1 00:00:10,960 --> 00:00:14,800 While geopolitical volatility remains a systemic risk, 2 00:00:14,800 --> 00:00:16,500 historical market cycles and post 3 00:00:16,500 --> 00:00:19,460 midterm trends suggest that growth remains intact. 4 00:00:19,460 --> 00:00:20,719 Welcome to Nasdaq trade talks, 5 00:00:20,719 --> 00:00:22,320 where we meet with the top thought leaders and 6 00:00:22,320 --> 00:00:24,199 strategists in emerging technologies, 7 00:00:24,199 --> 00:00:25,440 digital assets and regulatory 8 00:00:25,440 --> 00:00:26,740 landscape and capital markets. 9 00:00:26,740 --> 00:00:28,079 I'm your host, Jill Malandrino, 10 00:00:28,079 --> 00:00:30,220 and joining me on the desk at the Nasdaq market site. 11 00:00:30,220 --> 00:00:32,920 We have Phil McIntosh, chief economist at Nasdaq. 12 00:00:32,920 --> 00:00:34,520 Chris Dearborn, managing director on 13 00:00:34,520 --> 00:00:36,240 the Nasdaq Market Intelligence desk. 14 00:00:36,240 --> 00:00:38,680 Steve Sosnick, chief strategist at Interactive Brokers. 15 00:00:38,680 --> 00:00:40,559 And joining us from Tulsa, Oklahoma, 16 00:00:40,559 --> 00:00:41,599 we have Steve Wyatt, 17 00:00:41,599 --> 00:00:44,260 chief market strategist at Bok Financial. 18 00:00:44,260 --> 00:00:46,079 We're here to discuss the fundamental and 19 00:00:46,079 --> 00:00:48,399 historical assessments of the economy 20 00:00:48,399 --> 00:00:49,679 and the market at 21 00:00:49,679 --> 00:00:51,079 a very appropriate conversation for 22 00:00:51,079 --> 00:00:52,820 the two Steves with us today. 23 00:00:52,820 --> 00:00:56,139 As you are walking encyclopedias and history books, 24 00:00:56,139 --> 00:00:58,300 Steve, W let's kick it off with you. 25 00:00:58,300 --> 00:01:00,120 Give us a little bit of background here. 26 00:01:00,120 --> 00:01:02,740 It seems like geopolitical events and midterms could 27 00:01:02,740 --> 00:01:05,600 actually not be too bad for the market. 28 00:01:05,600 --> 00:01:08,120 Yeah. Good day. Jill. So yeah, so look, I mean, look, 29 00:01:08,120 --> 00:01:10,799 we all know the history of the markets when we've seen 30 00:01:10,799 --> 00:01:13,739 these types of geopolitical events in the past, 31 00:01:13,739 --> 00:01:15,760 the right decision was to buy the dip. 32 00:01:15,760 --> 00:01:18,000 If we think about midterm elections, 33 00:01:18,000 --> 00:01:20,740 which do have greater volatility, 34 00:01:20,740 --> 00:01:23,680 uh, than, uh, than other years of presidential cycles, 35 00:01:23,680 --> 00:01:25,720 but the long term is that you buy 36 00:01:25,720 --> 00:01:28,639 the dip because if we get past the midterms, 37 00:01:28,639 --> 00:01:31,120 we've never had a post midterm, 38 00:01:31,120 --> 00:01:35,800 12 month period negative for the S&P 500 since 1938. 39 00:01:35,800 --> 00:01:39,040 So I think that what's going to be we're going 40 00:01:39,040 --> 00:01:40,280 to have to watch closely 41 00:01:40,280 --> 00:01:42,360 as we think about what's happening in Iran. 42 00:01:42,360 --> 00:01:44,239 It's going to be the breadth of 43 00:01:44,239 --> 00:01:47,580 the conflict and the duration of the conflict. 44 00:01:47,580 --> 00:01:49,879 It is possible that this works 45 00:01:49,879 --> 00:01:52,079 out differently than what we've seen in the past, 46 00:01:52,079 --> 00:01:54,500 and some things we would be looking for there. 47 00:01:54,500 --> 00:01:56,739 Um, man, if we would see Saudi Arabia or 48 00:01:56,739 --> 00:01:58,999 UAE as they kind of mentioned, 49 00:01:58,999 --> 00:02:03,230 uh, potentially, Uh, moving on Iran as well. 50 00:02:03,230 --> 00:02:05,169 Or if we would see, uh, 51 00:02:05,169 --> 00:02:07,609 continued shutdowns in the Straits of Hormuz, 52 00:02:07,609 --> 00:02:10,670 which the president has come out to with some, uh, 53 00:02:10,670 --> 00:02:14,690 plans to help that that would take oil up to 100 bucks. 54 00:02:14,690 --> 00:02:16,350 Jill. Then I think we got to we got to 55 00:02:16,350 --> 00:02:17,889 reconsider because at that point, 56 00:02:17,889 --> 00:02:20,169 that would probably be enough to knock us off of 57 00:02:20,169 --> 00:02:22,009 this idea that we're going to 58 00:02:22,009 --> 00:02:23,889 have positive economic growth this year, 59 00:02:23,889 --> 00:02:25,369 that we're going to see inflation 60 00:02:25,369 --> 00:02:27,790 overall declining a little bit. 61 00:02:27,790 --> 00:02:29,010 Still trouble spots there. 62 00:02:29,010 --> 00:02:30,230 We know PPI was hot. 63 00:02:30,230 --> 00:02:32,830 We know the core PCE is at 3%. 64 00:02:32,830 --> 00:02:36,689 Uh but something that would knock us off of this idea of 65 00:02:36,689 --> 00:02:39,550 economic growth and improving earnings 66 00:02:39,550 --> 00:02:42,509 not just at the S&P level but broad more broadly, 67 00:02:42,509 --> 00:02:43,530 mid and small caps, 68 00:02:43,530 --> 00:02:45,870 which have done very well this year. 69 00:02:45,870 --> 00:02:47,809 It would have to knock us off of that for 70 00:02:47,809 --> 00:02:49,729 us to change this idea that 71 00:02:49,729 --> 00:02:51,289 we're going to view 72 00:02:51,289 --> 00:02:54,169 declines in the market more opportunistically, 73 00:02:54,169 --> 00:02:57,350 as opposed to risks of a longer term pull down. 74 00:02:57,350 --> 00:02:58,569 Yeah, Steve, it's interesting, as 75 00:02:58,569 --> 00:02:59,990 he's saying that since 1938, 76 00:02:59,990 --> 00:03:01,410 My first thought was the prediction markets 77 00:03:01,410 --> 00:03:02,569 are going to light up and 78 00:03:02,569 --> 00:03:05,290 see if we if we just jinx that history. 