You know, what is what is your relationship to this work and why did it feel necessary? for you? Where do you want to start? Do you want to start with the psychology of leadership, or do you want to talk a little bit about your own story?

I can answer both at the same time because the book starts with my own story.

By the way, when I finished the book and sent my father the manuscript, my father, who was a finance professor, he replied in a slightly snarky way, I believe, what? Are you in HR now? And for him, for a finance professor, for a numbers guy, for me having spent my career in quantitative finance and economics research, he was a bit puzzled that it was, why are you writing this? Why are you so interested? Well, first of all, I have to manage high performing teams.

And the bottom line is that I got interested in the psychology of leadership because I was stressed at work.

And I was saying what I've just told our audience not to do.

I was saying to myself, I was doing what I'm telling your audience not to do.

I was telling myself, why are you so stressed? That was my self-talk.

look, I'm looking at your peer feedback

Mm-hmm.

And I'm good at it.

So that was an important moment for me, though, in my career because as a quant analyst, when my colleagues and importantly my bosses realized that I could communicate clearly and well, then the combination of deep skills, quantitative, and the ability to communicate it Became really an attractive package for the firm, and I got-- I was an intern at the time.

I got a job offer, and soon enough, I was asked to explain difficult quantitative concepts to clients.

That's how I built the first few years of my career, by combining these things.

And I wanna say one thing about this, Greg.

This is about teamwork.

Totally agree with that.

So just unpack that a little bit for us.

Well, the feedback process is important in business.

It's normal for you in sports.

You have your coach on the sidelines, do this, do this, tweak this.

You seek the feedback.

You want it.

In business, it's uncomfortable.

Yeah,

How did you get to where you got to?

Okay, great question to start.

I'm in a financial mathematics class.

I'm finishing my master's degree.

We're doing some complicated math about bond pricing.

Really nerdy stuff, Darius.

I hit 100 on the test, perfect score.

How about yourself?

Goal-induced blindness.

When you get goal-induced blindness, this is specific often to high performers, you become so obsessed with your goal, usually a measurable goal, that you lose sight of anything in your life that's not goal-related, and that becomes a big problem.

That's the goal-induced blindness.

You might sacrifice your family life.

You might sacrifice your personal health.

You might sacrifice your sense of ethics.

You might start cheating because all you have in your sight is the goal.

And I love this because both sides of the spectrum are brilliant in and of themselves, right? But how should leaders actually think about building high-performing teams today through that lens?

... and the rest, your take on SpaceX.

Look, in general, those IPOs are being very well absorbed.

We believe in the AI trade.

We're bullish, we're long US large gap growth.

Tom, interestingly, people worry about debt levels and the sustainability of earnings.

The Russell 1000 large cap growth over the last five years at times have, has traded as high as 30 price earnings ratio.

We're at 22.

Talk to us about how you think about mo- momentum.

Goal-induced blindness.

When you get goal-induced blindness, this is specific often to high performers, you become so obsessed with your goal, usually a measurable goal, that you lose sight of anything in your life that's not goal-related, and that becomes a big problem.

That's the goal-induced blindness.

You might sacrifice your family life.

You might sacrifice your personal health.

You might sacrifice your sense of ethics.

You might start cheating because all you have in your sight is the goal.

And I love this because both sides of the spectrum are brilliant in and of themselves, right? But how should leaders actually think about building high-performing teams today through that lens?

If yields go up, what does the technology sector typically do?

You know, I think the typical is hard to describe because its duration, its sensitivity to interest rate moves, has been highly unstable historically.

You know what matters right now, Tom, is the earnings.

The earnings growth projected for the next 12 months for US large cap growth stocks are at 28%.

That's the highest it's been in my 25-year chart.

Now, you could say that's a high bar, but those are companies that tend to meet that high bar.

So Tom, we're still along the broadening trade, but we've taken about half the profits, and we've been moving money from international back to the US.

Are the earnings and the earnings forecasts enough to support this market?

Cliff Asness had a beautiful tweet out going, "What is this hot air?" What should we do with diversification given this war?

Tom, the stock-bond correlation is super hard to understand and predict.

But financial advisors everywhere just use a negative return correlation assumption.

And to me, that's wrong.

The twelve-month correlation historically between stocks and bonds has flipped time... has, has flipped signs twenty-nine times over the last eighty years, from positive to negative.

It has ranged from minus eighty to plus eighty.

Now, the key to understanding the correlation is a simple question.

So Sebastian, what are we doing in the bond market here? Um, how much credit risk should you be taking in a world that has black swan events, has a lot of cross currents, has a lot of geopolitical risk here? How about credit?

Do things go back to, quote unquote, "normal" when it comes to your view of stocks and how they should be valued?

I, I could not agree more, Melissa.

We don't know how long this is going to last.

But as market participants, we need to understand the damage that has already been done, and it's a little curious to me that the two-year inflation swap is at only 2.8%.

I agree with you.

I don't think we stabilize quickly back to normal levels of inflation.

