Transcript:Caroline WoodsJoining me now, Kevin Mahn, President and Chief Investment Officer at Hennion and Walsh Asset Management. Kevin, great to have you back at the desk.

Kevin MahnGreat to be back I love being up in New York stock.

Caroline WoodsWell we love having you. I want to check in on your market sentiment because you were last on in January. You were optimistic but said geopolitics was the biggest risk. That one right now that we’re in it. Are you leaning into this market or are you more cautious now?

Kevin MahnYeah. I think for the foreseeable future, markets are going to trade based upon the outlook for oil and the potential end to the conflict in Iran. But what we saw earlier this week is yet another reminder for investors to not try and time the market, right, because any one social media post or any one news announcements could dramatically change investor sentiment and also change market direction.

Kevin MahnSo where does that leave us going forward? I think we have to look back to the underlying themes that were really driving markets last year and are continuing to drive markets this year, despite all of the noise and the volatility coming out of Iran and the impact of higher oil prices on inflation and the economy.

Caroline WoodsSo does $92 oil impact your bullishness at all?

Kevin MahnIt does to a degree. $100 oil impacts and even more. But I think just as quickly as oil prices shot up they could dramatically come down as well. And we really need to hear some news about the successful passage of a non Iranian tanker through the Strait of Hormuz, because that will relieve some concern with respect to the future of oil prices.

Kevin MahnBut until that point in time, we’re going to see more and more consternation, because the longer oil prices stay elevated, the more gas costs, the more consumers have to pay gas prices, the less they can spend. And as you know, 70% of economic growth from some consumer spending. So higher oil prices could lead to higher inflation, which is going to have an impact on consumer spending, which will ultimately impact the economy.

Kevin MahnSo hopefully this doesn’t last too much longer.

Caroline WoodsWhich would ultimately be a market headwind. So what you will do between now and figuring out if we are close to an end for this Iran conflict, but also what impact oil prices would have, I would say, would you buy a dip like today? But we’ve actually already seen a reversal. Just as we were preparing for this. So the S&P essentially flat right now.

Caroline WoodsBut are you buying the dips. Are you putting new money to work right now?

Kevin MahnI am still investing, following the same money and thematic trends that I was investing in prior to the initiation of this conflict in the Middle East, and that’s I infrastructure, aerospace and defense, which you could argue has only intensified now in terms of the need to restock our munitions and modernize our military capabilities, not just here in the U.S., but across the globe, the need for power, the need for cooling solutions, the need for memory.

Kevin MahnAll of those themes are still in place right now. And if you look at the underlying companies in those areas, they’re significantly outperforming the markets thus far this year. So perhaps that’s where investors should continue to lean on as we have as well.

Caroline WoodsYour theme for the year was follow the money. Talk to us a bit more about where the money’s actually flowing and where it’s leaving.

Kevin MahnYes. So I would say where it’s flowing year to date is energy. And that’s a large part due to this conflict right now. And that’s why energy as a sector is up over 30% year to date, far.

Caroline WoodsOut.

Kevin MahnFor outperforming every other sector once lagging financials information technology consumer discretionary. And that shouldn’t be too surprising right. Investors continue to poke at the AI bubble almost hoping it’s going to burst because they feel too much money is being spent in that area. And those companies making all that spending want to achieve a return on investment for years to come.

Kevin MahnAnd they’re right. But let’s just follow where the money is being spent to find the investment opportunities. Today, the data center, construction companies, the power companies, the cooling companies, and of course, the memory makers and the chip fabricators. Still, as we heard from Q one earnings, still, our Q4 earnings rather hopefully soon, with Q1 earnings still going strong and still seeing an inflow of money.

Caroline WoodsSo you would rather be on the lagging side of the trade right now?

Kevin MahnI would rather lean in to where the money is being spent now, as opposed to where the money being spent will ultimately benefit them down the road, because that may be years down the road. So lean into where the money is being spent, as opposed to who’s spending the money right now.

Caroline WoodsAre you taking advantage of the energy trade at all or is it too late?

Kevin MahnI’m a little dubious of the energy trade right now. There are certain energy companies that we do have investments in, but we had investments in prior to the start of the conflict because I think once we get some more noise or some more chatter about a potential resolution, you’re going to see energy prices drop just as quickly as they rose, but they’re going to be staying elevated for some period of time going forward.

Kevin MahnBut the Federal Reserve realizes that as well. And that’s why I continue to tell investors, don’t expect too much out of the Federal Reserve this year. They told us last week, maybe one more rate cut this year of 25 basis points. Markets are pricing in no rate cuts. I’ll take the difference. They’re either 0 or 1, but no more than that at this point in time.

Caroline WoodsBut if the fed isn’t going to come to the rescue, was even, maybe one more rate cut. What is it that’s going to drive the market from here?

Kevin MahnYeah, I don’t think the fed needs to come to the rescue. Remember look at fourth quarter earnings a sixth consecutive quarter of double digit year over year earnings growth. That’s pretty good. We have wages rising faster than the rate of inflation right now. We also know that money continues to be spent in all these areas that we just outlined before.

Kevin MahnAnd the market now thanks to this pullback is now trading at more realistic valuations on a historical perspective. So that tells me that there’s more upside from here. We also and earnings from the Federal Reserve last week that they increased their forecasts for GDP growth this year to 2.4% while maintaining their outlook for unemployment at 4.4%, right where it is right now.