79 00:03:05,290 --> 00:03:07,490 But back to how corporates are approaching this. 80 00:03:07,490 --> 00:03:10,549 I think the other thing to consider is how 81 00:03:10,549 --> 00:03:12,729 corporate management teams are executing on 82 00:03:12,729 --> 00:03:15,250 all these investments that they made in the tech space, 83 00:03:15,250 --> 00:03:17,430 because you have to pay the piper at some point. 84 00:03:17,430 --> 00:03:19,089 This is this is one of the themes that 85 00:03:19,089 --> 00:03:20,970 I've been thinking about for some time. 86 00:03:20,970 --> 00:03:22,370 And we could see that the mentality 87 00:03:22,370 --> 00:03:23,890 has changed, you know, 88 00:03:23,890 --> 00:03:25,589 and for better or worse, 89 00:03:25,589 --> 00:03:28,870 the history of the internet sort of is relevant here. 90 00:03:28,870 --> 00:03:30,610 History doesn't repeat. It rhymes. 91 00:03:30,610 --> 00:03:32,050 But in this case, we're rhyming 92 00:03:32,050 --> 00:03:34,070 because you know we're moving. 93 00:03:34,070 --> 00:03:36,090 Let's stipulate that AI is 94 00:03:36,090 --> 00:03:38,410 everything that it's that it's hoped to be. 95 00:03:38,410 --> 00:03:40,090 That was that was really the case with the internet. 96 00:03:40,090 --> 00:03:42,690 It was everything we'd hoped it to be. And then some. 97 00:03:42,690 --> 00:03:44,709 On the other hand, you know, 98 00:03:44,709 --> 00:03:47,809 at some point you have to move past the enthusiasm of, 99 00:03:47,809 --> 00:03:51,110 what can I do for what can I 100 00:03:51,110 --> 00:03:54,730 do for you to how am I going to pay for this? 101 00:03:54,730 --> 00:03:55,850 And what can it disrupt? 102 00:03:55,850 --> 00:03:57,449 You can't have a disruptive technology 103 00:03:57,449 --> 00:03:59,210 without somebody being disrupted. 104 00:03:59,210 --> 00:04:02,500 That was the sell off in in software stocks. 105 00:04:02,500 --> 00:04:05,580 And but so what we're seeing here is we're 106 00:04:05,580 --> 00:04:09,420 moving when any normal business has to consider. 107 00:04:09,420 --> 00:04:10,800 And any normal investor needs to 108 00:04:10,800 --> 00:04:12,640 consider this on behalf of the, you know, 109 00:04:12,640 --> 00:04:13,879 what management is doing, 110 00:04:13,879 --> 00:04:17,020 what a return on equity or what a return on assets. 111 00:04:17,020 --> 00:04:19,320 And so how is AI going to 112 00:04:19,320 --> 00:04:21,940 bring efficiency to the bottom line? 113 00:04:21,940 --> 00:04:23,900 And with all the money that's being spent, 114 00:04:23,900 --> 00:04:25,820 as a lot of companies that have been 115 00:04:25,820 --> 00:04:28,660 celebrated for being asset light businesses 116 00:04:28,660 --> 00:04:30,660 are now asset heavy businesses 117 00:04:30,660 --> 00:04:32,660 with that are putting on a lot of 118 00:04:32,660 --> 00:04:34,579 fixed costs in terms of 119 00:04:34,579 --> 00:04:36,840 interest rates and other and other expenditures. 120 00:04:36,840 --> 00:04:38,559 How, how are we 121 00:04:38,559 --> 00:04:40,220 how are we going to bring this to the bottom line? 122 00:04:40,220 --> 00:04:41,540 And I don't mind that the market 123 00:04:41,540 --> 00:04:42,860 is looking at this more critically. 124 00:04:42,860 --> 00:04:44,860 I think that's I think that's sensible. 125 00:04:44,860 --> 00:04:46,339 But it's going to bring it's going 126 00:04:46,339 --> 00:04:47,880 to bring potholes along the way. 127 00:04:47,880 --> 00:04:49,139 Yeah, it certainly is. And we're 128 00:04:49,139 --> 00:04:50,480 seeing that play out in the market right now 129 00:04:50,480 --> 00:04:53,319 trying to discern the hype versus you know, 130 00:04:53,319 --> 00:04:56,920 the demand and broadening exposure lends to that. 131 00:04:56,920 --> 00:04:58,339 You've seen that over the last couple of months, 132 00:04:58,339 --> 00:04:59,840 which is kind of interesting. 133 00:04:59,840 --> 00:05:01,380 To Steve's point, everyone's point here 134 00:05:01,380 --> 00:05:03,499 about software selling off recently, 135 00:05:03,499 --> 00:05:05,540 especially as the AI ramp up from 136 00:05:05,540 --> 00:05:08,500 the different agents kind of pull into that concerns. 137 00:05:08,500 --> 00:05:10,159 There are really more of 138 00:05:10,159 --> 00:05:13,120 those companies being a little too. 139 00:05:13,120 --> 00:05:16,079 What would be the right word acting well, 140 00:05:16,079 --> 00:05:18,059 as over previously times and 141 00:05:18,059 --> 00:05:20,520 finally coming back down to normal a little bit. 142 00:05:20,520 --> 00:05:21,580 You know, the hyperscalers are 143 00:05:21,580 --> 00:05:22,939 still investing on free cash flow, 144 00:05:22,939 --> 00:05:25,620 so that money is going to continue to go into whatever 145 00:05:25,620 --> 00:05:28,300 needs to maybe whether it's workout builds, 146 00:05:28,300 --> 00:05:31,260 cross, um, investments or others. 