It's a slow-moving macroeconomic chain.

So are there pockets of this market that you feel as if the, the risk-reward has really improved a lot?

It's when do you set the metrics? When do you fold? When do you hold? My guess is that's the stressful part.

Yes.

And building the resilience around it.

Look, I decided to write the psychology of leadership because.

Because I was stressed at work, you know, and not only was I stressed at work, but I was stressing about stressing.

I was adding a second layer of stress.

What stressed you out? You know, the uncertainty associated with the job and as a leader, I'll be completely transparent with you.

this?

Sebastian, how important is non-farm payrolls on Friday in light of this, given the fact that a lot of whether this is an inflationary shock or whether this is potentially a shock to growth is predicated on how much momentum there was heading into this?

this?No, I think the geopolitical headlines will continue to dominate into Friday.

Non-farm payrolls are always important.

No single data point matters, but we still debate employment quite a bit in our asset allocation committee, especially in the context of AI.

I believe the unemployment picture is, is okay in the US for the time being.

You know, we're still at 4.3%.

I always remind people that the longer an average unemployment is 5.7%, so the economy in the US is humming.

They're not deescalating, and I just wonder how you think that's gonna play out in the weeks to come.

Right

... residential and commercial and so on, and it's part of a diversified real asset strategy.

It doesn't move hand-in-hand with energy prices, and that's a feature, not a bug, right? So we like putting all these stocks together and have it as a dedicated allocation because if you compare this with commodities, for example, with the real asset equities, you get an equity risk premium over time.

So even when there's no geopolitical risk, you get pretty good equity returns.

And then when you do get an inflation shock and bonds like Treasuries go down together with stocks, those stocks actually behave quite well and can outperform significantly in the portfolio.

And I...

It just comes down to having a range of, a range of outcomes here.

So I understand that you have a diversified portfolio, but how exactly do you position yourself for that worst case scenario, the bear case scenario? Where do you find a safe haven?

First, Sebastien Page of T. Rowe Price looking at the oddity of markets higher given sentiment.

That is such an interesting point about sentiment.

When I...

Uh, I was thinking about this on my way here this morning.

When everybody thinks we might be in a bubble, counterintuitively, that's kind of a good thing.

It means there's some conservatism.

Mm-hmm.

Late '90s, it was really n-...

How much of a draw down do we need to see where we break that inertial constructive force? 5%? 10% bear market?

Well, it's interesting the way you phrased the question, "How much of a draw down do we need to get the market broadening?" That's an assumption we're making, and I think it's the right one, uh, that in a draw down, we will see broadening.

If you look at how value stocks have been behaving over the last two, three years, every time we get a 3%, 4% move daily on the downside, value stocks outperform.

So my view is that a big draw down in the markets would be, almost mathematically, has to be driven by maybe an AI scare, something going on to unwind market concentration.

By the way, right now in our-

Yeah.

... and as valuation-sensitive investors, we still have a long credit exposure because, and our head of high yield keeps reminding our asset allocation committee every time, this is not the same asset class that it used to be.

So if you draw a chart of high yield spreads over time and you look at where spreads were in prior market cycles, you're looking at a different index.

(laughs)

Because for me, the realization that optimal performance does not occur at a stress level of zero.

That stress up to a point will increase your performance because you'll be activated, motivated, you'll prepare better, the adrenaline will push you.

Beyond that point, stress, we all know, is bad, is gonna kill you.

It's gonna just, you're gonna choke, you're not gonna perform as well.

But this idea that there's a curve, it's called a Yerkes-Dodson curve, and there's a- like 80 years of research on this.

And I think it's so underestimated how useful this concept is for business and life.

Mm-hmm.

Single best idea. And today, there were s- uncountable single best ideas into a Fed day. Special thanks to have Stephen Englund here on from Standard Charter Bank, and just before him, Michael Kushman of Morgan Stanley is what the magic's all about. These are very, very experienced, very wise, wisdom, wise, wise people. And it was the way the whole show was today. It was just great. Sebastien Page showed up. He grew up in Quebec, in the land of the hockey stick, in Sher- Sherbrooke, Quebec. That is where they make all the hockey sticks. It was like the Vatican of my childhood, if you will. We talked with him about Canada, had some incredible insights about the tensions in the 51st state concept. But mostly we talked to Sebastien Page of T. Rowe Price about allocation and about where we are right now.

We're not panicking, Tom. I think markets, the economy, I think we're gonna be okay. We're looking at a slowdown. The data for the consumer is showing that things are slowing down. And the markets is selling off, but it's not just because of tariff headlines. It's because of the growth slowdown. It's because we had extremely high valuations going into this. And yes, the word of the hour, uncertainty. So it's a combination of all these things, but I don't think we're getting a recession.

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Yeah.

... prints. The last one was positive, but still below expectation. The one before was revised -1.2% month over month. Those two data points are not good and they're showing some slowdown. Overall, the economic surprise index in the US is in negative territory. But I'm not counting the US consumer out yet. Unemployment at 4.1% is a low number for-