00:00First of all, I know you called this the Super Bowl of Earnings Week and that it was, I feel
00:03like
00:03it was like a giant middle finger to traders for all of these companies to decide within 80 seconds
00:08of each other to report. Just how difficult is this for the market to absorb these big
00:13consequential earnings coming from these companies that are uplifting CapEx and kind of the entire
00:19economy of the United States? Yeah, so we are not seeing any decline in spend and demand for AI.
00:27As we mentioned, it was the Super Bowl of earnings last night. By the end of the week, 66%
00:33of the
00:33market cap of S&P will have reported Q1 earnings. And from us, it's a very positive sign on the
00:41tech
00:41industry. And the way that you invest in the U.S. equity market is one of high quality,
00:47high demand, high free cash flow, and it's unlike any world in the globe.
00:51So if these are so attractive, why do we see swings like Meta down 9.5%
00:56on the day after it reports? Yeah, so I would say that if I look at the run-up
01:01into earnings and I take the semiconductor index, it rallied 19% over 19 days. And I think we're not
01:09seeing any real pullback in these names despite the move in Meta. But I would just say when I look
01:14at equity futures today hitting a new all-time high, there's a big shift from what was a technical
01:20driver in March to one that is a fundamental driver in April.
01:24How do you distinguish that? Because I could, for example, look at that open AI news on the
01:29Wall Street Journal that perhaps they're not hitting their internal targets, and you get tech that sells
01:33off. And it wasn't just tech. It was like a momentum basket does really poorly. So on days like that,
01:39when it's selling, how much of that is fundamentals in the driver's seat? And how much of that is just
01:43taking some of the air out of the momentum trade?
01:45I think the article happened hit at an all-time high point in the momentum factor. I think that
01:50baskets are trading in the market more than ever before. So it was orderly to me. It was a buying
01:56opportunity. It was one that was factor-driven, but it didn't change any views on the fundamental side.
02:02Is it fair to say, though, that a lot of these pullbacks are just buying opportunities,
02:05especially for these quality big cap tech companies?
02:07From our retail clients, we're really seeing that dynamic. So if I look at on Monday,
02:12we had our retail demand in the 94th percentile over the last five years. So I think when there
02:18is a sell-off, right now it's a buying opportunity, especially in the U.S. mega cap tech stocks.
02:24Has that been the case through this volatility through the war in Iran? Are we seeing retail
02:30still buying the dip?
02:31So I think that's a great question. Where you had retail really playing defense around tax day,
02:37April 15th was a big day where they were playing more defense and less offense. We've seen this
02:43completely change. So retail had a very good trading year in 2025. We execute between 35 and 40 percent
02:52of all retail flow. So we see this with data-driven insights. But now retail moved back into the driver's
02:59seat after especially one big beautiful bill act and tax refund checks hitting the accounts. I think
03:05we're seeing a return from retail. It's no longer meme stock trading, but it's one that is, you know,
03:11they're driving the price action.
03:12What does that mean for supply demand? And you're always really brilliant here because if you have
03:16retail buybacks coming back, hedge funds still participating, is there a real imbalance that
03:22could push stocks higher?
03:23There's a supply and demand mismatch right now, Danny. So when I look at corporate earnings, given that
03:29you mentioned it. So next week starts the start of the buyback window for corporates. If I look at U
03:37.S.
03:37corporates, they authorize $544 billion year to date, over a trillion worth of repurchases this year.
03:45It'll be the largest year on record. So stock certificates are now a rare commodity again.
03:51And, you know, by my calculation, I see about $5 billion worth of corporate demand every day during
03:57the open window, which negates some sort of the selling pressure. So U.S. corporates, again, are the
04:04biggest buyer of the stock market. And U.S. corporate CEOs are showing strength in their views on the
04:11market.
04:11If I just took everything you just said, it's very easy to be incredibly bullish on this market. And
04:16it's indeed not just easy, but logical. But then another part of my brain, Scott, goes to oil trading at
04:22four-year highs, yields moving higher, 30-year yields surpassing 5 percent. And at the same time,
04:28the VIX is 18. It does feel like a bit of a disconnect. Is that fair? Is there some irrational
04:33exuberance in markets that other macro cross-assets aren't really reflecting as well?
