Charlie McElligott on How Long the Stock Market Rally Can Go
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What is the main topic discussed in this episode?
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Hey there, Oddlots listeners. You are about to hear a very special episode of the podcast. This was recorded live at our June 26th event in New York. We are talking with Charlie McGillagut. He is, of course, managing director and cross asset macro strategist for the global markets America's business over at Namora. We talked to him about volatility in the market. What else?
Yep, it's been a kind of extraordinary couple of months with stocks basically at all-time highs despite so much going on in the world. What actually explains what's happening? Charlie uh does a pretty good job. So take a listen. Thank you so much, Charlie, for being here. Awesome to be here. Awesome to see you guys. So I didn't actually see where the market closed today, but like we're pretty close, like either we're at record highs or we're very close to it. I didn't actually see, but It's crazy to me all that's happened in 2025, and like we're sitting here at all-time highs. It's not intuitive. You have to admit it's kind of weird.
The um You know, I think the message I'm trying to remember the last time I was with you guys, but probably the message that I was communicating at that time was the the fixation and kind of the dooming with the left tail scenarios. Yeah. And um s as so often is the case, when people are not incentivized to see the world burn, which might be debatable to some. Sure. Um, but and you start seeing Especially with regard to, you know, negotiating tactics and things like that, where you start getting that not quite as bad as feared scenario. Oftentimes there's an impact, certainly with the mechanical stuff that we so often talk about, and you really underprice the less bad outcome. And there's a mechanical impact, there's a lot of you know vol distribution stuff, and it creates second-order impact, second order flows.
I think the most fascinating two points that I would say outside of the, you know, the the mechanical flows that we talk about and and the volatility component of this is is is two things. I think back to twenty twenty two. Um, where we had our first kind of inflation driven macro bear case, right? We just started the tightening cycle. I think there was nine or ten months in a row of inflation upside surprises with CPI. And um, you know, the macro bear case for equities at that point was this earnings recession. We're due to this price shock. It was going to impact consumption, top line sales go lower and you know, so so on and so forth. What ended up happening is ironically, because of the health of the consumer.
and tight, tight, tight employment with wages at forty year highs, you ended up actually getting a dynamic where the corporate world operates on aggregate consumption. They they operate in a nominal GDP world. And that inflation, perversely, for the bears, was the earnings catalyst. And all those folks got stopped out in twenty twenty three. There is an element of that still to this day right now as it relates to earnings. Um even be even though like nominal GDP is is in a different place to a certain extent, still kind of five percent ish. Um But the other point too is that as it relates to the CapEx spending uncertainty story, right? If you know corporates don't know what they're supposed to do with their cash because of the, you know, the the kind of range of outcomes with regards to where, you know, where they where these, you know, uh tariffs are gonna end up, um, the sand in the gears of the global economy.
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Chapters
5 chapters
1
What is the main topic discussed in this episode?
0:00–5:25
2
Why did the stock market rally back to all‑time highs after the April “Liberation Day” crash?
5:25–12:34
3
What does “relentless selling of volatility” mean and how is it driving the rally?
12:34–19:18
4
How are corporate buybacks becoming a major source of demand for equities?
19:18–22:00
5
Why are investors treating volatility selling like a new fixed‑income asset?
22:00–25:48
Speakers
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