From Trump tariffs to AI-fueled gains to talk of firing Fed Chair Powell—it’s been a wild mix of headlines. So, where does that leave the market?

 

We’re often asked: Is the stock market too expensive right now?

At ~22.5x forward earnings, valuations are undeniably elevated by historical standards.

But context matters.

 

As Lizzie shared in her Fox interview with Charles Payne, this valuation can be justified by three powerful forces shaping the road ahead:

1. We’re in the early stages of a game-changing AI revolution
2. The U.S. economy and labor market remain surprisingly resilient
3. Pro-growth policies from the “Big Beautiful Bill” are creating tailwinds

 

Yes, tariffs pose a real risk—but history shows that strong companies adapt. We believe earnings growth will continue.

Don’t get lost in the noise. Focus on the fundamentals.

 

Transcript:

Joining me now, Evans May Wealth Managing Partner Elizabeth Evans. Elizabeth, you know, the last few sessions going back to the last week actually felt like classic summer doldrums. So I want to get your sense on today: how would you classify the action or lack of action in today’s session? Well, good afternoon, Charles. I think your point on the CPI report was a good one.

You know, we saw some lower prices at the pump offsetting some higher prices at the grocery store. But I’m seeing all sorts of headlines today from economists looking for the Trump tariffs to work its way into the inflation data. And honestly, you know, I think they might be waiting forever. If you look at, if you pull rent out of CPI, we’re actually below 2% year-over-year.

Your points on. We’re just kicking off earnings season. So this is a big week, especially with the banks and learning the health of the consumer and also the Nvidia announcement today. So it is somewhat of a mixed bag. But where you know, the S&P continues to hit a new all time highs. So I a little bit of good and bad news.

But overall the the footing is still very solid. You know, to that point, I was looking through JP Morgan’s numbers. And you see delinquency has got fractionally better. Losses, net credit losses, got fractionally better. You know, I think the big story really with the with respect to this, our economy, which just has this sort of amazing resolve is the, some will say, the Labor Department.

But you know, in the consumer I don’t know how it keeps happening, but the consumer surprises every single month. Do you think that could continue? I do. The consumer is resilient and we hear it time and time again. Earnings season after earnings season. We know consumer spending makes up two thirds of GDP, so, so goes the consumer, goes the economy.

And I think that that strength will continue. I saw through your note the one thing that jumped out at me and I framed them in different ways, but I didn’t really know this, that the median S&P 500 constituent remains 11% below the all time high. You consider that bullish? I do. I think that the two catalysts for the next leg in the equity markets: broadening out.

So this has been a very narrow market. So as we see broader market participation, that bodes well for equities. And earnings. Earnings estimates. FactSet, going into this earnings season, is expecting earnings per share growth of 5%. That’s down from 9.4% at the start of the quarter. So if we start to see that companies are able to navigate tariffs better than expected, I think that some earnings surprises could bode well for the equity rally to continue.

You make a really great point that I want you to share with the audience, right. Because a lot of folks who come in, particularly older school Wall Street, they don’t want to buy this market. It’s at 22.5 times earnings. No way. But they’re going to be waiting forever, right? You make the case then that there’s that we can’t have more expensive valuations than traditionally.

Right. Because early inning AI, the economy, policies that are rolling out. You don’t want people to let that be the thing that stopped them from making money, right? Well, and the market always continues to move on and set new highs. So, it is, we are at 22 times earnings. That’s 97th percentile over the last 50 years. So it’s not a cheap market.

But I do think that the expensive valuations are warranted. You mentioned AI, Charles, we’ve been talking about the AI evolution. And we still believe we’re early innings there. That productivity boost is real. And I think we’ll continue to hear that from companies this earnings season. You mentioned the economy, the labor market. Importantly, we are on the cusp of a rate-cutting cycle that is very good for equities and the administration is pro-growth.

I think right now 9% of companies are somehow using it effectively. I saw some kind of amazing chart, but it’s hockey stick. Hey, about 30s, I don’t want to shortchange you too much, but you like Spotify and Constellation Brands. We talk Spotify a lot on this show. A while ago, when the when the marijuana thing was hot, Constellation Brands became some sort of proxy de facto, even though that’s not their main business.

Why do you like it now? Why should we take a second look? Yeah, Constellation Brands is an undervalued name. So this is a company for a value investor that’s willing to be patient. So Charles, we often talk growth names. Those will be a quicker hit. But Constellation, given their portfolio of brands, we think is undervalued especially the US imported beer.

They have 70% market share. They are by volume. It’s 40% off. Its all time high. We’ve seen some channel data that came out over the 4th of July that beer consumption and beer demand is actually better than expected. And typically, as you look at the beer distributors, Constellation trends very close to their outlook. So 13.8 times forward PE, 2.4% dividend yield.

So I think that’s one to look at as a value investor. Great stuff Elizabeth I always appreciate your insights. Thank you. Thank you Charles.