And what normally factors into how voters are thinking going into the polls here two years into a new administration or a different administration?

So a couple of things.

I would say on the Senate side, it's very much a race-by-race case, because it really matters who the candidates are, what kind of reputation and presence they have in their state, what are some of the key issues that are relevant to that specific state.

So it's hard to look at broader odds around the Senate without thinking about some of those individual toss-ups.

And right now, there's about a half a dozen toss-ups.

So you have Alaska, Ohio, Michigan, Maine, Texas and Iowa are in the mix as well.

And so they can really break either way.

So how do you think AI is going to impact the election? And then importantly, any regulations afterwards? The backlash has arrived.

I know, Meera, you say that the AI narrative is one of stagnation and rotation.

That's right.

It's no longer about is AI a bubble or not, but now it's this cycle dynamic between the stagnation and rotation.

So on the stagnation front, you see areas like the Mag Seven only up about 4 or 5% year to date.

You see the hyperscalers actually slightly down year to date, and these were the stocks that were the early winners of the AI trade.

So as some of the realities around ROI, free cash flow turning negative with some of these companies start to set in, that ROI being an abstract concept becomes very tangible.

And on the other hand, when you think about rotation, there has been this huge rotation into semis, uh, and, and you s- really see that in a big way in terms of earnings in particular.

I, I guess that's kind of the key question around a rotation, is does it rotate fully and then swing back, or does it rotate and, and kinda that's the end of, of that leadership? How do you see this playing out, Meera?

Meera, I'll, I'll turn to you, just how you're thinking about, uh, the market, where we find ourselves after this tremendous run, and of course geopolitical headlines, we're always at risk of dragging this market in one direction or the other.

We continue to be in this battle between sentiment and fundamentals, where the fundamentals have been pretty strong all year when you look at earnings growth starting the year with expectations for 15% on the S&P 500, now jumping to 22% and basically seeing double the earnings growth that we were expecting in the first quarter.

Now, in the first quarter, we did see poor sentiment because of AI and then geopolitics.

You start off the second quarter, there's enthusiasm around this AI, uh, around this earnings season that has been so strong.

But now you're getting again to this point where markets are starting to look at bond yields, look at inflation expectations when you look at inflation break evens or forward expectations, and thinking about the potential for a Fed hike.

Now, what we have seen time and time again over the last couple of years, the last decade or so in markets, is if you're going to see a durable sell-off, it's gonna have to do with Fed hikes.

You saw that in 2018, 2022, 2015.

There just doesn't seem to be a lot of sentiment behind it.

What do you make of that call?

It's hard to ignore that some of those mega cap tech darlings have reset a lot this year.

So the Mag Seven came into the year with 29 times, uh, forward valuations, and now are closer to 24.So that's not overly expensive.

And when you look at the fundamental backdrop here of some of these stocks, you're still seeing earnings growth in excess of 20%.

So the fundamentals behind a lot of mega cap tech and the broader tech trade have not necessarily changed, it's just that the sentiment has soured.

And I think we need to remind ourselves to seek that balance in portfolios across the board, uh, because there are still opportunities here.

I mean, you look at the Mag Seven, every single one is down this year, they're all underperforming the index.

Meera, how are you thinking about tonight? Same, same question.

Yeah

... and considering some of the challenges in the Strait of Hormuz right now.

So given that, we may not see all that much of an impact to growth, but similarly, we may not see a huge impact to inflation.

That's probably where we're gonna see the biggest impact overall, but o- overall, it's not gonna tip the scales to a spike in inflation.

This is not 2022.

I think that overall the trends underneath the surface are still relatively disinflationary.

That headline number might be disrupted for a, a small period of time, but as it was, we were expecting this year that inflation would peak above 3% at the midpoint of the year because you still have ongoing tariff challenges, because you also have those elevated tax refunds potentially driving up demand, and therefore, prices.

Mm

How important do you think that theme will be going into 2026?

The theme of our outlook next year is AI lift and economic drift.

So you think about some of these consumer sentiment numbers, some of these existing home sale numbers.

We may continue to see the data around the economy soften, but the AI trade is still alive and well.

