Good morning, investors. With a new bullish sector call to make, no time to waste today! Let’s get right into it.

Technology is no longer the most expensive sector in the stock market. 

Industrials now carry the highest forward earnings multiple in the S&P 500 and the group has emerged as the best way to own both the physical AI infrastructure buildout as well as the global defense boom. 

Industrials trade at 25.2x forward earnings, according to FactSet, above its 10-year average of 19.9x. 

That leads consumer discretionary at 24.3x and information technology at 22.7x, as well as the S&P 500 itself at 20x.

To DataTrek Research co-founders Nick Colas and Jessica Rabe, the advent of AI has made investors comfortable paying a premium against history. The top names in the group tell the story: 

Those multiples do not reflect the usual railroads, engines and factories of the industrial sector.

Rather, as DataTrek Research notes, they illustrate how bullish investors have become on AI and defense themes. 

Indeed, names like Caterpillar and GE Vernova are in the data center business, while RTX, General Electric and Parker Hannifin sell into defense budgets.

The counterpoint is that Uber (17x) and Union Pacific (22x) — two of cheapest industrial names in the market — have little to do with either major theme and so trade and discounted valuations. 

Through the first half of the year, industrials outperformed the S&P 500 by nearly 10 points.

But the sector has recently started to lag, which could imply a catch-up trade opportunity. 

It isn’t accurate to call industrials the new technology sector, but because it combines physical AI and defense, that could be an understatement anyway. 

🎯 President Trump paused the 50% Canadian tariffs for 3 days after a last-minute deal. The reprieve landed late Tuesday just before the midnight deadline with Trump crediting the Keystone XL pipeline as part of the resolution. (Yahoo Finance)

🏦 July FOMC minutes revealed 3 regional Fed presidents wanted to hike rates. Logan, Hammack, and Kashkari formed the first unified directional dissent since September 2016. (Yahoo Finance)

🛢 The US-Iran Strait of Hormuz standoff has continued another week. Only five commodity vessels transited the waterway last weekend versus 31 the prior weekend after Tehran demanded the US lift its naval blockade before any reopening deal. (CNBC)

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Ryan Detrick is the chief market strategist for Carson Group. He joined me on Episode 100 of Full Signal to discuss the latest data driving the bull market, his favorite sectors right now and what would convince him to turn bearish.

Tune in on Spotify, Apple Podcasts, or YouTube.

🗓 August 20, 1982: The Dow surged 3.66% to cap a 10% rally in a single week, launching the 1980s mega-bull market and the end of Paul Volcker's inflation fight.

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