08.18.26 - Who are the new winners in the stock market?

So, Bradford, you've been saying that given everything that we've been talking about today, this strong economy and this strong earnings situation, that you believe that we are in a golden age of stock picking right now.

Can you talk about what you mean by that and what the takeaways might be for investors in our audience today?

Yeah, by all means.

So the two simple observations, we've spoken about both of them briefly.

One is interest rates, and the other is this innovative technology known as artificial intelligence.

The interest rate story, quite simply, is that interest rates are no longer zero, right? And you mentioned we haven't seen 30-year yields like this since pre-GFC.

In fact, it was 2007, right? So it's been a long time, and investors' memories tend not to go back 20 years for sure, right? But because it's been a long time, it feels a little bit different.

And what I would say is the Fed is either A, going to stay on hold, or B, hike to Urien's point to kind of take back those rate cuts that maybe they shouldn't have done in 24 into 25.

We'll see what happens there, but I can tell you that doesn't seem to be a C scenario, right? Meaning it doesn't seem like the Fed's gonna continue to cut to make the cost of borrowing, the cost of capital, homogenous and cheaper.

So real fundamentals matter here, Heather, right? Revenue growth, margins, how a company deploys resources and capital matters again, whereas it didn't matter as much when rates were almost free of charge, right? Cost of capital.

The second observation is AI.

When you have a technology like this, this is not a rising tide lifting all boats.

We know that not every constituent in the S&P or every sector of every industry is going to utilize artificial intelligence to the same degree.

Some might hold off and wait to it to be a bit more real.

Others are early adopters.

So because of that, we do believe that you have to employ some discretion as to what companies you want to own, what mutual funds, what ETFs you want to select.

This is not going to be an easy investing thing past 15 plus years.

And we know historically, active management tends to give you alpha and tends to outperform over time.

And of course, our outlook, we're always hedging our bets here, but our outlook does tilt into that arena.

And we're rationally optimistic around the prospects of it.

So, Bradford, you've been saying that given everything that we've been talking about today, this strong economy and this strong earnings situation, that you believe that we are in a golden age of stock picking right now.

Can you talk about what you mean by that and what the takeaways might be for investors in our audience today?

Yeah, by all means.

So the two simple observations, we've spoken about both of them briefly.

One is interest rates, and the other is this innovative technology known as artificial intelligence.

The interest rate story, quite simply, is that interest rates are no longer zero, right? And you mentioned we haven't seen 30-year yields like this since pre-GFC.

In fact, it was 2007, right? So it's been a long time, and investors' memories tend not to go back 20 years for sure, right? But because it's been a long time, it feels a little bit different.

And what I would say is the Fed is either A, going to stay on hold, or B, hike to Urien's point to kind of take back those rate cuts that maybe they shouldn't have done in 24 into 25.

We'll see what happens there, but I can tell you that doesn't seem to be a C scenario, right? Meaning it doesn't seem like the Fed's gonna continue to cut to make the cost of borrowing, the cost of capital, homogenous and cheaper.

So real fundamentals matter here, Heather, right? Revenue growth, margins, how a company deploys resources and capital matters again, whereas it didn't matter as much when rates were almost free of charge, right? Cost of capital.

The second observation is AI.

When you have a technology like this, this is not a rising tide lifting all boats.

We know that not every constituent in the S&P or every sector of every industry is going to utilize artificial intelligence to the same degree.

Some might hold off and wait to it to be a bit more real.

Others are early adopters.

So because of that, we do believe that you have to employ some discretion as to what companies you want to own, what mutual funds, what ETFs you want to select.

This is not going to be an easy investing thing past 15 plus years.

And we know historically, active management tends to give you alpha and tends to outperform over time.

And of course, our outlook, we're always hedging our bets here, but our outlook does tilt into that arena.

And we're rationally optimistic around the prospects of it.