04:38Yeah. So the way that I view both cross-asset volatility and oil prices, you mentioned the 30-year
04:46bond hitting 5 percent. So there's a lot of reasons to run this wall of worry, especially on the
04:52software side and private credit. But when I look at the participation of who is trading the equity
04:59market, it's almost a macroeconomic indicator. When I think about the bottom 50 percentile of wealth
05:06demographics, we've seen equity exposure ramp by 300 percent since 2022. So it's almost a resilient
05:15consumer, one that grew up on the trading apps, trading all the exchanges and after-hours type
05:21of volumes that, to me, is as long as there's no displacements from AI in the jobs world,
05:29it's something that we're really bullish on. Can I tell you why I love that? Because we look at a
05:33lot of things like University of Michigan and sentiment looks really poor. So I feel like this is a better
05:38way to kind of gauge because it is. It's a consumer that keeps spending and clearly continues to buy
05:43stocks too. We actually have our own sentiment indicator that we started publishing. Citadel
05:50Securities executes between around 24 percent of the U.S. exchange on a daily basis. And what I find
05:57with our indicators is we're actually real-time backtesting this on data. And our indicators are a
06:04lot more euphoric than what the sentiment indicators that we've seen. Did they take any hit with higher oil
06:10prices in the war in Iran? I would say that it was a quick mechanical-led sell-off in March.
06:16It was
06:17very robotic on degrossing portfolios among institutional investors. But our retail clients
06:25were actually slowly entering into the market. And we've rallied pretty aggressively since then.
06:31By the way, since degrossing, have institutions regrossed up? Where do they stand in exposure?
06:36Yeah, that's a good question. So hedge funds, gross exposure, which is basically longs plus shorts,
06:44if I look at back to March, was at an all-time highs led by the shorts. And if I
06:49look at net
06:50exposure, which is longs minus shorts, that was at lifetime lows. So you had this dramatic
06:56need to hedge based on rules. So it was shorting ETFs. It was shorting index futures. It was buying
07:02put options. That all happened in March. The market heals dramatically since then. Hedge funds are
07:08slowly participating on the way up. But retail is really the price setter in the market.
07:13By the way, what difference does it make, I guess both for institutions and for retail,
07:17to have these huge IPOs coming to market? So much has already been said about the concentration in tech.
07:22And now we're about to get $800, $900 billion companies, even more when it comes to SpaceX.
07:27What difference does that make to have such a change in the composition of this equity market?
07:32So when you think about the S&P 500, if you allocate $1 into the SPY ETF, $0.35 goes
07:40into the MAG7,
07:41$0.40 goes into the top 10 stocks. When you think of what percentage of the U.S. equity market
07:48is AI
07:49or AI adjacent, it's $0.45 of every dollar. So when I see the distribution, I find the U.S.
07:58market remains
07:59very robust in terms of rebalancing. So there will be some of the big names have to be sold to
08:07make
08:07room for new IPOs. We've done a number of work on this, but it's not a net negative. It's something
08:14that is based on all of these passive flows that go into the U.S. market, based on target date
08:20strategies that make all companies higher in a market capitalization basis. So when they enter
08:27the market and go into these big indices, it's actually quite bullish for the U.S. versus the
08:32rest of the world. Interesting. So if you were running a portfolio and you'd want to kind of prepare
08:36for this, what do you advise? It's one that naturally the biggest weights need to be sold
08:42to make room for these new IPOs. The interesting dynamic is that retail will actually get a decent
08:49slug of the IPO allocation. And this is a new phenomenon in 2026, something that we're actually
08:55quite passionate about. But needing to make room is one that dollar for dollar, it's net neutral,
09:02but some of the big ones have to be sold to make room for the new IPOs.
09:05Scott, we're almost out of time, but I feel like I'd be remiss if I didn't ask about the setting
09:09that we're in right now. I want to leave the politics aside because there are some weird
09:12politics about New York and living there and working down here in Miami. You've been in the
09:16area for a long time. What is it like to be at the helm of one of the greatest financial
09:22firms
09:22in America and operating here out of Miami? It's really exciting. And if I take a look on the
09:29professional side, I just came down from a macro investor forum that we hosted in Palm Beach,
09:35where a lot of former central bankers and thought leaders spoke. So we had all of our institutional
09:41clients in town on the macro side. Two weeks ago, we hosted our 20th annual retail trading summit.
09:48So it's very interesting to have all the clients come down to Miami and South Florida and talk about
09:55the intersection of culture, politics, our firm's leadership here. And on the personal side,
10:03you know, it's really great to be able to coach my kids' baseball team tonight, run the pitching
10:08machine, and interview Mario Draghi in the same week. So for me, culture...
10:13Mario Draghi. He was just at our conference in Palm Beach this week, as well as other thought leaders.
10:19So I would say we actually have clients wanting to know what we're up to in Miami. We have a
10:24lot
10:24of interests, and I expect that to continue. And I also expect every time they come down here,
10:28they do that thing where they're like, why don't I live here? I need to pick up and move. It
10:32happens
10:32a few times. Yeah, I'm feeling a little bit of that right now. Scott, thank you so much for joining
10:35us. We really appreciate it.
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