00:00The market has consolidated for the better part of the last two months, and I think this
00:03consolidation will probably last for a little bit longer. What we are watching is the growth
00:07inflation mix, right? We are looking at the sort of the K-shaped economy in the U.S. and the lower
00:12part of the K beginning to have its say. The labor markets are weakening. At the same time,
00:17we're going to get a CPI release today, which probably will show core inflation at 3.2%,
00:22slightly north of 3.2%, at a point when the Fed is already priced for two or three cuts from here.
00:27So the markets are already expecting the Fed to cut, and inflation is going to go higher at the
00:32same time as growth coming lower. And this is, I think, is going to put some pressure on equities
00:36in the very near term, right? And along with the fact that, you know, as CapEx to sales have continued
00:41to increase for all the AI names, the market has become slightly less forgiving in terms of
00:46valuations, right? Oracle is not just the only problem. The market's become slightly less forgiving
00:51for worrying about IPOs coming next year, and that could be a problem for the tech trade.
00:56So all of these concerns near term, I think equities do consolidate. So we could be waking
01:00up in March with the S&P still at about $6,750 or $6,800. But once you start getting the checks
01:06in the mail, once you start getting the fiscal boost, the refunds, we think that probably is
01:10going to lead to the broadening trade.
01:12So the fiscal side is important. You want sort of evidence of that. But what about evidence on
01:16the AI side? So we have this huge capital investment taking place right now, but yet the benefits of
01:22this are maybe a little bit delayed. The productivity bonus, the productivity boost we're going to get
01:26from this, this we're all waiting for. So what do you watch specifically to get an early sense of
01:31whether we've expected too much or too little?
01:33This is very important. I think everybody understands that AI is going to impact every company at some
01:38point in the future, but which companies will be impacted first, right? Surely these are companies
01:42that have a lot of data that they can harness and perhaps a lot of labor that they can replace.
01:47So what kind of companies have a lot of data and a lot of labor? These are asset managers,
01:52insurance companies, retail companies, commercial and professional services. So this is what we're
01:58going to be watching. We're going to be watching financials and we're going to be watching retail.
02:01We're going to be watching commercial and professional services. These industries,
02:05we're going to be looking at sort of at the bottom up level where the sales per employee
02:09in these companies are rising, because I think these will be the vanguard, right? This will be
02:13sort of the leading indicators of tech love moving from the producers of AI to the consumers of AI.
02:20And we're hoping that this comes through the course of 2026. That's going to be a necessary
02:24condition for this trade to carry on.
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