147 00:05:31,260 --> 00:05:32,660 But what's really interesting is you're 148 00:05:32,660 --> 00:05:34,180 seeing the broadening of the market come out. 149 00:05:34,180 --> 00:05:35,660 You're seeing small and mid-cap names 150 00:05:35,660 --> 00:05:37,060 starting to perform very well. 151 00:05:37,060 --> 00:05:38,420 You're seeing defensive names starting 152 00:05:38,420 --> 00:05:39,840 to act very, very well. 153 00:05:39,840 --> 00:05:42,080 Staples, utilities all as 154 00:05:42,080 --> 00:05:44,500 a safe haven for this uncertainty. 155 00:05:44,500 --> 00:05:46,619 Granted you're going to see stock 156 00:05:46,619 --> 00:05:49,380 picking more than sector involvement. 157 00:05:49,380 --> 00:05:51,860 Companies that are doing well with who are operating 158 00:05:51,860 --> 00:05:55,880 well free cash flow predictability, profitability, 159 00:05:55,880 --> 00:05:59,100 companies that are uncertain or in their earnings calls 160 00:05:59,100 --> 00:06:00,660 don't forecast that are 161 00:06:00,660 --> 00:06:02,480 going to be hit and they're going to be hit hard. 162 00:06:02,480 --> 00:06:03,680 So you're seeing that broadening 163 00:06:03,680 --> 00:06:05,379 the S&P 400 mid cap is one of 164 00:06:05,379 --> 00:06:07,100 the best performing indexes year to date. 165 00:06:07,100 --> 00:06:08,860 And overall the markets really haven't 166 00:06:08,860 --> 00:06:10,760 reacted for the last two weeks. 167 00:06:10,760 --> 00:06:12,339 You know for the month of March there's 168 00:06:12,339 --> 00:06:14,360 only a couple of days we're flat. 169 00:06:14,360 --> 00:06:15,620 Yeah. I mean Phil, 170 00:06:15,620 --> 00:06:17,240 even from the macro perspective, 171 00:06:17,240 --> 00:06:19,760 AI productivity and spend is becoming more of 172 00:06:19,760 --> 00:06:21,779 a critical component of what 173 00:06:21,779 --> 00:06:24,040 we're seeing with GDP as an example. 174 00:06:24,040 --> 00:06:25,740 I mean, it's kind of hard to 175 00:06:25,740 --> 00:06:27,980 see AI productivity in the data. 176 00:06:27,980 --> 00:06:31,020 It's hard to see AI affecting jobs in the data. 177 00:06:31,020 --> 00:06:33,339 It's a little bit like a year ago looking for tariffs, 178 00:06:33,339 --> 00:06:35,280 having an impact on the economy as well. 179 00:06:35,280 --> 00:06:38,060 I think at the moment we're still pretty early stages. 180 00:06:38,060 --> 00:06:39,560 It's like the internet in the 90s, 181 00:06:39,560 --> 00:06:41,859 it didn't really deliver productivity gains 182 00:06:41,859 --> 00:06:43,060 until the noughties. 183 00:06:43,060 --> 00:06:44,540 And so we have to actually build 184 00:06:44,540 --> 00:06:46,339 the AI to the point where people know how to 185 00:06:46,339 --> 00:06:48,500 deploy it and how to make it make us more 186 00:06:48,500 --> 00:06:49,899 productive before it's actually 187 00:06:49,899 --> 00:06:51,200 going to make companies more money. 188 00:06:51,200 --> 00:06:52,819 So, you know, I think there's 189 00:06:52,819 --> 00:06:54,420 multiple legs to this trade. 190 00:06:54,420 --> 00:06:55,819 And right now there's, 191 00:06:55,819 --> 00:06:58,650 if anything, the people that would have lost their jobs. 192 00:06:58,650 --> 00:07:00,470 And now looking at AI and how to use it 193 00:07:00,470 --> 00:07:02,950 in the same companies and put it into products, 194 00:07:02,950 --> 00:07:04,690 but they haven't lost their jobs completely. 195 00:07:04,690 --> 00:07:06,849 Yeah. And I wonder if it, um, 196 00:07:06,849 --> 00:07:08,709 makes it harder to forecast 197 00:07:08,709 --> 00:07:10,770 in terms of what kind of jobs. 198 00:07:10,770 --> 00:07:11,630 Oh, totally. 199 00:07:11,630 --> 00:07:13,069 Because the whole thing is we get the efficiencies, 200 00:07:13,069 --> 00:07:14,610 we get the use cases and so forth. 201 00:07:14,610 --> 00:07:16,430 What is the ROI? How do we benchmark that? 202 00:07:16,430 --> 00:07:18,270 How do we value the data? 203 00:07:18,270 --> 00:07:19,630 It's pretty arbitrary at this point. 204 00:07:19,630 --> 00:07:21,589 And we can as humans, we can only keep up so 205 00:07:21,589 --> 00:07:23,850 fast with acclimating to this kind of technology. 206 00:07:23,850 --> 00:07:26,090 Which jobs are actually AI exposed? 207 00:07:26,090 --> 00:07:28,470 I mean, I've seen so many different charts 208 00:07:28,470 --> 00:07:30,269 where the category at the top is 209 00:07:30,269 --> 00:07:32,390 different and really different than 210 00:07:32,390 --> 00:07:33,510 a category at the top of the next 211 00:07:33,510 --> 00:07:34,790 chart or the chart after that. 212 00:07:34,790 --> 00:07:36,810 And so really, we just don't know 213 00:07:36,810 --> 00:07:40,030 how many jobs and people talk about augmenting jobs. 214 00:07:40,030 --> 00:07:44,089 So you could have AI make our job a lot less boring, 215 00:07:44,089 --> 00:07:46,190 a lot more interesting, and make us more productive. 