00:00So what do you do in the meantime during this financial eternity where suddenly there's a
00:03question about whether Main Street gets some of the stimulus? And frankly, Wall Street is
00:07struggling with questions around artificial intelligence. Right. So not to be too wonky,
00:13but one of the things we say, we want you to go up in quality. So higher quality companies,
00:16good balance sheets, good stewards of capital. In addition to that, we don't think it's the
00:21time to go bottom fishing, right? The chart can't look bad. The chart has to look good
00:25because a lot of these companies with positive price momentum, right? They do have better
00:30fundamentals. So we want to marry higher quality companies with companies that the market's already
00:34rewarding, be it no matter what sector you're looking at. Is big tech still high quality at
00:40these valuations? I think so. And I think one of the really interesting things is yesterday,
00:45Oracle had a bond issuance. I think they had a convert issuance. That went quite well,
00:49right? There's been a lot of concern about hyperscale or hyperscale or funding. And I think
00:54that put a lot of concerns, a lot of fears to rest. Are you hopeful for the numbers we get from
00:58Alphabet and Amazon that this just continues? I think the numbers in earnings season have been
01:03pretty good. The one thing I'm not seeing, and you still have a lot of idiosyncratic risk,
01:08right? But the one thing I'm not seeing is not seeing this acceleration, right? And if you need
01:11acceleration in the economy, you need acceleration in earnings to really go down to that secondary
01:16and tertiary bucket. One thing we talked about is how much the tech trade has just changed.
01:20Yeah. Hardware versus software within Mag7 as well. I'm not sure we can even talk
01:24about Mag7 as a group of stocks. It just looks so different from Meta to Microsoft. And
01:28Apple has no place in that group.
01:31I don't know if it has no place, but you're right. The phrase that I hate and the phrase a lot of
01:37people use coming into this year is it's a stock picker's market. Every year, it's always a stock
01:42picker's market. I don't understand that phrase. But I think it is applicable here. You do have,
01:47because idiosyncratic risk is getting bigger, you're later in the cycle, because the economy is not
01:51accelerating, because earnings are not accelerating. You really need a good idiosyncratic or stock
01:56specific story.
01:57Let's pick up on that phrase later in the cycle. Yeah. Late cycle or later in the cycle? I think it's
02:01later in the cycle. So credit spreads, and you've probably seen this, hit a low we haven't seen since
02:10AstroWatch jeans were in favor, right, since 1997. The amount of issuance that we're seeing is really
02:16rather significant. These are the things you see later in the cycle, right? Do I think the cycle
02:22will continue? I do think the cycle will continue, because I do think there's a lot of accommodation in the system,
02:27I don't think the monetary policy accommodation is done. So what kind of returns are you expecting
02:32this year? We've seen some projections for 7,800, 8,000, this idea that you can have AI continue to
02:37fuel this, even amid some of the wobbles that we've seen recently. Do you think that that's fair,
02:42or do you think that it's going to be more of a churn to year end? I think, so our expectations for
02:47high single digits, it's 7,450, right? Last year, we were much more aggressive. And what we think is by the end
02:54of the year, you're going to start looking to 27. And now you're going to start looking at a situation
02:58where it's beginning to decelerate. That said, with so much accommodation on the table, and with
03:03the Trump administration pushing things in front of midterms, we could have a little bit of a melt
03:08up or a pop summertime, fall, I think. So this is sort of the bipolar aspect of a lot of the
03:17conversations we have. Some people say because of the midterm elections, you're going to get a melt up.
03:21Other people say, you could get a meltdown in certain names. I'm thinking in particular of
03:24artificial intelligence-related energy types of projects, especially with the affordability
03:29crisis and how much you can crack down. There's been questions around the bank's trade and what
03:33we've seen there. How do you pair these two ideas? So what we're saying is, I think in the first half,
03:40you're going to have bouts of risk aversion. We've already seen a couple bouts of risk aversion,
03:44not excessive. That's going to continue. I think people are really,
03:48really, coming into the year, underappreciate the macro and some of the macro concerns.
03:52Underlying fundamentals are still good. We would buy any sort of 5%, 5% plus pullback. I think we do
03:58get some of that, right, because expectations are so high. But at the end of the day, we think equities
04:03do go higher later in the year. And there is a possibility for a sharp pop higher sometime,
04:10maybe in the summertime, maybe in the fall.
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