BlackRock's Despirito Sees Pockets of Irrational Exuberance in Markets

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00:00Tony DeSpirito of BlackRock writing,

00:02Pockets of irrational exuberance and a trading environment dominated by non-fundamental investors

00:07create abundant opportunities for skilled stock pickers.

00:10Tony joins us now for more. Tony, good morning.

00:12Good morning.

00:12Good to see you. You mentioned that phrase, irrational exuberance, pockets of.

00:16Where do you see those pockets right now?

00:18Yeah, so I was very careful to use the word pockets because I don't think that applies to the whole market.

00:23But I do see a market where, as I've discussed, the nature of the participants has changed.

00:28Fewer fundamental investors, more high-frequency traders, more retail investors.

00:32I think that helps fuel maybe some of those pockets.

00:35And then where I see the pockets are things like price-following strategies are doing very well.

00:41Unprofitable companies are doing very well.

00:43Some meme stocks.

00:44On the flip side, what's doing poorly?

00:47Min vols doing poorly. Dividend payers are doing poorly, etc.

00:51And so that's where I see the pockets of irrational exuberance.

00:55You've heard the phrase irrational exuberance before.

00:57We all have. It goes back to the mid-'90s.

00:59And when it came out of Greenspan's mouth, there were still a few more years to go.

01:02The debate that we've had around this table a few times over the last month or so is whether it's the mid-'90s or the late-'90s.

01:08I think we've got to ask also whether that's even an appropriate benchmark to think about stock markets in 2025.

01:13How are you thinking about those themes?

01:14Yes, so I think about it differently, which is I think about it in terms of is it a good market to be a stock picker?

01:21And I hear some people complain about some of these pockets of rationality.

01:24But to be a good stock picker, you actually need mispricings, right?

01:28And so I really like a market where I see the pockets of mispricings.

01:32And so in terms of the market overall, I think we're on much sounder footing than we were in the late-'90s.