216 00:07:46,190 --> 00:07:47,790 Or you could replace us with 217 00:07:47,790 --> 00:07:51,330 virtual people sitting at a desk like we don't know yet. 218 00:07:51,330 --> 00:07:52,870 Or maybe we're lucky and we're actually 219 00:07:52,870 --> 00:07:54,429 not exposed to AI doing this, 220 00:07:54,429 --> 00:07:55,910 so no one knows. 221 00:07:55,910 --> 00:07:57,269 And it's going to be interesting to see 222 00:07:57,269 --> 00:07:58,810 how it really does play out, 223 00:07:58,810 --> 00:08:00,849 what consumers want to buy 224 00:08:00,849 --> 00:08:03,250 and what they're willing to let AI do for them. 225 00:08:03,250 --> 00:08:05,029 Yeah, I mean, Steve White, I think the market and 226 00:08:05,029 --> 00:08:07,670 investors have to exercise some patience here. 227 00:08:07,670 --> 00:08:09,889 Well, and I'm going to go back to 228 00:08:09,889 --> 00:08:11,770 something that Steve said early on. 229 00:08:11,770 --> 00:08:13,970 This is the way we've been describing AI. 230 00:08:13,970 --> 00:08:15,950 This this to this point is 231 00:08:15,950 --> 00:08:18,429 how long will investors be, uh, 232 00:08:18,429 --> 00:08:19,890 willing to invest in the, 233 00:08:19,890 --> 00:08:21,609 in the enthusiasm for AI 234 00:08:21,609 --> 00:08:23,810 versus the need for actual returns? 235 00:08:23,810 --> 00:08:25,130 But I think the other part of this, 236 00:08:25,130 --> 00:08:27,829 we've all read the recent report that came out that 237 00:08:27,829 --> 00:08:30,550 indicated to Phil's point what could be at risk. 238 00:08:30,550 --> 00:08:31,649 And, uh, you know, 239 00:08:31,649 --> 00:08:33,490 I've vacillated between being 240 00:08:33,490 --> 00:08:35,869 really excited about AI as a tool and, 241 00:08:35,869 --> 00:08:39,770 and being absolutely terrified of it replacing me. 242 00:08:39,770 --> 00:08:42,150 Uh, but I think as we, as we move forward. 243 00:08:42,150 --> 00:08:43,769 Jill. Uh, in the end, 244 00:08:43,769 --> 00:08:45,070 companies are in the business to make 245 00:08:45,070 --> 00:08:47,269 money and it's just going to be, 246 00:08:47,269 --> 00:08:49,429 uh, I think every company needs to be 247 00:08:49,429 --> 00:08:51,570 thinking about how they're utilizing AI. 248 00:08:51,570 --> 00:08:53,250 I thought it was very interesting. 249 00:08:53,250 --> 00:08:55,369 Uh, when Jack Dorsey came out and said they were going 250 00:08:55,369 --> 00:08:57,470 to cut 40% of their employees at block. 251 00:08:57,470 --> 00:08:59,700 Now that hasn't been a great performing stock. 252 00:08:59,700 --> 00:09:01,679 There probably was some short covering, 253 00:09:01,679 --> 00:09:03,640 but that stock was up 25%. 254 00:09:03,640 --> 00:09:06,260 I think on the day that they made that announcement. 255 00:09:06,260 --> 00:09:08,799 I openly wondered with some of my internal people, 256 00:09:08,799 --> 00:09:11,140 does that green light companies now 257 00:09:11,140 --> 00:09:13,760 to make those kinds of decisions? 258 00:09:13,760 --> 00:09:15,579 As Steve pointed out earlier, 259 00:09:15,579 --> 00:09:18,020 companies were being were being rewarded for 260 00:09:18,020 --> 00:09:20,580 making these huge AI investments. 261 00:09:20,580 --> 00:09:22,340 That's kind of slowed down a little bit. 262 00:09:22,340 --> 00:09:24,219 Are we moving to a new era 263 00:09:24,219 --> 00:09:25,899 where it's going to be companies that are 264 00:09:25,899 --> 00:09:27,320 that this is how they're 265 00:09:27,320 --> 00:09:29,620 signaling that they're forward thinking? 266 00:09:29,620 --> 00:09:30,760 Jill. This is how they're 267 00:09:30,760 --> 00:09:33,460 signaling that they're on the front edge of trying to 268 00:09:33,460 --> 00:09:35,659 make AI a better 269 00:09:35,659 --> 00:09:37,919 part of their business plan and improve their margins, 270 00:09:37,919 --> 00:09:40,080 improve their profitability, whether 271 00:09:40,080 --> 00:09:42,560 that's actually going to be able to occur. 272 00:09:42,560 --> 00:09:44,400 I think Phil is exactly right. 273 00:09:44,400 --> 00:09:47,860 It's hard to see that at the moment, but, um, 274 00:09:47,860 --> 00:09:50,240 signaling can be an important part of what 275 00:09:50,240 --> 00:09:52,859 happens to your stock price in the short run. 276 00:09:52,859 --> 00:09:54,340 It's a double edged sword though. 277 00:09:54,340 --> 00:09:56,360 If you cut employee headcount 278 00:09:56,360 --> 00:09:58,620 and your stock goes up when you cut employee headcount. 279 00:09:58,620 --> 00:10:01,320 There's less spending going into the economy. 280 00:10:01,320 --> 00:10:04,380 Well, that's that's the micro versus the macro, right? 281 00:10:04,380 --> 00:10:05,600 I mean, you know that at 282 00:10:05,600 --> 00:10:07,320 the micro level it might make sense. 