>>> THE S&P 500 CLOSING AT A RECORD HIGH ALONG WITH THE NASDAQ ON TUESDAY. JOINING US NOW TO TALK MARKETS, ALESHA LEVINE, ANY ANGST, NERVOUSNESS, TREPIDATION, CAUTIOUS OPTIMISM, ANYTHING THAT YOU WOULD TELL INVESTORS TO BE WARY OF OR FULL STEAM AHEAD. >> AS I LIKE TO SAY, AS A STRATEGIST, OUR JOB IS TO WORRY. WE HAVE TO INVEST OUR CLIENT CAPITAL EVERY DAY. WE ARE CONSTRUCTIVE ON MARKETS, WE ARE POSITIVE, WE THINK THE FUNDAMENTALS ARE STRONG AND IN CERTAIN SECTORS GETTING BETTER, RAISING THE EARNINGS FOR THE S&P OVERALL. SO, THERE ARE SOME CHARTS THAT ARE ON TOPIC AND THAT LOOKS NOT HEALTHY, BUT ON THE OTHER HAND, THE FUNDAMENTALS ARE INCREASING AS WELL. >> IF YOU TOTALLY TOOK A.I. OUT OF THE PICTURE, THERE ARE STILL OTHER FUNDAMENTALS THAT ARE POSITIVE FOR EQUITY. >> RIGHT, RIGHT. >> YOU ADD IN A.I. AND YOU GET WHAT WE'RE WITNESSING. >> YOU HAVE THE NEXT LEG OF INNOVATION IN THE ECONOMY, REFLECTED IN THE COMPANIES AND THE S&P. SO, IT IS HARD TO GET NEGATIVE ON A FUNDAMENTAL BASIS, WITH WHAT'S GOING ON IN THE MARKET. WE'RE VERY OPTIMISTIC, WE'RE OVERWEIGHT U.S. LARGE CAP, WE HAVE BEEN THAT WAY FOR THE LAST TWO YEARS. AGAIN, YOU KNOW, IT JUST HAS BEEN THE RIGHT PLACE TO BE. IN THE END, OTHER COUNTRIES ARE LOOKING BETTER THAN FEARED, BUT THE GROWTH HERE IS SO MUCH STRONGER IN THE DEVELOPED ECONOMIES THAT YOU HAVE TO BE INVESTED HERE, WE THINK. >> TYPICALLY WHEN THERE IS TRANSFORMATIVE TECHNOLOGIES AND -- YOU HEARD IN THE PAST, OH, YOU PUT A DOTCOM ON THE END OF A COMPANY, IT IS GOING TO GO HERE, OR WITH BIOTECH, IT WAS A -- ANYTHING THAT WOULD INDICATE THAT YOU'RE INVOLVED IN THIS HOT NEW TECHNOLOGY AND THE STOCKS WOULD ALWAYS OVERSHOOT WHERE THEY SHOULD ACTUALLY BE. THERE IS NONE OF THAT IN A.I. RIGHT NOW? >> THERE MAY BE. IF YOU REMEMBER, FROM THE LATE '90s, THE INITIAL WINNERS WEREN'T NECESSARILY THE ONES COMING OUT IN THE -- IN THE MID-2000s OF WHO ACTUALLY WON THE HORSE RACE THERE. SO, INNOVATION IS ALWAYS CHANGING, AND I SAY THIS, THE HYPERSCALERS ARE SO BIG AND THE COMPANIES ARE SO BIG AND THROWS SO MUCH CASH FLOW, THERE ARE MOATS AROUND THEM, AND MOATS WITH ALLIGATORS. IT IS VERY HARD TO BE COMPETITIVE AND IN THE END, YOU KNOW, YOU SEE FOR INSTANCE THAT IF THERE ARE COMPETITORS, THERE ARE THEN PARTNERSHIPS. IN A WAY, THE LARGE CAP COMPANIES ARE ABLE TO TAKE IN SOME OF THE INNOVATION OF OTHER COMPANIES, AND THUS NOT BE THREATENED BY IT. >> IF WE WERE GOING TO