AI Summary
5 min readEverything is outperforming the S&P 500 this year. That is the headline from Michael and Ben on this episode of Animal Spirits, and it is not because the S&P 500 is falling. Through the close on Monday, the index was up close to 10% year-to-date. The Russell 2000 was roughly doubling that return. Small-cap value, large-cap value, REITs, mid-caps, emerging markets, and dividend stocks were all outperforming the S&P 500, some by a very large margin. The reason is simple: the Magnificent Seven are not participating in the rally. The average P/E for Microsoft, Amazon, Google, and Meta is at its lowest level in five years. Microsoft is down 33% from its high. Meta is down almost 30%. Oracle is nearly 50% off its highs. Netflix is down 45%. Ben owns Netflix and is down 30% on the stock, which he says is unusual for him. "The transition from a growth stock to a value stock is very messy," Michael said. "And I think that's what's happening right now with Netflix."
The AI Infrastructure Boom and the Bottleneck
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What you'll learn
- 1 (02:11) **Everything Outperforming the S&P 500** - Michael and Ben open with the surprising market dynamic that nearly every other asset class is beating the S&P 500 this year, even as the index itself is up.
- 2 (05:54) **The Erosion of the Mag Seven's Halo** - The hosts discuss why the mega-cap tech stocks are struggling, including the risk of them disrupting themselves with massive CapEx spending.
- 3 (09:06) **The Triple-Digit Club and Market Volatility** - Morningstar data shows an unusual number of stocks have more than doubled, leading to sharp but expected pullbacks.
- 4 (10:57) **War Hedges and the Semiconductor Bottleneck** - A look at how semiconductors have been the best hedge for Middle East conflict, and why their margins are structurally supported.
- 5 (16:35) **The Noise of Investor Behavior Data** - Ben and Michael examine conflicting signals from retail trading, hedge fund positioning, and cash levels, concluding the data is very noisy.
- 6 (23:16) **Doubt and the AI Bubble Survey** - An AAII survey shows most investors don't think there is a bubble in AI stocks, which the hosts see as a sign of remaining doubt rather than a top.
- 7 (25:32) **Consumer Spending and Credit Card Dynamics** - Consumer spending is remarkably robust, and the hosts discuss the strange world of 0% financing offers alongside 25% credit card rates.
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Show Notes
On episode 470 of Animal Spirits, Michael Batnick and Ben Carlson discuss: why diversification is working again, how AI is creating more winners and losers in the stock market, why the Mag 7 is underperforming, the triple-digit club, why investors are holding more cash, rich people who complain too much, what makes America great, AI is disrupting self help books, the World Cup and more.
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Find complete show notes on our blogs:
Ben Carlson’s A Wealth of Common Sense
Michael Batnick’s The Irrelevant Investor
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Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Ben Carlson are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management.
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