283 00:10:07,320 --> 00:10:09,399 And I do think at some level, 284 00:10:09,399 --> 00:10:12,159 um, you know, and I'll let Phil speak more to this, 285 00:10:12,159 --> 00:10:13,559 but my gut is telling me in 286 00:10:13,559 --> 00:10:15,120 a couple of conversations I've had with, 287 00:10:15,120 --> 00:10:17,240 with other economists have been 288 00:10:17,240 --> 00:10:18,380 that a lot of 289 00:10:18,380 --> 00:10:20,560 the weakness in labor that we're seeing now. 290 00:10:20,560 --> 00:10:22,279 Yes, AI is part of it, 291 00:10:22,279 --> 00:10:24,159 but it's also to some extent, 292 00:10:24,159 --> 00:10:26,440 the aftermath of the labor hoarding that 293 00:10:26,440 --> 00:10:28,760 went on during during the Covid era. 294 00:10:28,760 --> 00:10:30,980 And at this point, maybe, you know, 295 00:10:30,980 --> 00:10:33,320 is in the case of square, 296 00:10:33,320 --> 00:10:35,240 and I don't want to pick on that company because I don't 297 00:10:35,240 --> 00:10:37,440 know enough about their business particularly. 298 00:10:37,440 --> 00:10:38,980 But I've heard people allege that, you know, 299 00:10:38,980 --> 00:10:42,280 they were hoarding labor, they've been underperforming. 300 00:10:42,280 --> 00:10:43,440 So now they're going to jettison 301 00:10:43,440 --> 00:10:44,840 everybody and not everybody, 302 00:10:44,840 --> 00:10:45,960 but they're going to jettison a large 303 00:10:45,960 --> 00:10:47,200 amount of them and say, 304 00:10:47,200 --> 00:10:49,400 you know, say it's because of AI efficiency. 305 00:10:49,400 --> 00:10:50,880 So we don't really know. 306 00:10:50,880 --> 00:10:53,420 And in many cases, this is, you know, 307 00:10:53,420 --> 00:10:56,059 going back to the the ROI, the ROI, 308 00:10:56,059 --> 00:10:58,639 the ROI, You know where 309 00:10:58,639 --> 00:10:59,799 the micro is different than 310 00:10:59,799 --> 00:11:01,720 the macro you were talking about from the macro level? 311 00:11:01,720 --> 00:11:04,020 Phil. At the micro level, 312 00:11:04,020 --> 00:11:05,600 you know, where he was saying that, 313 00:11:05,600 --> 00:11:07,780 that these are very fluid technologies. 314 00:11:07,780 --> 00:11:12,260 Again, I want I want to use the analogy of in 1998, 315 00:11:12,260 --> 00:11:14,919 if we were all investing the way, 316 00:11:14,919 --> 00:11:18,019 the way that the trends were going and the internet, 317 00:11:18,019 --> 00:11:19,779 we would be, we'd be, you know, 318 00:11:19,779 --> 00:11:22,260 dialing up on AOL right now to, to log, 319 00:11:22,260 --> 00:11:23,760 you know, you know, and 320 00:11:23,760 --> 00:11:26,520 checking and checking, searching with yahoo. 321 00:11:26,520 --> 00:11:28,000 And, you know, you also had 322 00:11:28,000 --> 00:11:29,799 all this spending going on with, 323 00:11:29,799 --> 00:11:31,200 you know, the global crossings of 324 00:11:31,200 --> 00:11:32,680 the world and all the people. 325 00:11:32,680 --> 00:11:34,400 And again, the data center build out to 326 00:11:34,400 --> 00:11:36,699 me is very analogous to, um, 327 00:11:36,699 --> 00:11:39,480 the, you know, the hardwire build up the, 328 00:11:39,480 --> 00:11:41,200 the bandwidth buildup that went on then. 329 00:11:41,200 --> 00:11:43,200 And those were illustrious companies 330 00:11:43,200 --> 00:11:45,220 like Global Crossing, Northern Telecom, 331 00:11:45,220 --> 00:11:48,939 Lucent, um, Worldcom, Enron, 332 00:11:48,939 --> 00:11:50,120 you know, should I go on? 333 00:11:50,120 --> 00:11:51,920 Um, so yeah, so, 334 00:11:51,920 --> 00:11:54,179 so the point being we don't know, 335 00:11:54,179 --> 00:11:55,380 does it fill you? 336 00:11:55,380 --> 00:11:57,450 Sorry, you put this on the tee for me? 337 00:11:57,450 --> 00:11:58,630 I'm just. I'm just hitting it here. 338 00:11:58,630 --> 00:12:00,610 So from a on a on a macro level, 339 00:12:00,610 --> 00:12:02,370 if we don't know on a micro level, 340 00:12:02,370 --> 00:12:03,970 we have to be concerned as well. 341 00:12:03,970 --> 00:12:05,910 That doesn't, that doesn't mean all the bets 342 00:12:05,910 --> 00:12:08,010 that the market's making are wrong. 343 00:12:08,010 --> 00:12:11,330 But you know, remember in 1998, 344 00:12:11,330 --> 00:12:13,489 Mark Zuckerberg was probably still in high school, 345 00:12:13,489 --> 00:12:15,130 if not if not starting college. 346 00:12:15,130 --> 00:12:17,309 And, and the guys at Google were just, 347 00:12:17,309 --> 00:12:19,310 you know, putting their putting their ideas together. 348 00:12:19,310 --> 00:12:20,830 Neither of these companies really 349 00:12:20,830 --> 00:12:23,130 existed yet they're the ones who dominated. 350 00:12:23,130 --> 00:12:25,430 We don't know who's going to dominate AI. 351 00:12:25,430 --> 00:12:27,850 I saw a great chart that looks at all of 352 00:12:27,850 --> 00:12:29,049 the different industries and 353 00:12:29,049 --> 00:12:30,549 employment in the industries, 354 00:12:30,549 --> 00:12:32,610 and even in the industries that were affected 355 00:12:32,610 --> 00:12:34,730 by technology and innovation, 356 00:12:34,730 --> 00:12:36,310 they still had more employees. 357 00:12:36,310 --> 00:12:38,169 And then there was a bunch of new industries 358 00:12:38,169 --> 00:12:39,410 that layered on top. 359 00:12:39,410 --> 00:12:42,309 So I mean, historically, even with innovation, 360 00:12:42,309 --> 00:12:43,990 humans find new places to do 361 00:12:43,990 --> 00:12:45,950 work and we create jobs as well. 362 00:12:45,950 --> 00:12:48,890 I mean, business cycles and failures do happen. 