Observes risk-off sentiment and dissonance between global reflation/small-cap plays and falling bond yields driven by AI trade fears.
Paul
Dan Skelly
Acknowledges dissonance: market fears AI spending but also says software will be disrupted. Notes not all software is equal - some partner with AI model makers.
Asks about equity setup for 2026 given 2025's excellent US and better international returns.
Paul
Dan Skelly
Recommends sticking with international trade due to AI optimism shifting to concern benefiting international markets, plus policy/fiscal tailwinds in Japan, Latin America, Europe.
Dan Skelly
Earnings are solid and broadening with Russell 3000 median earnings growth around 11%, up from low single digits.
Questions if Microsoft/others could change sentiment with large bond deals.
Paul
Dan Skelly
Most AI spend funded from cash flow, but Mag 7 balance sheets are net cash and could take on leverage.
Asks if European markets' time to shine given they've traded at discount to US without tech exposure.
Paul
Dan Skelly
European markets benefit from absence of negative, real fundamental catalysts like defense spending/post-Ukraine recovery, and favorable fiscal policy in Japan/Europe.