Why investors' 'proverbial wall of worry' is no match for the market rally

Hennion & Walsh chief investment officer, Kevin Mahn, sits down with Yahoo Finance Senior Reporter Brooke DiPalma to share his thoughts on what's driving the market rally.

This is incredible. We're seeing yet again the Nasdaq, the S&P 500 at record highs. There's so many factors playing into this market. So what are those factors here?

Yeah, clearly investors continue to climb the proverbial wall of worry, whether it's oil staying above $100 a barrel, the 10 year above 5 and a quarter percent, uncertainty of what the Federal Reserve will do or perhaps not do next, and of course the upcoming mid-term elections. But still we see record earnings strength. We're on track now for the third consecutive quarter of 20% plus year-over-year earnings growth. And then we continue to hear more announcements on billions of dollars being spent in our economy around AI infrastructure, around power, and around Aerospace and defense. Look no further than Constellation Energy this morning announcing their 20-year contract to provide nuclear energy to Google. And then we learned recently that uh a big company out there, you may have heard of them, Raytheon or RTX Corporation received a 20 billion dollar plus order from the US Navy to restock their Tomahawk missiles. Money continues to be spent, growth opportunities continue to exist and it's not just technology, even though technology is leading the way right now.

I want to get on that because we are seeing this concentration right now in tech. Does that worry you and are there other ways? You mentioned some growth opportunities that investors maybe should be looking at to diversify here?

Yes. I I don't want to get back to 2023 when the Mag 7 accounted for 62% of the total return of the S&P 500. That was good for those seven stocks, but it wasn't good for the sustainability of this bull market rally. What we're seeing today's strength in, utilities, once again. Not your father's utilities or my father's utility. Yes, utilities hold up well in the face of volatility. Yes, they pay good dividends, but now they've become a back door play into the AI revolution, particularly as it relates to nuclear energy. And then aerospace and defense. They pulled back over the course of the last quarter, but history shows when they pull back as much as they did in a given quarter, more than 12%, well, guess what, over the next year, they've been higher 100% of the time with an average return of nearly 29%. So that tells me as a portfolio manager, I want to look at those as attractive entry points.