HAVE A RECESSION, WOULD THAT CAUSE YOU TO LIGHTEN UP ON YOUR EQUITY EXPOSURE? >> YES. SO, RECESSIONS ARE ALWAYS ASSOCIATED WITH EARNINGS DOWNGRADES AND IN THE END, WE'RE LOOKING AT EARNINGS CASH FLOW AND MARGINS. THAT'S WHAT WE CARE ABOUT. SO, A RECESSION WOULD AFFECT THAT, AND, YES, WE WOULD -- >> SO YOU HAVE TO HAVE CONFIDENCE THAT THE FED HAS ORCHESTRATED A SOFT LANDING, BECAUSE THEY'RE TRYING -- INFLATION LOOKS LIKE IT IS COMING DOWN. ON THE FLIP SIDE WHAT YOU WORRY ABOUT IS THEY MIGHT OVERSHOOT AND SLOW THE ECONOMY DOWN TOO MUCH. YOU DON'T THINK THAT'S -- SO THEY'RE NOT -- THEY USUALLY AREN'T ABLE TO WALK THAT LINE. THIS TIME THEY'RE GOING TO BE ABLE TO DO IT. >> IT LOOKS LIKE THEY'RE ABLE TO DO IT. >> AMAZING. >> IT LOOKS LIKE THEY'RE ABLE TO DO IT. I THINK THE RESILIENCE OF THE U.S. ECONOMY IN THE FACE OF THE ONSLAUGHT OF THE FASTEST TIGHTENING CYCLE IN 40 YEARS TELLS YOU THERE IS A LOT OF RESILIENCE IN THE HOUSEHOLD. HOUSEHOLD NET WORTH IS UP 40% IN FOUR YEARS. IT IS $40 TRILLION, $45 TRILLION. AND SO IN THE END, THERE IS A LOT OF RESILIENCE THERE WITHIN THE ECONOMY, IN THE AGGREGATE, EVEN THOUGH IT IS OBVIOUS THERE IS PARTS OF THE ECONOMY LOWER AND WORKERS LOWER WAGES ARE STRUGGLING BECAUSE THEY'RE SPENDING ON CREDIT. AND CREDIT IS EXPENSIVE. SO IF A COMPANY OR AN INDIVIDUAL OR HOUSEHOLD HAS TO BORROW ON THE SHORT END, THAT'S WHERE THE PAYMENT IS. >> WHERE DID THE REST OF THAT COME FROM, THE STOCK MARKET OR HOUSING PRICES? >> HOUSING PRICES OVERALL ARE UP ABOUT 40%. MORE IN SOME MARKETS, SOME MARKETS ARE UP 100% AND ULTIMATELY, YOU KNOW, THE FLIP SIDE OF NOT HAVING CORPORATE PENSIONS ANYMORE OR NOT HAVING SUFFICIENT PENSIONS FROM THE GOVERNMENT IS THAT INDIVIDUALS ARE RESPONSIBLE FOR INVESTING FOR THEIR RETIREMENT AND AS A RESULT, HOUSEHOLDS HERE IN AMERICA ARE JUST MORE EXPOSED TO THE STOCK MARKET. SO THE WEALTH EFFECT IS JUST SPREAD OUT MUCH MORE ACROSS THE ECONOMY HERE THAN IT IS, FOR INSTANCE, IN EUROPE. >> NO MORE DEFINED BENEFIT -- DEFINED CONTRIBUTION. >> EVERYBODY IS PAYING ATTENTION TO THE STOCK MARKET. SO THEY SEE IT. SO IN A BULL MARKET, LIKE THIS, WHERE FUNDAMENTALS ARE GOOD, PEOPLE FEEL CONFIDENT AND THEY SPEND. IT IS NOT THAT THERE AREN'T SIGNS OF WORRY, BECAUSE THERE ARE. WE SEE IT IN SOME OF THE CONSUMER STOCKS AND CONSUMER SECTOR. THE BOND MARK SET PRICING IN A CUT IN SEPTEMBER. IT MAY HAPPEN. IT SEEMS THAT THE RESILIENCE OF WHAT CAME BEFORE