Caroline Woods:
Joining me now, Kevin Mahn, president and chief investment officer at Hennion & Walsh Asset Management. Kevin, great to have you back at the desk.

Kevin Mahn:
Great to be back here at the New York Stock Exchange.

Caroline Woods:
Yeah, so we're talking stocks. U.S.-China trade tensions did have investors on edge for a bit, but stocks are back in positive territory today. What's your take? How much of this market rally depends on the two sides striking a deal?

Kevin Mahn:
Yeah, I still contend that China is the top of the fight card as it relates to global tariffs and trade. And the more back and forth that we hear, the more investors get concerned about what the long-term prospects are. Of course, we need their rare earth minerals and they need our chips, so that's at the heart of all this. But the market seems now to be looking past that. We had that initial pullback on Friday, and boy, did we have a relief rally on Monday. That just reminds me—and should remind investors as well—about the dangers of trying to time the market.

Look, I've been doing this for over three decades. I don't know how to time the market effectively. It's an exercise in futility. So stay invested. Stay invested consistent with your risk tolerance, build in diversification where appropriate, but don't play this guessing game of in the market, out of the market, in the market, out of the market—because you're likely to miss out on the most significant returns that the market has to offer.

Caroline Woods:
But for those investors looking to put some money to work—maybe they missed the initial huge run higher—would you say that opportunities like last Friday were a good buying opportunity, or will there be better? You can't time the market, but would you be comfortable putting money to work right now, with stocks very close to record highs?

Kevin Mahn:
Yeah, I do believe we're in a buy-the-dip type of phase once again right now. We've had 33 record closes thus far this year for the S&P 500—57 such record closes last year. We have the market trading at elevated valuations, so most would think, "How much higher could we go?" But we got a tailwind back in September, and that tailwind came from the Federal Reserve.

There was a stat put out by Goldman Sachs that looked at the last 40 years and found that the Federal Reserve cut interest rates eight times after pausing for six months or more, as they did in September. Now, in four of those times, Caroline, the economy moved into recession—that's not our base case here. In the other four instances, however, when the economy continued to grow—even if at a slower pace—the market moved higher by an average of 8% over six months and 15% over the next 12 months. I think we're leaning more toward that, but you're going to have to be a lot more selective to find those growth opportunities this time around.

Caroline Woods:
15% from here?

Kevin Mahn:
From here, over the next 12 months.

Caroline Woods:
All right. So if you have to be selective, what should you be adding to your portfolio? What should you be taking out?

Kevin Mahn:
Sure. I think you want to continue to follow the money—aerospace and defense spending, and infrastructure spending. And I know we continue to talk about the AI revolution, but I'm more focused on the infrastructure buildouts and all the money that's being spent there—on data centers, on cooling solutions, on power solutions.

Some names that I think coincide with that: a name like IIS Holdings—most haven't heard of the company. They provide electrical connectivity to data centers. Their stock's up almost 97% year-to-date.

How about a company like Comfort Systems, ticker symbol FIX. They're in the industrial sector. What the heck do they have to do with the AI revolution? But they supply cooling solutions to warehouses, distribution centers, and data centers. Their stock is up over 100%.

And then finally, Caroline, two names that are reporting earnings this week: ASML, which reported earnings earlier today, and Taiwan Semiconductor, which reports tomorrow. I think those are other great ways to play the AI revolution without just going back and forth with Nvidia, which in my view at least, still sits at the hub of the AI ecosystem.

Caroline Woods:
I was going to say—notably missing from your list is Nvidia. You can't count out Nvidia. You still would be putting money to work in Nvidia?

Kevin Mahn:
Absolutely. Absolutely. And I think Nvidia is playing the long game with respect to AI. They used to be just in chips. Now what we found in last quarter is that 88% of their revenues came not from chips but from data center revenue. So they're diversifying in terms of their revenue base going forward. I think that's very smart. But there are other opportunities beyond Nvidia and beyond chips—and those other names are just a couple of examples.

Caroline Woods:
So you're diversifying within the AI space. But what about diversification overall? Because there are other headwinds for investors to contend with. It's not just trade tensions. It's a government shutdown. It's a weakening macro picture. It's interest rate policy, which could be a tailwind unless the Fed doesn't do what the market actually wants it to do. So I mean, there are plenty of other obstacles in the way.

Kevin Mahn:
Climbing the wall of worry. And I think there will be more short-term bouts of volatility here in the fourth quarter. So investors who may want to get a little more defensive in this environment—but don't want to exit the market completely—how about the utility sector? The top-performing sector year-to-date. Big old boring utility stocks. They hold up well in the face of volatility. They pay good dividends.

But guess what, Caroline. Now they've become a backdoor play into the AI revolution. Those multi-utilities that supply natural gas, nuclear power, and more traditional sources of power appear to be good from an investment perspective as well—and are good diversifiers.

