00:00 Speaker A

Let’s get to what you think people should be doing in this market because, um, as I mentioned, it’s a risk on rally again today. Large cap tech is leading. We are seeing, um, some of these more speculative areas of the market, quantum computing stocks, for example, are are higher again today. Um, how is that going to play out given that macro backdrop you’re talking about?

00:23 Speaker B

Yeah, it is very challenging. If you think about it, it’s almost like investors are like a if you have a cat and you have a laser pointer and you know you can keep them entertained for quite a long time and you’re entertained for quite a long time by shining that laser pointer, the cat chases that light and it seems like that’s what some investors are doing chasing quantum computing and whatever else it looks like maybe the government is going to be taking an equity stake, right? And so that can drive the prices higher. But when I think about sort of the underlying fundamentals, the fundamentals of big tech stocks look very good in terms of the growth, but are the expectations too high? So in one of my notes that I put out, it was about how, you know, I I’m a big fan of the idea, look for growth, but don’t just buy it at any price. Look for growth at a reasonable price as opposed to growth at just any price. I do feel like there is that fervor in the market where people are kind of ignoring that, you know, there’s got to be a little bit of substance here to what you’re buying. For that, I’m finding more of that on the value side of the spectrum than on the growth side. Not to say that, you know, we’re avoiding growth. It’s just that, you know, value is likely going to have its day in the sun. It hasn’t for like the last 15 years and maybe that will happen uh sooner rather than later.

01:45 Speaker A

What do you think will be sort of the trigger for that, uh, that kind of migration?

01:54 Speaker B

Sure. Well, I think part of it is if you think about growth right now, a lot of the big cap growth companies, they don’t have a lot of debt, right? And so if the Fed does show that they are willing and able to continue to cut not just once or twice, but actually a sequence of cuts, maybe four times. I think that could really uh benefit some of the value companies that do tend to have more debt. We’re seeing it with small cap stocks. Now, granted in small cap stocks, you have to differentiate between the profitable and the unprofitable, right? The Russell 2000, you’ve got them all in there. The S&P 600, small cap, those are the profitable ones. And so when it comes to uh the outperformance of the unprofitable versus the profitable, I would be looking for that to change as the Fed really signals that they are willing to continue to cut to try to prop up growth here. And then people are going to maybe be more confident that some of those value names, smaller cap names are not going to be facing that policy headwind.