00:00Nuveen Chief Investment Officer Sarah Malik says that while analysts haven't significantly lowered estimates,
00:05companies are likely to beat earnings per share in aggregate driven by tech.
00:09And I think we're looking for, Sarah, about, I don't know, 7-8% in the third quarter.
00:15We've had double-digit earnings growth in the previous couple of quarters.
00:19Do you think we're going to get that high?
00:22I think that we likely will end this quarter with beating earnings seasons again.
00:26Again, what is interesting is normally when you go into an earnings season,
00:31analysts lower estimates going in, they lower the bar, and then companies beat earnings.
00:35We're not seeing that.
00:35Actually, analysts have been raising estimates coming into third quarter earnings season.
00:39But with expectations at about 8% for year-over-year growth,
00:43I think that companies can beat earnings again and probably print in the low double digits.
00:47The leader is going to be tech stocks.
00:49Can we just sit on the consumer for a moment, Sarah, because there is this confusion.
00:54And, hey, Matt, how's it going?
00:56There you go.
00:56Hey, Sarah.
00:57There is this confusion at the moment.
01:00Of, okay, Pepsi comes out with pretty good earnings.
01:03And, again, this was supposed to be a company that maybe was affected by a mass market consumer
01:08who didn't want to trade well.
01:09Maybe what makes more sense is a Delta with the premium consumer doing well.
01:13But then you get Ferrari coming out with an outlook that's disappointing.
01:17And, again, that should be a segment of the population that's doing really well.
01:20Do we have any handle on the consumer and consumer-related equities right now?
01:25Well, the consumer has been – their strength has been a surprise this year.
01:29What markets expected was that tariffs would come into place and the consumer would weaken.
01:33What we have seen, notwithstanding Ferrari, is that the high-end consumer has stayed strong
01:38while the lower-end consumer has struggled.
01:40So that's the issue there.
01:42And what happens from here, we're still not seeing an impact from tariffs in terms of spending
01:48and consumer sentiment.
01:50But holiday season is still to come there.
01:52Our theory is that a lot of companies pre-bought inventory because they knew tariffs were coming.
01:57So that inventory is just beginning to be at the tail end of running through it.
02:01So there could still be some impact on goods and tariffs in terms of the consumer's pocketbook.
02:07But it might not happen until holiday season or early 2026.
02:10I think – and we're going to talk to Craig Trudell, our global auto czar, about this in a second –
02:16that Ferrari's problem may be of its own making because their hypercar only has a V6.
02:21And their new 12-cylinder looks like, I don't know, a futuristic nightmare of a Daytona.
02:27We'll get to that, Sarah.
02:28I want to talk to you about Google because you're bullish on the stock.
02:32It's not underperformed the other MAG-7 stocks other than NVIDIA.
02:38It's up 226% in total return over the last five years.
02:42How much further do you think it could go?
02:45Well, three factors that are driving the markets.
02:47Government shut down AI and deals there and also third-quarter earnings season.
02:52So let's go to tech.
02:53Tech has been the driver of U.S. equities for many years now.
02:56That's no different this year.
02:57So what we need to think about is can AI and MAG-7 stocks continue to drive this markets higher?
03:03And if so, where should we be putting our money?
03:05We like Alphabet here.
03:07First of all, there's a free option on Waymo and YouTube upside there.
03:10I think the view that Google's advertising business is going to be at risk because of open AI is overdone.
03:17Google Gemini has a lot of upside to it.
03:19All of that, I think, is a reason why Google continues to outperform.
03:22Now, the other side, of course, for tech stocks is people will look and say, well, they're just too expensive.
03:26But if you look at what's been driving tech stocks higher, it's not so much been valuations.
03:32It's been earnings-driven.
03:33Also, in the AI trade versus the late 90s when there was so much supply of Internet companies and unprofitable Internet companies,
03:41this time around, the winners in AI so far are these large mega-cap companies like Alphabet, like Microsoft, NVIDIA, and Broadcom.
03:49And the supply of these companies is low.
03:51And that is another plus sign for why technology can continue to do well.
03:55And I heard you earlier say that the market has hit something like 33 highs year-to-date.
04:00But when you look at history, Q4 from a seasonal point of view is normally a strong quarter, especially when we're up substantially year-to-date.
04:09So odds are in your favor for this rally to continue.
04:11Hey, Sarah, just quickly, because I know you like not just the tech hyperscalers itself, but some of the data centers and electrification play.
04:19How are you thinking about investing in that?
04:21Well, for those who are worried about tech valuations, there are derivative plays.
04:26We've had, as our Global Investment Committee, infrastructure has been a top pick for us for a couple of years now.
04:32We love the tailwinds there.
04:33One of them is AI data centers.
04:35So there's a company, it's a utility based in Indiana called Nysource.
04:39This utility has very strong earnings growth, high-quality assets.
04:42They are a play on the build-out of data centers to support AI and technology, and also the continued electrification of our economy, not only to support artificial intelligence, but also to support the shift to renewable energy.
04:56So that's a way to play tech and AI, but do it in a different way from the infrastructure point of view.
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