The Dow Jones Industrial (^DJI) briefly crossed 40,000 for the first time in its history, echoing the significant gains in the broader market. While some signs point to inflation slowing, there have been signals that the consumer is beginning to pull back.

IDX Advisors Chief Investment Officer Ben McMillan joins Market Domination to discuss the Dow's new record and why he believes investors will need to move with "cautious optimism."

"I do think equities are priced to perfection at this point. So we would urge caution. It's also important to remember that this is a momentum driven market. You got to be really careful to kind of pick and choose your value," McMillan tells Yahoo Finance.

For more expert insight and the latest market action, click here to watch this full episode of Market Domination.

This post was written by Nicholas Jacobino

Video Transcript

Stock mix today with the Dow crossing 40,000 for the first time ever.

For more on the latest market moves and what they mean for investors.

Let's now welcome in Ben mcmillan, ID X advisors, Chief Investment Officer, Ben.

It is good to see you.

So Dow 40,000, Ben making headlines getting a lot of attention.

Let's just start there, Ben.

What do you make of this market where we are and where you think we're headed from here?

Yeah, I mean, you know, look after yesterday's inflation numbers, you know, it's, you know, the news was fairly good, the economy remains strong, inflation is moderating.

I do think, you know, equities are priced to perfection at this point.

So, you know, we would urge caution.

It's also important to remember that this is a momentum driven market.

Um There's not, you know, you got to be really careful to kind of pick and choose your value.

You know, we've already seen them at rotation out of kind of the tech dominated mag seven at the beginning of the year.

You know, fast forward to today.

Utilities, the XL U sector is out performing the queues.

So I think that's in some ways very good.

We're seeing a broadening, we're seeing more breadth, uh, as opposed to just seven stocks carrying the industries higher.

Um, I wouldn't be surprised if we see, you know, uh, the indices continue to set highs throughout the end of the year.

But again, you know, urge caution here because if you drill in under the hood, you know, the consumer is driving the economy but, you know, there's an asterisk there, um, you know, defaults are starting to creep up.

It looks like unemployment, you know, might be showing some signs of weakness.

Um, and you know, if the almighty consumer falls, um, you know, that's where we could start to see, you know, a real correction.

And so when you talk about things being priced for perfection, what kind of a scenario are stocks implying then at these levels?

Well, you know, one thing I think was interesting when you, you know, you like again, we started at the beginning of the year with kind of, you know, 6 to 7 rate cuts priced and obviously, you know, interest rates move everything.

It's the discount rate for all risk assets including stocks, you know, after yesterday's, uh, you know, print you, we still have two rate cuts.

You know, the market is still pricing in two rate cuts, which, you know, I think it's still fairly optimistic.

I mean, you know, you've even had, uh, you know, Richard Fisher, former Dallas vet president yesterday saying he was skeptical that, you know, we, we'd have two rate cuts this year.

And so I think that's the tail risk in this market is that, you know, the, the assumptions going into these equity valuations are still potentially a little bit too rosy.

Now again, the flip side of that is we've got record deficit spending, you know, let's, let's look at kind of the elephant in the room which is, you know, what's powering this economy?

Yes, it's the consumer.

But part of that is because they're coming off, you know, they've got a lot of excess savings after COVID, we have, you know, deficit spending that's greater than 6% with unemployment under 4% which I don't know that we've ever seen with the possible exception of kind of World War Two.

So that's, you know, that bill is gonna come due at some point.

And I think that's, I think we're starting to see that with stickier inflation.

I think we could see some dollar weakness in the future for sure.

And equity markets could certainly go higher, but I do think there's risk to the downside for sure.

Ben.

You know.

So, so what you're urging here is kind of cautious optimism.

Uh That's a theme if, if that's true, Ben, how do I sort of invest in that theme?

And, you know, at least in the US stock market, uh what sectors would look like would look attractive to you Ben here.

Well, I think we're starting to see kind of a broadening, you know, one of the concerns earlier this year was that you had, or even last year frankly is that you had, you know, a handful of stocks literally pulling the entire index higher.

And so, you know, a lot of equity strategists, a lot of investors wanted to see a broadening out of equity strength and we're seeing that, like I said, I mean, you start to see some of the more defensive sectors.

Utilities is a good example of value stocks, you know, consumer, uh other consumer staples.

Um, you know, starting to kind of pick up where, you know, things like technology and the, you know, the, the high flying tech stocks have, have, uh lagged off.

So I think that's good.

You know, I candidly, I think, you know, you're starting to see a move towards active management, you know, this is a so called stock pickers market.

I do think that that's gonna start to, to matter more.

I think, you know, the pockets of value for those that, you know, really taking a close look will, you know, they'll be able to find it, but it's, it's gonna be much less of a, you know, just kind set it and forget it, trade much more of a, you know, pick your spots and really try and find the value stocks well.

And you talked about utilities, really seeing an uptick in B we've seen that group really start to pick up some steam here underlying that is this demand for more electricity, more power in part because of data centers, you're looking at uranium specifically here because of the nuclear play.

How do you think that is going to play out?

And how does one play that?

So that is, that's an excellent point.

And that is a big trend that we're starting to see unfold and you're seeing that in commodities prices.

I mean, look at copper, you know, co copper is kind of trading part and parcel with utilities and it's all part of this, as you said, kind of move towards electrification, you know, all things ev alternative energy and you know, there, there's an embedded em play there too.

You know, if you look at countries like China coming back online or India starting to emerge as, you know, big consumers, they, they're gonna need a lot of electricity, they're going to need a lot of wiring for that electricity and everything you mentioned is, is kind of part of that.

And so I think, you know, we're very bullish on copper, we're bullish on utilities um for that exact reason because we think that's we, we're in the early endings of kind of a secular bull market for, you know, this move towards alternative energy, this move towards greater electricity, which, you know, interestingly copper, this kind of boring industrial metal.

Now all of a sudden it's kind of an adjacent A I play.

Ben, I also wanna get your take on gold.

I'm interested in how you want to invest there.

Do you want to invest there?

And if so Ben, is it with the metal, the miners both?

So we remain bullish on both gold and the miners.

Um For the same reason that I mentioned earlier is, you know, the, the US has printed a lot of money.

It has uh you know, been very aggressive with its status as a reserve currency.

And if you look, you know, the the world has taken notice, you know, if you look at central bank buying in gold, we started getting a bullish on gold, you know, several months ago, mainly because, you know, we were seeing central banks globally really step up their gold purchases and they're doing that by selling treasuries.

And that's, you know, that's the market saying that we're worried about the US printing money.

Let's not forget, 80% of all dollars in existence have been printed, you know, since COVID and you know, gold is a way to play that.

And if you look at the gold miners specifically, um you know, with higher prices, there's a lot of embedded operating leverage in the miners, it's a more volatile asset class to be sure.

But you know, it's one that we think is undervalued relative to the metal.

Uh and you know, one that we're bullish on