Episode summary
All-Time Highs Should Feel Better Than This | Animal Spirits 443
Animal Spirits
· · Hosts: Michael Batnick, Ben Carlson
Summary
The hosts argued that the stock market’s rally has broadened out even as the biggest AI-related names have stumbled. They pointed to equal-weight S&P strength, Russell 2000 and international stock highs, and strong cyclical breakouts as evidence that the market is no longer relying only on the Mag 7. In their view, that breadth, plus investors putting “a governor” on expensive AI stocks, is a healthier setup than the narrow leadership of the last few years.
A big part of the discussion was whether AI is in a bubble. The hosts pushed back on that label, noting that Microsoft has barely outperformed the S&P 500 since ChatGPT launched and that Nvidia’s forward P/E has fallen even as its market cap exploded. They said the more relevant concern may be concentration risk and irrational enthusiasm in specific pockets, not a broad market bubble. They also discussed Howard Marks’ call for a moderate, selective stance rather than going all-in or all-out.
The episode also covered the economy and 2026 outlook. The hosts said the labor market is weakening but financial markets have not cared yet, while inflation remains painful because housing, transportation, and food have risen more than the average basket. They were constructive on housing because most homeowners now have large equity cushions, and they were skeptical of venture, cautious on private-market liquidity, and mixed on OpenAI’s business model versus Google and Meta’s monetization advantages.
Key takeaways
- The hosts see today’s market as broad and healthy because equal-weight, small-cap, international, and cyclical stocks are all participating.
- They do not think the stock market is in a broad bubble, even if some AI names may be overextended, because Nvidia and Microsoft do not show classic bubble behavior.
- Howard Marks’ advice to stay moderate and selective is presented as the right approach when nobody can know whether AI becomes a bubble.
- They argued that labor-market deterioration has not yet mattered to risk assets because earnings, consumers, and credit spreads still look resilient.
- They expect housing to remain constrained but not fragile in 2026 because most homeowners have substantial equity.
Notable quotes
“the equal weight index is breaking out in a big way”
“as somebody just looking at the stock market, you cannot possibly ask for a more bullish environment”
“This is not a bubble. This is not a bubble”
“no one can definitively say whether this is a bubble”
“the labor market obviously continues to deteriorate and you you can't say like it's in a strong place”
How the episode opens
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Welcome to Animal Spirits with Michael and Ben. As we wind down the year, 2025 has been the year of sliding narratives, I think. Your take, Ben?
Okay, continue. — All right, I I need to hear a little more. — Maybe I should make the case that's fair. Um going into the year we had deregulation. There was going to be a financial boom. Um every the the window for anything whatever activity you wanted to do on the table. Let's go. And then we pulled the Ereak going to liberation day and there were quotes uh Larry Frink I believe said um our customers are telling us that we're already in a recession like it was like immediate.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- stock market rally breadth
- ai bubble concerns
- investment outlook for 2026
- inflation and worst effects
- housing outlook for 2026
Watch the episode
Watch “All-Time Highs Should Feel Better Than This | Animal Spirits 443” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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