363 00:12:48,890 --> 00:12:50,570 It feels as if over the past decade and a half, 364 00:12:50,570 --> 00:12:53,050 we haven't been allowed to fail to a certain extent. 365 00:12:53,050 --> 00:12:55,170 But you know, to both of your points, 366 00:12:55,170 --> 00:12:57,010 these are how businesses get 367 00:12:57,010 --> 00:12:58,969 borne out of learning from those mistakes, 368 00:12:58,969 --> 00:13:00,770 what worked, what didn't work, and where investors are 369 00:13:00,770 --> 00:13:02,829 willing to put capital towards. 370 00:13:02,829 --> 00:13:04,610 And what are the new products that we can 371 00:13:04,610 --> 00:13:06,570 make with AI that we can't make right now? 372 00:13:06,570 --> 00:13:07,670 That's going to be really interesting. 373 00:13:07,670 --> 00:13:09,250 I mean, your point about Google and we 374 00:13:09,250 --> 00:13:11,189 talked about Netflix last time I was here, 375 00:13:11,189 --> 00:13:13,050 like it didn't exist in the tech bubble. 376 00:13:13,050 --> 00:13:14,370 It's only because of 377 00:13:14,370 --> 00:13:16,110 the internet that you can have Netflix. 378 00:13:16,110 --> 00:13:17,290 Well, it's because we have the show. 379 00:13:17,290 --> 00:13:20,110 So thank you for the internet, Chris. 380 00:13:20,110 --> 00:13:21,769 It's interesting though. Where else 381 00:13:21,769 --> 00:13:23,550 would you go though to put your money to work? 382 00:13:23,550 --> 00:13:25,970 Right? So again, the main point where 383 00:13:25,970 --> 00:13:27,049 people are putting investment 384 00:13:27,049 --> 00:13:28,410 into is the broadening of the market. 385 00:13:28,410 --> 00:13:29,410 They're putting it into small and 386 00:13:29,410 --> 00:13:30,710 mid-cap names right now, 387 00:13:30,710 --> 00:13:32,409 pulling back a little bit from the crowded trades 388 00:13:32,409 --> 00:13:33,909 that we've seen with the mag seven, 389 00:13:33,909 --> 00:13:36,770 though they are acting better as of recently. 390 00:13:36,770 --> 00:13:39,050 What you're seeing is again, the defensive names, 391 00:13:39,050 --> 00:13:41,309 but companies that are clear about 392 00:13:41,309 --> 00:13:44,049 their cash flow have a clear path to profitability, 393 00:13:44,049 --> 00:13:46,270 are seeing investments into the stock, 394 00:13:46,270 --> 00:13:48,830 their more conservative names. 395 00:13:48,830 --> 00:13:49,929 You know, you're talking about 396 00:13:49,929 --> 00:13:51,470 staples that pay a nice dividend. 397 00:13:51,470 --> 00:13:52,949 Others right now they're parking some of 398 00:13:52,949 --> 00:13:54,090 that money because they're 399 00:13:54,090 --> 00:13:55,514 unsure of where it's going to go, 400 00:13:55,514 --> 00:13:58,840 Really, where we're going to go is still an uncertainty. 401 00:13:58,840 --> 00:14:00,679 The IPO market is strong right now, 402 00:14:00,679 --> 00:14:02,159 even though we've got a bit of a pause 403 00:14:02,159 --> 00:14:04,520 on right now for the obvious reasons. 404 00:14:04,520 --> 00:14:06,600 We've had a fairly amount of good names 405 00:14:06,600 --> 00:14:09,140 p e starting to let some of those companies come out. 406 00:14:09,140 --> 00:14:12,400 So there is a risk on appetite somewhat, 407 00:14:12,400 --> 00:14:13,740 but it depends on the company. 408 00:14:13,740 --> 00:14:15,620 If the company has a clear path to profitability, 409 00:14:15,620 --> 00:14:17,460 like with an investment with a stock that's been 410 00:14:17,460 --> 00:14:19,499 out or a company that's been public for a long time, 411 00:14:19,499 --> 00:14:21,220 they're going to find investment. 412 00:14:21,220 --> 00:14:23,840 If it's uncertainty, they're going to sit and wait. 413 00:14:23,840 --> 00:14:26,020 I mean, you're still getting close to 4% on the ten year. 414 00:14:26,020 --> 00:14:27,840 That's not so bad either, right. 415 00:14:27,840 --> 00:14:29,820 So people have options. 416 00:14:29,820 --> 00:14:31,980 But the uncertainty about what's going on 417 00:14:31,980 --> 00:14:34,700 globally headline and economically, 418 00:14:34,700 --> 00:14:37,100 especially with inflation picking up a little bit more. 419 00:14:37,100 --> 00:14:39,560 And then with the fed changeover coming up in May, 420 00:14:39,560 --> 00:14:42,220 you know it's still a little bit up in the air. 421 00:14:42,220 --> 00:14:43,660 But the markets are still acting well. 422 00:14:43,660 --> 00:14:44,960 They're holding their own well. 423 00:14:44,960 --> 00:14:46,120 I mean interest rate risk. 424 00:14:46,120 --> 00:14:48,200 Could be a big part of the equation as well. 425 00:14:48,200 --> 00:14:49,480 I think earnings though 426 00:14:49,480 --> 00:14:51,500 companies across all the sectors of 427 00:14:51,500 --> 00:14:52,860 the S&P 500 across 428 00:14:52,860 --> 00:14:55,059 all the market cap ranges even around the world, 429 00:14:55,059 --> 00:14:56,319 companies are doing really well 430 00:14:56,319 --> 00:14:58,100 compared to 2 or 3 years ago. 431 00:14:58,100 --> 00:15:00,379 So I think that's helping support the market because 432 00:15:00,379 --> 00:15:01,940 the actual fundamentals coming 433 00:15:01,940 --> 00:15:03,820 out of the companies is pretty strong. 