00:00Well, for the equity market, what's been on our mind, and this was sort of central to the equity
00:04component of our mid-year outlook that we just published, is this divergence that you're seeing
00:08in breadth. The fact that, you know, the average stock, when you look at the percentage of companies
00:13above their 200-day moving average, when you look at percentage of companies outperforming the S&P
00:17500 on a rolling three-month basis, that's remained pretty weak because you've gone through, you know,
00:22another kind of bout of AI hype, especially within the semiconductors. So that in and of itself is
00:27not a horrible, you know, omen for the market. We've seen it actually resolve itself. Those
00:32divergences resolve themselves in a positive way over the past couple of years when they have
00:36happened. Yeah, like even in the past three days. I mean, when I got the Dow moving up and I
00:41see some
00:41of the mutual funds giving me better returns than Broadcom. Yes, yeah. There's something going on out
00:47there, isn't there? Yeah, and I will say the new norm, you know, the last time that you actually
00:51saw a lower percentage of that metric I mentioned, the percentage of companies that are outperforming
00:56the index on a rolling three-month basis, the last time you saw a lower percentage,
01:00so sub-23 percent, was 23 and 24. Before that, you have to go back to 1973. So, of course,
01:05very different market backdrop, 73 the start of a horrible bear market, 23 and 24 more consistent
01:10with correction. So it is more of the norm these days, you know, given the concentrated market.
01:15Well, let's just say the future is negative 50 right now.
01:17Kevin, we're in a time here where very active equity new issuance in the marketplace. We had this
01:23monster mega deal from Goldman, I mean, from Google this week from Alphabet. The market took
01:29it in seemingly very well. And then, of course, we've got all these IPOs that are two-ed up SpaceX
01:34on the road as we speak. Then maybe some of these AI plays come in. Huge transactions. What does that
01:40tell you about this market here? How do you guys think about it?
01:42So I think it does underscore, of course, that the sentiment environment is certainly getting
01:47frothier. You know, whether you think of it as frothy or not, I think that's always just kind
01:50of up for whatever the person's perspective is. I will say, you know, I've been traveling the past
01:56four weeks almost nonstop all over the country, also in Korea. But, you know, in the U.S., when
02:02I've been speaking with our investors, there's actually been sort of an elevated degree of
02:07skittishness or hesitation around just the environment of mega cap IPOs in general. So the
02:12attitudinal sentiment is not necessarily matching up with the behavioral sentiment that we've been
02:17seeing in terms of really stretched fund flows and how much, you know, has been going into tech
02:21and how well semis have been doing. So to me, that sort of lays the framework, I think, or the
02:27groundwork for maybe a little bit more room for sentiment to get stretched to the upside. Of course,
02:32you know, I think the game will change a little bit after we do get a lot of these companies
02:36coming
02:36online into public markets. But I haven't yet felt, at least, that on the attitudinal side, there's been
02:41a lot of that hype that has matched what we've been seeing with people, you know, what they've been doing
02:45with their actual dollars. And I guess, you know, if you want to take the bullish side here, which
02:49is probably the right way to be, earnings have been there. Earnings have supported this market,
02:55it seems like. And how do you think about that going forward? I mean, I think, you know, of course,
02:58the breadth of earnings is actually, if you just want to look at the number of industries that are
03:02seeing their earnings grow, yes, the breadth is there. Of course, the magnitude in terms of
03:07concentration, it is a little bit more skewed towards the large caps and the mega caps. I do take the
03:13optimistic side and angle of that where if you look over the past several decades, the growth in that
03:18earning share for that cohort has grown. So it's not like it's been totally unjustified. But on the
03:24flip side, you do have more reliance on a smaller share of companies. So to the extent that they can't
03:28keep up with expectations, to the extent there is a disappointing, you know, quarter, a series of
03:32quarters where CapEx estimates for some reason have to come down, earnings estimates, you know, get
03:37revised, get revised lower. Of course, you always run the risk. But that's why we make the case for
03:41diversification within the equity market because you've been able to, you know, that's been the
03:46best way to play this, especially with even a sector like health care over the past couple of
03:49weeks. On the road and with the new Schwab commitment to wealth advisors and all that,
03:55huge announcements from Schwab over the last 10 days on this. On the road, in the trenches,
04:01Paul and I, it's Cushing. You know, Paul gets in the Gulf Stream and, you know, he goes out to
04:05San
04:05Francisco and, you know, he takes the ferry home and sits there with a beverage of his choice.
04:11It's a can of Budweiser. And, you know, I'm in the Bentley going up Madison Avenue complaining
04:16about the traffic. You're in the real world. Yeah. How do you respond to people who raise their hand
04:23and say, I love all your optimism. We love Lizanne Saunders, but we're scared stiff. How do you respond
04:30to them? Well, frankly, I, you know, we don't get a lot of clients who exhibit a lot of fear,
04:35especially if they're working with an advisor and taking an advised approach. I mean, I, you know,
04:39I've, I've always been a believer that is the benefit of working with somebody, taking your own
04:43personal emotion out of it. But seriously, I mean, that is, that is actually the biggest split I see,
04:47especially when I talk to people, you know, who are newer to markets, this kind of newer retail cohort
04:53that, you know, just is getting, still getting into this, still getting into investing and learning it,
04:58not necessarily working with somebody. That's where you see some skittishness around, you know,
05:03what do I do with a big drop in the market? What do I do when I see a particular
05:06stock or industry go
05:07up by 20 or 30%, you know, in a day? So I haven't been met with as much fear, but
05:13as my, you know,
05:14to my point around some of these larger IPOs and just the sentiment environment, that was where there's
05:19been some, I guess, concern over whether this is, you know, too hyped up. And I think it comes back
05:24to,
05:24I mean, my favorite quote ever about markets is from the late, great John Temple
05:28Sir John Templeton, you know, bull markets being born out of pessimism, growing on skepticism,
05:33maturing on optimism, dying on euphoria. I mean, that is, I think, the perfect way to sort of,
05:37the perfect overlay that you can apply to really any cycle. It doesn't say anything about earnings,
05:41doesn't say anything about valuation. When you're on the road seeing your clients,
05:46are they looking to embrace these markets here? Or like as Tom said, maybe a little bit skittish,
05:51are they looking to maybe reposition? Maybe I should own some more bonds. Maybe I should own
05:54some gold. Maybe I should maybe a little bit more cash. Yeah, I haven't seen the willingness
05:58to embrace markets fade materially. If anything, I think the bigger concern has been more on the
06:04economic side. And actually, the dominant question I've been getting in the first question I've been
06:08getting at every event is the concerns over AI in the labor market. That has actually been and from
06:13all age groups across the whole spectrum, from Gen Z, you know, to people who have been investing for
06:20decades. That has been the dominant question that, of course, nobody knows the answer to.
06:24I tend to have a relatively optimistic view, you know, in the end, you know, the end game of this,
06:29not necessarily being tens of million jobs just fading, you know, out of the economy. But that has
06:35definitively been the main question.
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