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Markets take a breather after notching their longest rally this year. Traders eyeing Fed chair Powell speech at the Jackson Hole conference for more color on the path for rate cuts. Here for more on the recent comeback rally, we've got Pence Capital Management CIO Dryden Pence. Dryden, always good to see you.

Good to see you. Happy to be here.

So we're we're trying to make sense of these markets, Dryden. You had you had the growth scare, you had the panic, and now you've come roaring back. I mean, it's a really big fast U-turn. You look at the SPX, you're back near all-time highs, Dryden. How much upside you think is left there?

Well, I think there's two things going on. We're recognizing the growth of earnings of really the 493 and the rest of the market, even the small and mid caps, are kind of catching up. All the earnings for this magnificent seven for the first half of the year. Now everything's coming up. So I think two things happen. The first, as earnings grow in that broader group and that moves up, then let's put a floor under the market. So when you see this, you know, things fell, everything kind of fell very quickly back to kind of a stabilized pricing structure. That's the first thing, but the second thing is, as you continue to see earnings grow, that's going to be what propels the market further. If we had leadership from seven, what happens when 493 catches up because they're they're basically looking at a 15.4% forward PE on 24 months. What happens when it gets normalized to the rest of the market of 21? So you have a have a big push available in the rest of the 493. So we we're constructive for here for the rest of the year because it's going it's really about fundamentals. And so people panic, they become the frazzled cat, you get a growth scare. We're going to get a revision to the the jobs number, which will probably recognize that some of the panic was, you know, we had bad weather, so you had temporary layoffs, right? So all that comes back in, those numbers firm up a little bit. I think we're going to recognize that this was this blip was a little bit of panic and now we're kind of moving on to understanding the broadening out of the earnings growth of our economy and that's going to propel us forward through the rest of the year.

So if it's earnings that is going to be propelling us forward, um then what role does the Fed play? Is it is it just a matter of removing that? In other words, is a cut actually stimulative and that's what the market needs, or is it just a matter of do no harm and the Fed needs to cut and just get it over with?

I think much of what the Fed does is psychological and in terms of how they how they predict. So now it's the fact that we when we think they'll move in September, the fact that we've moved, we've actually officially pivoted. We had this long pause for you now we've pivoted. So so but I think we have to remember that, you know, soft landing also means slow cadence and so of growth of of of growth but of also Fed cuts, right? So so if you're going to you're going to cut in September, maybe December, maybe they're 25, maybe they wait and pause and become data dependent. But if if the soft landing scenario is true, then that means the cadence of cuts is going to be slow.

So we shouldn't expect bang bang bang bang cut at every meeting.

No. No. I mean, I for for us, I mean we look at it, more people are working making more money today in this country than ever before. We've grown the equivalent of the GDP of France since the pandemic in last four years. So that's the seventh largest economy in the world. So when you think of that and profits are, you know, corporate profits are at an all-time high. So the market makes sense for it to be at an all-time high. When you see more people working making more money, what do Americans do when they have money? They spend it. That's stimulative to the economy. So we think that this is we're it's we've gone from a torrid pace. It's like driving a car at 90 miles an hour and you slow down to 50. Well, you think you're standing still. It feels slow, but you're still moving 10 times faster than you can walk. So it's this adjustment period that we're going through. And I think that that's going to still be good for the markets, good for the economy, and good for the American people. I I I don't see a a a big thing that would cause the Fed to cut rapidly. I think it's just going to be elongated all the way through.

What what do you think, Dryden, the market wants to hear and needs to hear from J. Powell on Friday morning? Because we we had a strategist on on the show this week, who who kind of said, listen, if he doesn't signal uh that that cut is coming in September, he he kind of suggests that would not be good for the bulls.

I I think the, you know, the September cut is probably the most anticipated rate cut of all times. And I think that they probably would do that. The data now begins to show that, you know, inflation structurally correct. We don't need a five a 5.5% fed rate uh at this point to have the economy move in the direction that we need. They have plenty of room, right? They've they've got plenty of ammunition. They didn't have that a couple years ago, right? So they can afford to make a cut. I think what his his comment is, we'll probably make a cut in September and then we're going to be very data dependent and probably not necessarily for 10 a December cut or anything thereafter. It's like we're going to just very slow cadence thereafter. But I do think we see a cut in September because it's time for us to begin to directionally signal what's going to go on. And I think that that will that will help drive the rest of the market and the yield curve the same way.