434 00:15:03,820 --> 00:15:05,380 Let me ask a question to the group, 435 00:15:05,380 --> 00:15:07,200 if you don't mind me taking over for a second. 436 00:15:07,200 --> 00:15:09,820 When was the last time anybody talked about rate cuts? 437 00:15:09,820 --> 00:15:12,360 That was just what I was alluding to. There's so. 438 00:15:12,360 --> 00:15:12,820 Much. 439 00:15:12,820 --> 00:15:14,220 You're drinking from a fire hose when 440 00:15:14,220 --> 00:15:15,659 you're thinking about all the, 441 00:15:15,659 --> 00:15:17,820 uh, you know, the worries that this market is. 442 00:15:17,820 --> 00:15:20,179 But rate cut probabilities have have fallen. 443 00:15:20,179 --> 00:15:20,500 One. 444 00:15:20,500 --> 00:15:22,980 Now. Well, no, it's one and change. 445 00:15:22,980 --> 00:15:25,000 But the first rate cut we'd gotten as we'd 446 00:15:25,000 --> 00:15:27,380 gotten as far as pricing went in for June, that was that. 447 00:15:27,380 --> 00:15:29,680 That was only about like a three day period or so. 448 00:15:29,680 --> 00:15:31,139 But we're now beyond 449 00:15:31,139 --> 00:15:33,420 July for the first rate cut, and we're about one. 450 00:15:33,420 --> 00:15:36,019 And as we're taping this sort of about 60%, 451 00:15:36,019 --> 00:15:38,259 70% for a second rate cut, 452 00:15:38,259 --> 00:15:40,179 whereas we were, you know, 453 00:15:40,179 --> 00:15:42,339 definitely, you know, definitely, 454 00:15:42,339 --> 00:15:44,359 if not June definitely won by July, 455 00:15:44,359 --> 00:15:46,059 definitely to by December, 456 00:15:46,059 --> 00:15:48,980 if not a 30 or 40% chance of a second cut. 457 00:15:48,980 --> 00:15:53,440 Market hasn't really reacted to that and yet, 458 00:15:53,440 --> 00:15:55,879 you know, but so the narrative, 459 00:15:55,879 --> 00:15:58,780 I will say investors are incredibly creative. 460 00:15:58,780 --> 00:16:01,140 To your point, Chris, not only about rotation, 461 00:16:01,140 --> 00:16:03,660 but changing the narrative to whatever fits. 462 00:16:03,660 --> 00:16:06,159 It's now to Phil's point about earnings in the economy. 463 00:16:06,159 --> 00:16:07,340 Rates have come down. 464 00:16:07,340 --> 00:16:08,900 I think that's you know, a year ago we were 465 00:16:08,900 --> 00:16:10,620 talking about rates needed to come down. 466 00:16:10,620 --> 00:16:12,159 They have all come down. It's a question 467 00:16:12,159 --> 00:16:13,660 of where is neutral. 468 00:16:13,660 --> 00:16:15,480 And you look at Canada and you look at Europe. 469 00:16:15,480 --> 00:16:18,140 And they're basically at the point now where they 470 00:16:18,140 --> 00:16:19,539 probably don't want to have to put 471 00:16:19,539 --> 00:16:21,220 rates down because that's recession. 472 00:16:21,220 --> 00:16:23,199 They might be going up for the next, 473 00:16:23,199 --> 00:16:24,660 uh, you know, sort of rate change. 474 00:16:24,660 --> 00:16:26,840 We probably do need a little bit more of a cut to get to 475 00:16:26,840 --> 00:16:29,180 our neutral rate, but not much. 476 00:16:29,180 --> 00:16:30,840 So I think that's why, you know, 477 00:16:30,840 --> 00:16:32,659 even if we do get 1 or 2 more cuts, 478 00:16:32,659 --> 00:16:33,800 that's going to be it. 479 00:16:33,800 --> 00:16:36,600 And so we're pretty close to back to normal. 480 00:16:36,600 --> 00:16:40,040 So Steve, why is the market distracted from other things. 481 00:16:40,040 --> 00:16:41,320 I think feels exactly right. 482 00:16:41,320 --> 00:16:42,780 Look, we're just not that far away from 483 00:16:42,780 --> 00:16:44,279 neutral and I don't know how much, 484 00:16:44,279 --> 00:16:45,690 you know, what's another 25 or 485 00:16:45,690 --> 00:16:47,120 50 basis points going to do? 486 00:16:47,120 --> 00:16:48,780 What what would upset the market 487 00:16:48,780 --> 00:16:49,980 is if we would have to start 488 00:16:49,980 --> 00:16:51,500 thinking about the potential 489 00:16:51,500 --> 00:16:52,940 for the fed to raise interest rates? 490 00:16:52,940 --> 00:16:54,804 I don't think we're close to that now, 491 00:16:54,804 --> 00:16:58,449 but I don't think anybody's really looking for the fed to 492 00:16:58,449 --> 00:17:00,110 be the stimulus that's going to 493 00:17:00,110 --> 00:17:02,270 drive the growth going forward. 494 00:17:02,270 --> 00:17:04,790 Uh, companies are doing are doing well. 495 00:17:04,790 --> 00:17:06,650 And there are, uh, you know, 496 00:17:06,650 --> 00:17:09,470 earnings expectations are there. They've broadened. 497 00:17:09,470 --> 00:17:10,950 I think the biggest thing that, 498 00:17:10,950 --> 00:17:12,630 that I'm taking away from the market and 499 00:17:12,630 --> 00:17:14,749 just looking at how it is behaving, 500 00:17:14,749 --> 00:17:16,630 even in the short run as 501 00:17:16,630 --> 00:17:18,749 all of this stuff is happening, uh, 502 00:17:18,749 --> 00:17:20,430 there's rotation in the market, 503 00:17:20,430 --> 00:17:22,910 but nobody's pulling money out of the market. 