Evercore Founder Roger Altman Touts Resilience Of US Market — Says Iran War, High Energy Prices Are Not Enough To Destabilize It

• Altman cited the robust earnings growth as evidence of a strong U.S. economy, noting that 86% of the S&P 500 companies beat consensus estimates, leading to the strongest quarter in five years.
• He cautioned that no one in the market really knows if the “astronomical” capex on AI is going to earn a satisfactory return.
• Altman added that while he thinks AI is revolutionary and that there are going to be some big winners in the industry, there is a lot of concern about the return on these investments.

Evercore founder Roger Altman believes that the U.S. equity market is resilient, saying that they have been shrugging off headwinds like the Iran war, high energy prices, as well as slightly elevated interest rates.

During an interview with CNBC, Altman said that these headwinds are not enough to destabilize the equity market.

He pointed to two encouraging trends: strong earnings growth and the fact that 86% of S&P 500 companies have beaten consensus estimates, making it the strongest quarter in five years.

Warsh’s Comments On US Economy Were Striking, Says Altman

Altman also highlighted the comments made by Federal Reserve Chair Kevin Warsh on the U.S. economy, while calling him a “real inflation hawk” even as the central bank’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) Index, continues to remain above the long-term target of 2%.

“Kevin Warsh's comments, which got very little attention, on the economic strength were striking,” he said.

Altman also cited strong consumer spending in the second quarter, which rose at a 3.2% pace during the April-June period, rising from 0.5% in the first quarter (Q1). He also said that the increase in final sales to private domestic purchasers, at 3.9%, and strong capital expenditure by U.S. companies were other factors that pointed to a strong economy.

“You have consumer spending that's strong and business investment that's strong; I think it's a strong underpinning for the market,” he said.

Altman Says No One Knows If AI Capex Is Going To Earn A Satisfactory Return

Altman said that no one in the market really knows if the “astronomical” capex on AI is going to earn a satisfactory return. He added that while he thinks AI is revolutionary and that there are going to be some big winners in the industry, there is a lot of concern about the return on these investments.

“I don’t think AI spending is driving the whole economy,” he said, while adding that consumer spending accounts for two-thirds to about 70% of the U.S. Gross Domestic Product (GDP).

What Warsh Said

During a press conference after the Federal Open Market Committee’s (FOMC) meeting last week, Warsh struck an optimistic tone on the broader U.S. economy, saying economic activity is expanding at a solid pace despite heightened uncertainty stemming in part from the Middle East conflict.

He highlighted strong productivity growth and capital investment, while noting that job gains have kept pace with labor force growth and the unemployment rate has remained largely unchanged.

Warsh also emphasized that the Fed does not view strong productivity-led growth as a threat, but rather something to embrace, arguing that the central bank can achieve strong economic growth, low inflation and robust employment simultaneously.

At the time of writing, the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, was up 0.57%; the Invesco QQQ Trust ETF (QQQ) was up 0.15%; and the SPDR Dow Jones Industrial Average ETF Trust (DIA) rose 1.29%. Retail sentiment on Stocktwits regarding the S&P 500 ETF was in the ‘bearish’ territory.

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