And the way we evaluate that AI trade, E-V-A-L, is earnings, valuations, adoption, leverage.

From an earnings standpoint, you've seen double-digit earnings growth in the MAG7 since early 2023.

The upward revisions that are going on within those stocks are pretty impressive for 2026 and full year 2025 relative to downward revisions for the rest of the index.

So it seems like outside of AI, there are certain situations that maybe sounding the alarm into next year? Is that your read as you talk about the economic drift, as you call it?

Is that the story?

I would say it's somewhat of a tactical run at hot, because if you think about the economic growth running hot in the first half of next year, a lot of that is due to the increase in tax refunds that many consumers are going to see.

But we know from the U.S. consumer, a penny earned is a penny spent.

So that's likely to cool off in the second half of the year.

So I would agree if we think about areas like small cap, yes, you may have a little bit of a tactical bounce there.

But we're not going to see a protracted rate cutting cycle from here.

In fact, maybe one or two cuts next year, if that, few and far between.

Why can't everything work under the environment that we're talking about?

Is AI a bubble?

When we think about some of the fundamentals that we're seeing in AI, we do not see a bubble at this point, but certainly there's a lot of exuberance around it.

So, there's a couple of things we're watching.

We want to make sure that we continue to see these companies produce revenue to monetize their technology, not to take on too much leverage.

Look, a little bit of financing from the capital markets, from the, the debt market specifically is okay.

That's good capital allocation.

But we don't want to see too much leverage, and we want to make sure that that adoption continues.

So, are, are traders now finally ch- moving their focus to valuations, and do they make sense? Do they fit?

Do you think there's incremental new China risk?

In some ways, yes, but I think we've also seen this movie before where we see trade tensions ratchet up, we see trade tensions dissipate.

So what I'm really paying attention to right now as it relates to trade is what goes on from here on out when we think about the Supreme Court and some of the rulings around tariffs there.

because that's meaningful if you do have some change there where the administration is reestablishing tariffs under different legal underpinnings that create some uncertainty for companies.

And it also potentially could infuse some lift into the bond market when we think about yields because of that uncertainty and because if some of these companies have to get their money back and the government refunds some of that, that's going to trade, change some of those revenue dynamics for the government in the short term.

So those are some of the longer-term issues that I'm thinking about as opposed to the ebbs and flows of the headlines around trade, because I do think we want to go into this as the administration with a stronger negotiating position.

So I think that there's something to that.

And Besson suggested to Sarah yesterday that might be on the comm as early as Q2.

Is this the way it's going to be for a bit?

Don't fight the Fed, don't fight fiscal, don't fight AI.

When you have this trinity of catalysts for the market for the next couple of months, it's really hard to want to back off at these levels, even though valuations are pretty much as high as they've been in many years, if not since the coming out of the pandemic, also since the early 2000s.

But I think the reality is when we think about AI and we think about some of these big announcements, as long as companies are maintaining their revenues or growing them, as long as that cash position from a funding source for a lot of these investments is still intact, then that is a good sign of the health here.

But I do pay attention to some of these circular announcements where it sounds like...

There is a lot of, again, that circular economy here between some of these big tech names.

So we want to make sure the way that we're assessing these companies stays true to form and we don't start sliding into announcements of future deals that may or may not happen.

Sure, but I think the prevailing thought from most people who've been coming on the network, even those who are concerned about some issues like you are, is like the music's going to play and you have to be on the dance floor while the music's playing because it can play for a long time before there's a record scratch.

But now we want to see results, right? I mean, how do you make the AI trade work for you in sort of a targeted way rather than just a blanket, hey, they said AI, I'm going to throw some money in that name too.

First, I think we are seeing some of that ROI come through.

And investors are being... holding these companies to a pretty high standard in terms of understanding whether that investment is translating to revenue is translating to greater productivity internally in terms of how these companies are operating but also externally are they selling their product are people buying into that and adopting and while we've seen some of the adoptions start to falter a little bit overall you're seeing that if you think about the ai revolution is happening in large part out to consumers in the last two or so years we're probably tracking ahead of where many other technological advancements and revolutions have in terms of that adoption and ability to translate that.