And then I think on the fixed income side of the equation, what about municipal bonds? Investment-grade muni bonds that really haven’t rallied back just yet due to all the excess supply that took place before the one big beautiful build-back was passed. I think they come back. They’re paying very attractive tax-equivalent yields right now, and it's another great diversification example if you want to look at fixed income.

Caroline Woods:
It’s interesting though, because you make the point that utility is one of the best performing sectors. Some of your stock picks—up 97%, 100% year-to-date. Some might say, “Am I too late?” But you think that there's more room to run for those particular names or sectors from here?

Kevin Mahn:
I do. And I’ll lean into Nvidia’s CEO Jensen Huang here, who has forecast that there's going to be somewhere between $3 to $4 trillion—with a "T"—of money spent on AI infrastructure by the end of this decade. Right now, we're around $600 billion. So if we get to $3 to $4 trillion by the end of this decade, all of those infrastructure buildout names still stand to benefit and could move higher.

But you make a very good point—they’re trading at some pretty rich valuations right now. So try not just to pick one or two winners. Try and pick multiple winners. And then also try and surround that with some more diversified names in other sectors, just in case too much money goes in there and there is a pullback.

Caroline Woods:
OK. One thing we haven’t talked about yet is earnings. Should we look at earnings as a positive catalyst as we really kick things off, or should we look at it as potentially another headwind for the market?

And we also haven’t talked about banks. You didn’t recommend any bank stocks. We’ve heard from all the big banks. So I want to get your takeaway from big banks' earnings as well.

Kevin Mahn:
I’ll start with banks. So I think banks are off to a good start this earnings season. The big money center banks—I looked at Bank of America, which reported very strong investment banking revenue. That’s interesting to me. Net interest income at several of the banks appears to be in a comfortable range. That’s a net positive for the economy.

But where I really see the opportunity within banks isn’t necessarily the big money center banks—but the smaller-cap regional banks, the roll-ups, which will continue to perform as short-term interest rates move lower, even if only gradually over the next two years—because now they become more attractive acquisition targets to those big money center banks.

Earnings overall—I think it’s forecast that we’re going to grow about 8% year-over-year earnings growth. If that holds true, that’s the ninth consecutive quarter of earnings growth. That’s a really positive trend right now. And what I’m really encouraged by is a lot of these earnings are citing continued strength with the consumer.

We have to remember, during the first half of this year, AI infrastructure spending actually matched the contribution to GDP of consumer spending. That’s not normally the case. Usually, the consumer accounts for 70% of the economic growth in our country. Now it appears to be turning back to the consumer again in the second half of this year, despite all the spending that still takes place in infrastructure. And that’s good for corporate earnings—and that’s good for the economy.

So I’m really anxious to see if the economy continues to grow, as the Atlanta GDP forecast is suggesting—or does it start to pull back to what the Fed is suggesting by the end of the year? Remember, they’re forecasting economic growth to slow to 1.6% this year.

Caroline Woods:
What do they know that we don’t know?

Kevin Mahn:
Well, and we’re learning even less with the government shutdown, right? We’re not getting any new data—raw data. But I think that this earnings season should give us, at least in terms of guidance, some more insights into how the consumer is doing and maybe some broader economic implications.

Caroline Woods:
If we start to see signs of concern from some of these companies—or even continued signs of concern from some of these companies—is that make or break for this rally? Do you change your forecast of 15% from here?

Kevin Mahn:
Well, that’s not my forecast—that’s just what history has suggested might happen. And of course, this time could be different. But my outlook going forward is still optimistic. But I’m also factoring in that the Fed is going to cut interest rates two more times this year, that they’re going to continue to cut rates over the next year and a half until we get back to their 3% neutral rate.

My forecast is still based on the economy not moving into recession. My outlook is still based on all of this spending taking place in aerospace, defense, and AI infrastructure, and the AI revolution continuing. So yes, I have a lot of contingencies with that forecast—but it does appear as though everything is lining up right now.

And the concern for me, as a portfolio manager, is that others feel the same way. And there’s a lot of complacency on Wall Street right now—that the market’s going to continue to grind higher, that this spending is going to continue to take place at these record levels. And it won’t. It can’t continue in perpetuity.

So this might be an appropriate time for investors to sit with their financial advisors, look at their portfolios, take some gains, and reallocate to other areas of the market to build more diversification into their portfolios—if, in fact, they’re concerned about oncoming volatility.

Caroline Woods:
All right. We'll leave it there. Kevin, thank you so much for sharing your insights and your picks. Really appreciate it.

Kevin Mahn:
Thanks, Caroline.Caroline Woods:
That’s Kevin Mahn, president and chief investment officer at Hennion & Walsh Asset Management.

This story was originally reported by TheStreet on Oct 15, 2025, where it first appeared in the Business & Finance Videos section. Add TheStreet as a Preferred Source by clicking here.