00:00You provide macro analysis, you provide strategic guidance to global companies on business investment, on economic policy.
00:06And what's really interesting is you're sort of telling us and pointing towards your expertise,
00:10showing that 2026 is really going to be a prove-to-me moment, right?
00:14For 2025, it's been about picks and shovels and infrastructure.
00:172026, we need the economic upside. We need the productivity gains.
00:22Yeah, absolutely. I mean, so far, right, we've had really broad-based adoption of AI.
00:27About 55% of American workers, for example, say that they're utilizing AI.
00:31We haven't seen it translate into the productivity numbers, right?
00:34And this isn't just with the government data. It's also with private studies as well and university studies as well.
00:40So as we get into 2026 to really validate the underlying fundamentals, we're not only going to have to see that breadth,
00:46we're going to have to see really meaningful depth of adoption as well.
00:50Natalie, when you're pouring over the data, what is the data that we're going to need?
00:54Is it going to be in earnings of health care companies and financial institutions that actually start to see margin improvement because of AI adoption?
01:01How do you get that tell?
01:03Yeah, absolutely. I mean, the first place we'll probably see it is in earnings release, right?
01:07The government data often lags behind.
01:09You know, we've seen a lot of earnings releases where CEOs have said, hey, we're utilizing AI.
01:14We're seeing these productivity gains. At the same time, we're not seeing them show up in as meaningfully as a way as we're going to need to really justify the valuations that are out there.
01:24Really confirm, right, that we are seeing that productivity growth or that return on the transformational promise of AI.
01:30What we have seen show up is the AI investment numbers driving GDP figures.
01:38Many would say that basically 2025's economic growth entirely hinges on a few big names in tech, making some extraordinary big investment plans.
01:47How wide could the economic shakeout be if indeed we did see a pullback and a questioning of productivity?
01:54Yeah, I mean, it could be really significant, right? 2025, AI spending, CapEx spending, it's really served as a macroeconomic stabilizer, a macroeconomic anchor, even as we've seen other parts of the economy really meaningfully stagnate, right?
02:10It's really been this promise that's continued to lead growth to not only deliver, but really surpass expectations in 2025.
02:18And that's definitely true, right? It continues to be an anchor in 2026.
02:21So if we see a meaningful pullback, if we see AI not deliver and sort of that translate or cascade through the economy, I mean, the economic implications are really, really broad-based, well outside of tech.
02:35How broad-based do you think the economic implications have been of China and U.S.?
02:40And this technology war, really, we're seeing at the heart of it, how much has that implicated U.S. businesses and in the longer term, do you think?
02:49It's been fascinating, right?
02:52Because U.S. businesses, even with sort of this headwind of overall trade uncertainty, it's back and forth with China, they've really continued to deliver.
03:02And so that's really positive to see.
03:04You know, on the other hand, right, if we do get more and more decoupling with China, the economic implications are also broad-based there as well.
03:12We have a reduction in revenue translates to a reduction in R&D.
03:15And so, of course, the economic implications, based on what direction we take, they can be quite extensive.
03:21Now, at the same time, if it leads to sort of a benefit when we look at the competition dynamics, then maybe it's a little bit of a win-win for the U.S.
03:31What's interesting is, while we've got perhaps a questioning of valuations in the market, some still manage to rise on absolutely no fundamentals at all.
03:41And Tesla is currently maybe closing in yet a new record high, the first ones that we've seen since December 2024.
03:47Now, maybe that's a bit of moon music coming from an extraordinary valuation being given to the private company that is SpaceX elsewhere in Elon Musk's realm.
03:55Natalie, what do you think about some of the froth in the areas, particularly in the private area?
04:02It's been really interesting to see, right?
04:04Whenever, you know, as an economist, what I look at is cash yields, right?
04:09And whenever we end a rate-cut cycle or, you know, debatably end a rate-cut cycle like we are right now, cash yields become less attractive.
04:17And what we need to really carefully watch is, are we seeing meaningful investment in actual infrastructure?
04:24And that's what's really driving these extremely high elevated, excuse me, these elevated valuations?
04:32Or are we seeing investors go towards alternative investments because cash yields are quite impacted?
04:40And so we're going to really need to see these valuations be meaningful, right?
04:44We're going to need to see that the proof is in the pudding.
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