What other sectors are you eyeing right now with potential buys?

So one sector that I think is fascinating, and this goes into that phase three of my AI thesis, which is the adopters of AI.

And there's a lot of sectors that I think can really benefit from AI adoption.

So think of everything from financials, even software companies.

And I'll give you a for example, and this is just a thought exercise, not a recommendation to buy, sell or hold.

So I'm using a company specific company in this thought exercise.

But if we take a company like Intuit, TurboTax.

So I think it's fair to ask you this after all that happened.

What do you think, David?

Yeah, I agree that we have an inflation problem in the U.S. economy.

I also think that the Fed is in kind of a predicament because on one hand, inflation has come down from its post-pandemic highs.

And at the same time, it's still above their 2% target.

Meanwhile, we've started to see some softening in the labor market.

So I think the Fed is going to be walking that fine line between demand destruction and inflation.

anticipating any impacts in the labor market.

Tell me more about that.

When you say there's a limit, what do you mean by that?

Yes.

So, so last week we had, you know, uh, really a not so great jobs report.

What that did was it caused, um, the probabilities for an October rate hike to come down, and so that's why the, the stock market caught a, caught a tailwind.

But having said that, really, uh, when we stop and think about it, the, the bulls have, have a case based on earnings.

So earnings have held steady in this environment.

The bears, meanwhile, have a value- have valuation concerns because higher interest rates generally lead to lower valuations.

Uh, how are you viewing the AI trade?

And where are they? What are their phone numbers? Let's give them a call.

Yes, totally.

You know, what's interesting about insurance companies, and they manage their balance sheet very similar to how a bank does.

So it's asset liability matched, meaning for an insurance company, their liabilities are their future payouts for annuities and life insurance, you know, to pay out life insurance payments.

And their assets are the cash that they receive from a premium, and they invest that into a series of investments.

So historically, they were investing in a very kind of traditional way, I'll say, investment-grade corporates, treasuries, government agencies, and so on, with a smaller allocation to more high-yield type investments.

investment securities with the advent and the rise of private credit and private credits, nothing that's necessarily new, but it's now more in the forefront because now these insurance companies, they can, they can collect higher interest rates on, on private credit.

But I just want to know you're actually in the mix.

You know, is there any alarm bells going off there? And then we'll get on to Besant's recent move and what that might mean.

Yeah, so with the 30-year bond, there's not a lot of natural buyers for the 30-year bond.

So historically, it's been insurance companies.

It's been pension funds.

It's been some sovereign funds that have bought the long end.

But it certainly is a signal, right, when the long end comes up.

And so with Scott Besant, his stated purpose on the treasury buyback program is to support liquidity in the treasury market.

I think given a lot of what we've spoken about today for the audience, um, What is it you're looking at sort of moving forwards for the rest of this year for some of those things to play out that we've spoken about on the macro? You know, what are you paying attention to sort of for the rest of this year coming up?

I mean, what are these earnings telling you right now and what is the way to then play both of those themes you just outlined?

Yeah, so the other earnings that were announced today was TJ Maxx, and their earnings beat.

And so, what we're seeing is that K-shaped economy playing out.

Tomorrow's Walmart, so we'll get another read on consumers.

But when we think about the homeowner, specifically the do-it-yourselfers with Lowe's, it seems to be pulling back there.

Home Depot yesterday benefited from the pro-contractor side of the business.

But really, with TJ Maxx, what's interesting is that that's a retailer where consumers can go to find deals, the value hunters.

I mean, given all the information we've got in the last fortnight, what are you looking forward to hearing from the most?

How did that change things?

Yeah, so really what's happened is the price of oil has come down.

I mean, after today's close, the price per barrel is under $80 a barrel.

So what that means is that energy-related inflation that has been permeating the economy, both from a headline CPI and PPI perspective, should start to normalize.

And so automatically that will lead to lower inflation just because the price of energy is coming down.

Having said that, we have to remember that the Fed targets a 2% inflation metric on core inflation, meaning they exclude food and energy.

So core inflation has been a little bit more tame, but it is still those higher energy prices are still permeating the economy.