I do think though, as investors, we have to think phase one of AI is about a concentrated small number of names that hold all the cards.

Phase two is all of the other beneficiaries starting to come into the fold.

So it's not just the Mag7, and increasingly you're seeing a huge dispersion with the Mag7.

Half of them are beating the S&P 500, half of them are woefully behind.

So where are we now and where should you be focusing those investments now?

I like that.

... surpass that.

You are seeing the Mag 7, of course, so far blowing the lights out on earnings.

Expected to contribute about two-thirds overall to earnings growth over the course of this quarter, but that should broaden out over the next couple of quarters.

So, the good news is that we are not only hanging our hat on Mag 7 profits.

The across-the-board story is improving incrementally.

But when you think about how that passes through to markets, the Mag 7 are driving about a third of the returns in markets.

How did you guys view that kind of trend? And you guys, did you guys participate?

I guess the question is, have they come down enough? Do you still think there's earnings risk in this market?

If we're going to see potentially slow growth this year, recession is no longer our base case, but even slow growth, it's going to be very difficult to achieve what some of the analysts expect in terms of profit growth.

So it is still a risk.

And although we had an incredibly robust first quarter where we had essentially seven percentage points higher on year over year growth than we would have expected coming into earnings season, that is reflective of the situation we were in, not the situation we may be in.

And when we think about tariffs in particular, although the tariff rate has potentially come down quite a bit, we're not out of the woods, and it's still going to be a lot higher than it was last year.

So that means domestically and from foreign sources, revenue could slow.

And when we think about margins, someone's going to pay for those higher prices.

What are we going to learn about those assets after the NVIDIA earnings?

Before we get into the next couple of years, can we deal with the next couple of months? How will you digest the incoming information? What will you ignore? What will you choose to put some weight on?

What I want to choose to put weight on the most is how are prices impacted because as I mentioned, the link between markets and the economy in the long run is going to be the profit picture here, and profits are really going to determine how well stocks can do.

Because ultimately, we're already in an environment where valuations are still, compared to their long-term averages, 20% higher than they perhaps should be on an average basis.

And so when we think about what underpins that, we have to see that profitability.

Now, we have to recalibrate a little bit around economic growth expectations.

We were at a 50/50 recession probability coming into this.

Perhaps now that has skewed towards slower growth as opposed to definitive mild recession.

Where is that place? Is that gold?

This is painful.

It is painful, but I would agree with Anastasia in that we haven't really seen tangible evidence that the economy is slowing.

And we are starting with such a strong buffer.

Nine of the last 10 quarters, we've had above-trend growth.

We look at profits, expectations for 12% profit growth.

If we get half of that, that would be in line with a typical year of pretty strong profit growth.

So there is quite a bit of a buffer in the markets and the economy to absorb some of this.

we talked about tech albeit briefly we led the show with some of the upset mirror that we've seen in in the nasdaq down more than four percent until you get some stabilization there and it's not just the mega cap names all those names under the surface that felt so great you know shooting up palantir app loving bistro vertive there's like 30 names and they are crashing hard how do you get the nasdaq to stabilize until that stops

Why so?

Well, clearly it's not a time to drop tech or the Mag 7.

I think what we've seen from earnings overall is that there's some really positive long-term prospects here.

And just because you have a little bit of competition from other companies, other markets, and those competitive moats are dwindling somewhat, doesn't mean these companies cannot be fundamentally competitive.

huge deliverers for shareholders.

But I do also think we are all breathing a bit of a sigh of relief here after the last two years where the MAG7 were 63% and 55% of S&P 500 returns, that this year when they're only contributing 3%, the rest of the market is up.

We are still near all time highs.

You know where I'm going with that.

What's your view?

I use 2018 as a case study of how we think tariffs will impact the markets.

So you had this drip feed of tariffs throughout 2018.

And while that did cause episodes of volatility in the markets, you're seeing that today and right now.

Ultimately, we also had a massive tax cut both for consumers and for businesses.

And that resulted in 21 percent profit growth.

And that really supported the market for the majority of 2018.

The biggest market cap companies on this planet are within this group of stocks.