THIS, WHICH WAS 15 YEARS OF ZERO RATES, ESSENTIALLY MADE THE GREATER PERCENTAGE OF THE ECONOMY IMMUNE TO THE HIGHER RATE CYCLE. >> SO WOULD YOU -- PEOPLE ARE BUYING NVIDIA TODAY. THEY'RE BUYING IT WITH A $3.3 TRILLION MARKET CAP. WHERE DO THEY THINK IT IS GOING? IS IT GOING TO $4 TRILLION? >> I CAN'T TALK ABOUT INDIVIDUAL STOCKS, BUT I WOULD SAY THAT THE GROWTH RATES OF THE STOCKS THAT HAVE DONE WELL ARE COMMENSURATE WITH THE INCREASE IN THE MULTIPLE AND WHERE THE STOCKS ARE GOING. THE GROWTH RATE IS HIGHER AS WELL. WE JUST PUT OUT OUR NEW FORECAST FOR THE S&P FOR THE END OF THE YEAR, WE'RE AT 5700 FOR THIS YEAR. THAT IMPLIES TO 12% GROWTH RATE THIS YEAR AND NEXT YEAR, DRIVEN BY INCREASED EARNINGS IN COMMUNICATION SERVICES AND INFORMATION TECHNOLOGY. SO, YES. >> JUST, YOU KNOW -- >> I AGREE. >> IT IS STAGGERING. >> IT IS STAGGERING BUT THE EARNINGS AND THE CASH FLOW ARE THERE. IF YOU LOOK OVER TIME, THE CASH FLOW INCREASE IS ASSOCIATED WITH HIGHER MARGINS -- HIGHER MARGINS AND HIGHER MULTIPLE OVERTIME. WE TALK ABOUT THE MULTIPLE. THE MULTIPLE NOW IS ABOUT 20.5 TIMES. IT IS NOT UNREASONABLE GIVEN WHERE FREE CASH FLOW IS. OVERALL IN THE S&P DRIVEN BY THE TOP TEN. >> I KNOW IT IS NOT UNREASONABLE. I KNOW THIS IS NOT THE DOTCOM BUBBLE AGAIN. SOMETIMES THE MARKET ISN'T RATIONAL. TO THE DOWNSIDE OR THE UPSIDE. THERE COULD BE A TIME WHERE PEOPLE SAY, WE DON'T BELIEVE IT, OR A TIME WHERE BIG CORPORATIONS PULL IN AND AREN'T WILLING TO SPEND AS MUCH BECAUSE IT HAS BEEN A BIG COMPANY THAT ARE SPENDING THE MONEY THAT IS NECESSARY ON THIS. LONGER TERM, LONG HAUL, SURE, MAYBE IT IS THE RIGHT DIRECTION, BUT THAT DOESN'T MEAN YOU CAN'T HAVE A PRETTY SIGNIFICANT PULLBACK. >> YOU CAN HAVE PULLBACKS. ON THE FUNDAMENTALS SIDE, IT TAKES US THE NEXT 18 TO 24 MONTHS. THE BIG RISKS ARE THE ONES NOT PRICED IN. WHAT IS NOT PRICED IN? RECESSION IS NOT PRICED IN. INFLATION REBOUNDING IS NOT PRICED IN. AND, OF COURSE, ANY SHOCK IS NOT PRICED IN. AND WE ALL TALK ABOUT THE DEFICIT. CBO TOLD US $2 TRILLION THIS YEAR, AGAIN, THAT'S THE RISK. IT IS FUNDING IT IN THE BOND MARKET. >> NOT THE DEFICIT THIS FISCAL YEAR, 7% OF GDP. NEVER BEEN. >> NEVER. >> AND BY JUST WHERE WE ARE RIGHT NOW, IT IS GOING TO BE 122% THE DEBT HELD BY THE PUBLIC, 122% BY 2034. IT IS GOING TO GO UP EVERY YEAR. IT WAS NEVER OVER 100 BEFORE THAT. DO YOU BELIEVE IN MMT? >> DO I BELIEVE IN MMT? I DO NOT. I DO NOT. BUT THE TW