So Do you think if we keep prices lower, we're going to start to see that shift potentially away from a hike? What's your outlook for the Fed going forward through the year? Are you viewing a hike? Are you viewing a cut? Or are we just in wait and see mode indefinitely?

You're part of your conversations with your clients, But where do things like other asset classes like fixed income or international exposures play in or perhaps even derivative overlays to try to enhance or hedge some of that risk as you try to structure something holistically to meet a client's needs?

Yeah, great question.

And really what we focus on is quality companies, high quality companies with quality earnings, great sales, low leverage.

And so that's really where we start, top-down approach.

And then we want to stay invested in large cap tech because that's the wave of the future.

But really it's thinking about diversifying into some of those value companies, dividend payers specifically, fixed income.

has historically been a great diversifier for a stock portfolio.

But I just wonder if it's too early when obviously they have a pretty significant critical energy security issue on their hands right now.

What is your interpretation?

Yeah, so the labor markets are interesting because you're exactly right.

The Bureau of Labor Statistics came in and revised the 2025 numbers down by, I, if memory serves, it was like 700 to 800,000 jobs.

And, and really this is a, a function of how the Bureau of Labor Statistics calculates these jobs.

And, and the primary driver is, um, they have an estimation function within their calculation of new jobs, and it's called the birth-death rate.

And, and it's not the birth and death of human beings, it's the birth and death of businesses.

So if we go back to the COVID era, right at the beginning, remember all the, the PPP loans- There was, there was all this money that was being funneled to US businesses.

Are you m- placing bets on robotics yourself?

What does that signal, David?

Well, you know, the, the goal of private credit and the reason, um, businesses will turn to private credit is for speed of execution and customization.

Um, the difficulty is, is that, um, you know, when a bank makes a loan, you know, they have certain covenants that are in place, they file UCC reports, which, um, in, in banking terms we call it perfecting the collateral, meaning that there's an assignment of that collateral to the loan.

In the private credit space, I don't know if that's happening and, and there's a lot of loans that are being issued w- that are called cov light, meaning that they're trimming some of the covenants that are re- you know, that would typically be required from a bank loan perspective.

And so my biggest concern there is, is that, you know, as they've made these loans that are now, you know, sitting on balance sheets somewhere, that, you know, one, do they have access to the collateral? Two, is it a perfected, you know, stake in that collateral? Or will we see something like, uh, what we recently saw with First Brands and Tri Color, where they've re-hypothecated the collateral, meaning they've assigned the same collateral to multiple loans.

And, you know, a couple of banks, uh, regional banks took a, you know, took a pretty sizable charge, um, in that space.

And then of course, Black Rock, you know, there's been headlines, you know, of a $150 million loss and a $500 million loss, but it's all tied to that private credit space.

Very difficult to do when you're just invested in the index, which is mostly just tech, as you know.

HOW DO YOU THINK THAT IMPACTS HOW THE FED MOVES FROM HERE, ESPECIALLY WHEN YOU THINK ABOUT, FOR We would have gotten CPI today, but we actually may never get the latest CPI report or the one before that, I should say.

Yeah, Diane.

Well, first of all, thank you for having me back.

And you're exactly right.

There has been a data fog in the background because, as you know, the Fed monitors inflation as well as growth and unemployment.

And right now, there's not a lot of clarity in terms of where inflation is going.

It seems to be trending down, but there's still risks.

But what is your take on the state of the job market right now?

David, do you think the takeaway from this quarter is going to be a good one?

I think so.

On one hand, we're seeing some pretty solid results from those that have already reported.

The one area that I'm most concerned with is credit quality, specifically in regional bank loan books.

And the reason is because last week we saw Zions and Western Alliance both report that they were subjected to potential loan fraud and it caused the rest of the regional banks to sell off last week.

Now, what we're seeing there is some potential for credit deterioration, and that's what I'm concerned with.

And will it bleed into the other sectors or to the other regional banks? And so this week we have Zions, Western Alliance, we have Cadence Bank.

And what about the big picture, whether it's economic indicators or the government shutdown or labor or inflation? David, do you think that any of this can really dampen the market or some of these earnings? Because right now we're right around highs and people are still feeling pretty good.