Kevin MahnSo if labor is not going to worsen, if the economy is going to grow a little bit more than the fed, expect it back in December. And they only think inflation’s going to go up to 2.7%. That strikes me as the fed doesn’t need to do much more. And there’s plenty of catalysts in place already once we move past.

Kevin MahnObviously the conflict in our room.

Caroline WoodsWhat needs to happen for you to change your mind and be less bullish? How long does this conflict with Iran need to last? How long do we need to see high oil prices?

Kevin MahnSure. Obviously, if this continues through and into the second quarter, if in fact other countries get pulled into this conflict and it doesn’t stay just about opening the Strait of Hormuz, that would make me revisit my entire outlook. But that’s not our base case right now. I do think there will be an end to this conflict. I do think we’ll start to see tankers moving through the Strait of Hormuz, and I think there will be less pressure on oil prices now, the long term stability of the Middle East, the long term stability of Iran, question mark, question mark.

Kevin MahnBut once we get oil prices to start to moderate, then investors shift their focus back and that’s when follow the money comes back into play.

Caroline WoodsAnchor is the conflict in Iran though, something that the market can look through, or is it something that needs to be resolved before there is a clear direction? Either way, or do we just need to be prepared for more volatility?

Kevin MahnI think we need to be prepared for a relatively, but what the market told us yesterday is just one social media post about talks taking place between the US and Iran, or at least an intermediary between the US and Iran, really move markets.

Caroline WoodsIran actually came out and said, wasn’t the case.

Kevin MahnThey didn’t. But now we heard that perhaps they weren’t in talks, but an intermediary was. So the story lies somewhere in the middle there. But clearly something is taking place, and markets are looking for any kernel of positive information to be bullish once again. So I think the underlying sentiment remains bullish. Otherwise we would have seen a much more severe pullback already.

Caroline WoodsOkay. So Kevin tell me if I gave you fresh capital to work with right now. What are some of the names that you’d be scooping up here?

Kevin MahnSure. I would start on the aerospace and defense side. How about L3 Harris. Obviously we’ve seen very successful missile interceptors. We also need to restock our own missile supplies here. And if in fact, we want to seriously spend money on building our own Iron Dome capabilities, L3 Harris would have to be one of those benefactors. If I want to think about AI infrastructure, how about Micron Technology?

Kevin MahnWe just learned from them in the last week that they killed it in terms of earnings, in terms of revenues lift at their forward looking guidance and there’s an insatiable demand for memory out there, particularly from their largest client who is in Nvidia, who needs more memory now for their next advanced AI chip, which is their Reuben chip.

Kevin MahnSo I really like micron. And here’s a name for most of your listeners don’t know of right now, but Eaton Corporation, big old boring Eaton Corporation rated infrastructure to play. But they’ve been in the news lately, too, because they just had their bond sale to help finance the acquisition of liquid cooling specialist Boyd Thermal. So they’re leaning more into the data center play as well.

Kevin MahnYou want to talk about cooling? How about furtive? Furtive, which supplies the cooling capabilities to data centers already their stocks up significantly year to date. And I can never talk about and not talk about Taiwan Semiconductor, the largest dedicated chip foundry in the world, which post and video also as their largest client. So it’s really just look at all the other benefactors sitting around Nvidia.

Kevin MahnThere’s a lot of good investment opportunities there, and we continue to put money to work in those areas.

Caroline WoodsYes, we appreciate those picks. We’ll dig into those picks a bit more in a different segment. But before we let you go, we want a rapid fire game of this or that. Are you ready? This is your first rodeo. Let’s do it. The rules here. All right.

Stock market worst is over or still ahead.

Kevin MahnBecause there’s still more volatility a.

Caroline WoodsVolatility opportunity or warning sign.

Kevin MahnOpportunity.

Caroline WoodsBuy the dip or wait for clarity.

Kevin MahnAs these don’t exit the market. But we need to wait for more clarity before putting more capital work here.

Caroline WoodsIf you’re putting money to work today, growth or defense growth, rest of 2026, U.S. or international.

Kevin MahnA blend I hate to use that. That’s a cop out, but a blend of both.

Caroline WoodsSo that’s a boost for big tech buy or trim here.

Kevin MahnCertain areas of big tech by, other areas, we continue to trim.

Caroline WoodsWhich areas are you trimming?

Kevin MahnI’ll tell you the areas we’re not trimming. Nvidia. Mike, first of all, the people who continue to lean into AI and spend in those areas and are doing it judiciously are the areas we think we continue to add to AI.

Caroline WoodsChips, software or infrastructure? Infrastructure better safe haven, big tech or gold?

Kevin MahnLonger term safe haven? I would say gold, but better opportunity right now. Big tech.

Caroline WoodsThe fed stuck or still cutting.

Kevin MahnStock.

Caroline WoodsHigher rates. Opportunity or risk? Risk bigger threat to your portfolio. The Iran war or fed policy.

Kevin MahnEr yeah I ran more earnings.

Caroline WoodsStrong enough or at risk strong enough. The best opportunity in this market that investors are missing.

Kevin MahnUtility stocks.

Caroline WoodsI’ll leave it there Kevin thanks so much.

Kevin MahnMy pleasure.

Caroline WoodsThank you. And your insight.

Kevin MahnI could stop sweating though.

Caroline WoodsKevin Mahn, president and chief investment officer at Hennion and Walsh Asset Management.