504 00:17:22,910 --> 00:17:25,210 It's still there. They want to be there. 505 00:17:25,210 --> 00:17:27,190 There's this idea that, uh, 506 00:17:27,190 --> 00:17:29,150 they can make shifts within the market, 507 00:17:29,150 --> 00:17:31,190 but they're not going to, they don't want to be out of 508 00:17:31,190 --> 00:17:33,230 the market for any period of time. 509 00:17:33,230 --> 00:17:34,630 And in the end, uh, 510 00:17:34,630 --> 00:17:35,749 for all the concern, 511 00:17:35,749 --> 00:17:36,789 if there is that, uh, 512 00:17:36,789 --> 00:17:38,369 of what the fed may do, 513 00:17:38,369 --> 00:17:40,810 there is still a lot of liquidity out there. 514 00:17:40,810 --> 00:17:42,270 There's plenty of liquidity. 515 00:17:42,270 --> 00:17:45,190 You know, we haven't talked about potential tremors in 516 00:17:45,190 --> 00:17:46,670 the private credit world and 517 00:17:46,670 --> 00:17:48,590 where that what that might do. 518 00:17:48,590 --> 00:17:49,990 But if we just shift that 519 00:17:49,990 --> 00:17:52,109 over to the public credit markets, 520 00:17:52,109 --> 00:17:54,150 they haven't shown the type of stress 521 00:17:54,150 --> 00:17:56,269 there that would lead me to believe that 522 00:17:56,269 --> 00:17:57,450 that there's enough at 523 00:17:57,450 --> 00:17:59,509 this point that there's enough there 524 00:17:59,509 --> 00:18:00,990 for us to be concerned about that 525 00:18:00,990 --> 00:18:02,930 from a broad economic standpoint. 526 00:18:02,930 --> 00:18:03,170 Yeah. 527 00:18:03,170 --> 00:18:04,990 I mean, that's what happens when you allow the market in 528 00:18:04,990 --> 00:18:07,250 the business cycle to recalibrate naturally. 529 00:18:07,250 --> 00:18:08,770 Absolutely. That's you know, 530 00:18:08,770 --> 00:18:11,090 that's one of the things I do say, even, 531 00:18:11,090 --> 00:18:13,750 even after my point about rate cuts is you should 532 00:18:13,750 --> 00:18:15,430 always be rooting for a stronger economy 533 00:18:15,430 --> 00:18:16,750 because that does bring earnings. 534 00:18:16,750 --> 00:18:18,730 That does it brings 535 00:18:18,730 --> 00:18:21,050 all the good things happen from a strong economy. 536 00:18:21,050 --> 00:18:23,110 You have people working, you have money being spent. 537 00:18:23,110 --> 00:18:24,610 You have investments being made. 538 00:18:24,610 --> 00:18:26,230 I do get a little concerned about 539 00:18:26,230 --> 00:18:29,250 private credit because it is opaque and I do. 540 00:18:29,250 --> 00:18:30,810 And over history, 541 00:18:30,810 --> 00:18:35,290 every new asset class gets a real world test. 542 00:18:35,290 --> 00:18:36,869 And it's not clear to me that 543 00:18:36,869 --> 00:18:39,830 private credit has finished. 544 00:18:39,830 --> 00:18:42,050 It's finished the exam period yet. 545 00:18:42,050 --> 00:18:44,049 But you know, but I'm 546 00:18:44,049 --> 00:18:46,350 not I'm not knowledgeable enough about 547 00:18:46,350 --> 00:18:48,549 the asset class to just sort of have it 548 00:18:48,549 --> 00:18:50,750 as other than sort of a background risk at this point. 549 00:18:50,750 --> 00:18:52,650 Because because, you know, 550 00:18:52,650 --> 00:18:53,834 you got a lot of smart people 551 00:18:53,834 --> 00:18:55,680 allocating a lot of money, but it is. 552 00:18:55,680 --> 00:18:59,220 It is opaque and therefore difficult to reckon with. 553 00:18:59,220 --> 00:19:00,940 If there is a bit of a hiccup. 554 00:19:00,940 --> 00:19:02,720 Especially when you have so many products that have been 555 00:19:02,720 --> 00:19:04,620 designed around it as well. 556 00:19:04,620 --> 00:19:06,980 Right. I mean, if there's demand fill, 557 00:19:06,980 --> 00:19:08,320 the products will come. 558 00:19:08,320 --> 00:19:09,760 Yeah. The problem with 559 00:19:09,760 --> 00:19:11,920 private credit and private equity is you're 560 00:19:11,920 --> 00:19:15,600 by definition investing in long duration assets. 561 00:19:15,600 --> 00:19:16,839 And so you can't afford to have 562 00:19:16,839 --> 00:19:19,660 short duration liabilities like deposits. 563 00:19:19,660 --> 00:19:20,859 It's one of the arguments why 564 00:19:20,859 --> 00:19:23,040 private credit makes sense to do in a hedge fund, 565 00:19:23,040 --> 00:19:26,239 because the investors are in it for a longer term 566 00:19:26,239 --> 00:19:27,960 rather than us with deposit money and 567 00:19:27,960 --> 00:19:29,880 our wages and checks going in and out, 568 00:19:29,880 --> 00:19:31,839 where the banks have a much higher risk of 569 00:19:31,839 --> 00:19:34,040 their deposits floating quickly. 570 00:19:34,040 --> 00:19:35,400 But the private credit people 571 00:19:35,400 --> 00:19:37,080 are asking for some money back. 572 00:19:37,080 --> 00:19:39,039 And it's it's problematic because you can't 573 00:19:39,039 --> 00:19:41,340 really sell some of these assets that quickly. 574 00:19:41,340 --> 00:19:42,840 All right. I appreciate everyone's insight. 575 00:19:42,840 --> 00:19:44,160 Thanks for joining us on trade talks. 576 00:19:44,160 --> 00:19:47,800 I'm Joe Malandrino, global markets reporter at Nasdaq.