small caps actually catch a bit. And the question is, does the market, does the small cap market specifically know something that we don’t, or is it just front running in anticipation of lower interest rates later this year?

Robert ScheinTime will tell.

Caroline WoodsOkay. So Russell’s up 18% so far this year outperforming the S&P 500. Do you expect more room to run then for the Russell. Would you bet on small caps from here.

Robert ScheinYes I would. And simply because you know even though that they’re a leader this year relative to other indices doesn’t mean that, you know, it’s done for the year. That just means that it’s playing catch up. Like I said before, because the last few years, it’s underperformed relative to the other indices. So, yeah, small caps is something to, you know, could be a material trade, not only, for the remainder of this year, but multi-year cycle.

Caroline WoodsOkay. I think this is a great time to transition to our rapid fire game of this or that. Quick questions, quick answers you’ve played before. Are you ready to play again.

Robert ScheinAs you go?

Caroline WoodsAll right. Here we go. Markets cooling off. We’re more room to run.

Robert ScheinOr room to run.

Caroline WoodsHow much more room to run last.

Robert ScheinNight we can see another 10% from here.

Caroline WoodsPath to that 10%. Smooth sailing or bumpy road.

Robert ScheinIt’ll be a bumpy road.

Caroline WoodsTake profits or stay fully invested.

Robert ScheinTrim your overweight and reallocate to your underweight, but safely invest in.

Caroline WoodsBuy every dip or wait for a big reset.

Robert ScheinI would buy the dip.

Caroline WoodsYeah tech leadership staying strong or broadening out staying strong. Summer slump for summer rally.

Robert ScheinSummer rally.

Caroline WoodsMidterms. Market catalyst or headwinds. Catalyst I winner from here. Semis or software.

Robert ScheinCould be software from here.

Caroline WoodsBigger AI opportunity infrastructure applications.

Robert ScheinApplications.

Caroline WoodsOne software name you’d buy right now.

Caroline WoodsServiceNow one you’d avoid.

Robert ScheinThat’s a good question.

Robert ScheinI don’t know.

Caroline WoodsMore upside from here. Micron or Nvidia. Micron tech stock most at risk from AI disruption.

Robert ScheinApple.

Caroline WoodsMega cap tech or the rest of the market.

Caroline WoodsMaking cap small caps or large caps. Small caps one sector you’d avoid right now. Conference at.

Robert Schein12:00 energy.

Caroline WoodsOne winner you take profits on today conversation.

Caroline WoodsNvidia best downside protection cash or hedging cash.

Caroline WoodsPrivate credit concerns overblown or underappreciated.

Robert ScheinUnderappreciated.

Caroline WoodsOne word to describe this market right now resilient.

Caroline WoodsRobert Schein, chief investment officer, Blanke Schein Wealth Management thank you so much for playing along. I appreciate your insights and your picks. Thank you. If you enjoyed this street talk, check out our full interview with Ross Gerber where he explains what could still drive this market higher.