00:00Let me just start with the jobs data and sort of how you process what we saw yesterday and what
00:03it says to you about the health of this U.S. economy.
00:07Well, it speaks to the underlying health of the economy, David, despite the myths.
00:11When you go beneath the surface, you see the fact that we had some seasonality with a local government World
00:17Cup.
00:18But what I looked at was very encouraging the increase in jobs for construction and manufacturing health care.
00:23So I spent a lot of time talking to our bank clients, commercial clients, and they're talking about adding labor,
00:29not shedding it.
00:30In some cases, using AI automation.
00:33But the job market remains, I think, pretty on solid footing.
00:36But are you at all concerned that even the job growth we're seeing, construction jobs, in my head when I
00:42read that, I thought, oh, we're building houses again.
00:43That's great.
00:44And then we dig into it, and it's mostly AI data centers.
00:47It seems like it's all the same circular AI world.
00:51I mean, the exposure there, to me, seems very high, but you're the expert.
00:55You tell us.
00:55If you're still bullish on this, tell me I'm wrong.
00:58No, no, you're not wrong.
01:00And definitely, you're on track with that.
01:03You're seeing a huge contribution to GDP, industrialization, the materials demand from data centers.
01:11But also, you're seeing foreign companies come in here, increase their production of chemicals, automobiles, automobile parts.
01:17You're seeing other U.S. companies build out the plant, whether it's a little bit, you know, factory in addition.
01:23So it is data center driven, but there's a lot more to this manufacturing buildout, construction buildout, than just data
01:30centers.
01:31But it is overwhelmingly, it'll alleviate, fade a little bit here in the 27 and 28.
01:35But when I sit, I see the reindustrialization, the manufacturing capacity coming back.
01:41And related to that, defense, defense spending.
01:43We need more missiles, ammunition, munitions, you name it.
01:47That's helped driving that growth as well.
01:49Joe, I want to get your perspective on the market that we're in, the moment that we're in.
01:53And in your latest note, which I mentioned a moment ago, it's kind of a refutation of the bear case
01:57on the U.S. economy and U.S. markets right now.
02:00I'll read one line from it.
02:01Amid the gloom, something curious keeps happening, you write.
02:03The dire predictions of the worry warts never happen.
02:06Disappointing and surprising market bears.
02:09What explains the resilience here as you see?
02:12And what gives you grounds for the optimism that you have about the markets and the economy?
02:17Well, David, the background to that note was like every meeting I go into, it usually starts with a client's
02:22like, I'm really surprised about the consumer, the dollar, the federal budget deficit, the underlying strength of the economy.
02:27So we wrote the piece kind of leaning against that narrative because when you look at the consumer, sure, it's
02:33K-shaped.
02:34We know that higher income households are out there spending.
02:37The federal budget deficit, I've been debating that for like three decades with clients.
02:41That's an issue, but we can manage it.
02:44The weaker dollar obituary has been written how many times?
02:47I mean, so there's all of these kind of bricks of worries in the wall, right, so to speak, that
02:53we've got to work through.
02:54And it does weigh on sentiment, and it can keep people out of the market when they should actually be
02:59leaning into the market.
03:00So not that we don't have any problems, right?
03:04We've got big issues to deal with with our dollar, foreign demand, federal budget deficit.
03:09But the underlying capacity of this U.S. economy to absorb the shocks, take the blows, reset, is underappreciated still.
03:17And to me, that's a lean into and any pullbacks to buy.
03:21You also talk about a couple sectors you're following.
03:24One that surprised me was U.S. solar stocks rose on Friday after the president ordered this 15 percent new
03:29tariff and a price floor for polysilicon derivatives,
03:34which were not really on my list of things I needed to know this week.
03:37But why is this relevant, and why are you seeing this movement in this energy sector,
03:41especially at a time when we're not hearing a lot about solar anymore, a lot about diversification of our energy
03:46sector,
03:46despite the need and despite what's going on in the Gulf?
03:49Well, I'll take it from the macro level.
03:51We need every source of energy in this country right now, whether it's fossil fuels or renewables.
03:57So the Gulf War back early in February, that kind of gave a new life to the renewable sector in
04:03general,
04:04not just the United States, but even globally in Europe as well.
04:06Look at China.
04:07Yeah, China, they say, oh, burns a lot of coal.
04:10Well, that's true, but so do we.
04:11But they're also using a lot of renewables.
04:13So I think it's all hands on deck when it comes to generating power, and that includes renewables.
04:19So I think that's been a hidden corner of the market that's done very well.
04:23But I think that trade is now becoming recognized.
04:25Joe, I'm not going to put in your position where you have to talk about specific companies,
04:28but let me just ask you about AI broadly.
04:30I imagine when you walk into those rooms where you're dealing with some bearish sentiment,
04:34there's probably some concern that you're hearing about AI's future, the path forward.
04:39We've just been through the part of earnings season that dealt with these hyperscalers
04:43and their attitude toward the growth of AI.
04:46What do you take away from that?
04:48How does that change or reshape the AI narrative as you see it?
04:52Well, the biggest thing, David, I'm looking at is, OK, when we get into 27 and 28, when
04:56we kind of get back, get beyond the data center build out, what picks up the slack?
05:01And I think it will be picked up, whether it's transportation, the grid, defense spending.
05:05But the artificial intelligence, you know, we're looking at very carefully how are companies
05:10leveraging this new technology to drive margins.
05:13And you're hearing more and more companies speak to this every earnings, every quarter, right?
05:18So we're seeing that happen.
05:19It's not going to happen all at once.
05:20It's not a hockey stick.
05:21You know, you go sideways and then straight up.
05:24So it's happening.
05:25And we're the belief that by the time we get to 28, 29, 2030, you're looking at a different
05:30economy, a different workforce, increased productivity.
05:33So that keeps us very constructive on U.S. equities overall.
05:37But there's going to be job displacements, right?
05:39We know that.
05:40But I think when we release labor because of automation or technology, then we upskill it.
05:46And that means more income.
05:48That means higher paying jobs.
05:49So I believe the AI were early innings with the build out, early innings with the adoption
05:54and early innings when it comes to productivity.
05:56But I think it's coming down the track.
05:58And so do a lot of investors.
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