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For more on the latest market moves as tensions rise in the Middle East, let's welcome in now Sam Stovall, CFRA Research chief investment strategist. Sam, it is always great to see you. So, uh, listen, geopolitical tensions front and center, Sam, Iran attacking Israel, I am curious Sam, you know, as as an investment strategist, how do you try to think through this kind of dynamic?

Hey, Josh, well, certainly you try to realize, uh, how, um, long it's likely to last. I mean, well, when you see the market, uh, really take a dive and embrace the defensive sectors, consumer staples, health care, utilities, which are your traditional safety, safe havens, your go-to during these kind of surprises. Uh, but then you see the market recover quite strongly. Uh, I'm I'm very impressed with the fact that the market has been able to take, uh, a three punch, uh, that we it's been experiencing with a more hawkish Fed, uh, with the port strike, and now with the, uh, heated up, um, Mideast tensions to say that this market wants to head higher, but it's too soon to to say that the all clear has been signaled because quite frankly, if we do end up seeing the first ever direct conflict between Israel and Iran, uh, that would very quickly push oil prices up to $85 and beyond.

And then, presumably, that would also be problematic for stocks, at least non-energy stocks, it would seem.

Absolutely, Julie. Well, I mean, what just first off, my thought was, gee, this is almost like 1956, an election year in which you do have a crisis that, uh, unfolds in October. Back then you had the Suez crisis with Gamal Nasser, seizing control of the Suez canal, and then you had the, uh, Hungarian uprising that was crushed by Soviet tanks. So, uh, October is certainly earning its reputation as having uh, 34% more volatility than the average for the other 11 months of the year.

And what happens, Sam, um, give us a history lesson on, you know, October during an election year. How does that change the equation?

Well, typically, August and September, uh, are the two back-to-back negative months during all years, but in election years, actually, it gets shifted to September and October. Uh, and typically that two-month period, the market has declined with, uh, a majority of sectors, styles, sizes, and sub-industries, uh, undergoing a sell-off. Uh, but then once the uncertainty of the election has run its course, then it's a complete reversal. All sizes, styles, um, sectors, and 97% of sub-industries have posted gains in the final two months of the year.

So, Sam, um, besides sort of getting past, perhaps, some of these both political and geopolitical elements, what are sort of the underlying, I know you're watching some important underlying drivers that could help push stocks higher. Tell us what they are.

Well, I think the drivers are that, uh, we're getting confirmation of a soft landing. Expectations are for a 3% plus gain in the third quarter of GDP. Uh, employment remains resilient. Uh, expectations are for 150, uh, thousand new jobs. Unemployment rate, uh, unchanged at 4.2%. Uh, essentially, uh, indicating that also earnings are expected to be up by about 13% in 2025 and similarly in 2026. So really that the best place to be continues to be the US, uh, because around the globe, there continue to be problems about a potential recession.

Sam, I know it's not a timing tool, but but how does valuation look to you here?

Well, valuation is a bit unnerving. The S&P is trading at about a 36% premium to its long-term average forward PE. Uh, tech trading below 60, uh, percent premium, but, uh, it had been trading at about a 78% premium, uh, in mid-July, just before, uh, we really started heading lower into that 8 and a half percent price decline. So in a sense, you could say that the, uh, PE, uh, contraction in tech has been a bit encouraging because now with most investors shifting their focus to 2026, uh, that actually makes the, uh, valuations more palatable.

Um, Sam, of course, valuations can keep going higher, and they have been. Um, I'm curious what you're expecting for this, uh, earnings season that is coming up. What kind of growth we might see and how that might also help propel, or not, when it comes to stocks.

Well, the interesting thing is, on June 30th, so just before second quarter earnings were reported, expectations were for about an 8% gain in third quarter earnings. Now that has been cut in half. Uh, and so possibly because a lot of third quarter gains were shifted to the second quarter, uh, and it does appear as if fourth quarter is likely to be up by more than 12%. So a bit of a rebound in the fourth quarter, so a little bit of a dip in this third quarter. So it could also be management doing a very good job of managing expectations, as I like to say. Also, rarely is one injured themselves falling out of a basement window. So if the expectations are pretty low to begin with, uh, there's only really one way to go.

Sam, great to see you. Always is. I appreciate your time.

Thanks, Julie and Josh.