Episode summary
Why Retail is Outperforming | Animal Spirits 432
Animal Spirits
· · Hosts: Michael Batnick, Ben Carlson
Summary
The hosts argue that the stock market’s recent strength is still overwhelmingly an AI story, not a politics story: since November 2022, AI-related stocks have accounted for most of the S&P 500’s returns, earnings growth, and capex growth. They agree the spending surge looks bubble-like, but they also stress that the companies driving it are highly profitable and that a bubble can persist for a long time before breaking.
That same concentration theme runs through the rest of the episode. They point to how the market remains broad underneath the headline names, with global new highs improving and emerging markets outperforming the US this year. At the same time, they highlight how the top 10% of households own most of the stock market, so rising equities keep rich households feeling better and help explain why the economy has remained resilient despite housing weakness and political noise.
The conversation also covers healthier investor behavior, the continuing popularity of index funds and ETFs, the rise of leveraged speculation, and the possibility that private equity’s slowdown will be more of a long grind than a sudden crisis. On housing, they argue that many would-be buyers may actually have been better off renting and investing instead of stretching to own.
Key takeaways
- The hosts say AI has driven most of the market since late 2022, with AI-related stocks accounting for 75% of S&P 500 returns and 90% of capex growth.
- They call AI spending bubble-like, but note that strong earnings and cash generation make it hard to time the end.
- They argue the economy is being powered by wealthy households, because the top 10% own most stocks and their sentiment tracks the market.
- They say investor behavior has improved because index funds and low-cost ETFs have replaced expensive products that used to be sold as gospel.
- They think private equity’s problem is slower distributions, not an imminent crash, because firms still have large pools of undeployed capital.
Notable quotes
“AI related stocks have accounted for 75% of the S&P 500 returns, 80% of earnings growth, and 90% of capital spending growth since Chhat GBT launched in November 2022”
“I think the excess spending levels and the and the actions taken by the tech companies are a bubble”
“it is weird. Okay, here's the here's the opposite side”
“The most popular ETF is VO, the Vanguard S&P 500 ETF. It's bringing in more money than any ETF in history”
“the top 10% owns 87% of the stock market and then the bottom 90% owns like 55% of the housing market”
How the episode opens
Today's Animal Spirits is brought to you by Y Charts. The Fed recently cut rates for the first time in over a year. Unemployment is ticking up.
Bond yields are sliding. And those big cash payouts everyone loved, they're already starting to shrink. Advisers, your clients are going to have questions about what this all means.
Y Chart's new Fed rate cut deck helps you answer them with intuitive charts and context. You'll see how lower rates filter through to mortgages, credit cards, and household budgets, where bond holders are benefiting as yields fall, and what history shows about stocks when the cutting cycle begins. This is just one of Y Charts's many free resources designed to help save you prep time and keep you ahead of client questions.
Download your copy today using the link in the show notes and get 20% off your initial Y Charts professional subscription when you start your free Y Charts trial through Animal Spirits. Of course, that's through new customers only. Welcome to Animal Spirits with Michael and Ben.
Ben, how are you? Thank you for bearing with us. Let's take a minute.
Yeah, a little technical difficulties, but we're here to go. Ready to go. Let's do it.
Um, all right. Before we start the show, I'm excited to announce that we're we're we're in Charlotte. Okay.
We have seven people, eight people there, but we want to go bigger. We were there last week to scope out some new office space, and we found a sweet unit. Is that the right term?
Unit. I don't think so. Space uh in the south end.
I got to tell you that city is uh it's on fire. Feel like every city that I go to there's cranes everywhere, especially in the south. So, how many how many more people can fit in the new office space then?
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- retail outperforming
- ai bubble
- stock market inequality
- investor behavior
- private equity dry spell
Companies and tickers mentioned
- YCharts
Watch the episode
Watch “Why Retail is Outperforming | Animal Spirits 432” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
More from Animal Spirits
Animal Spirits, this episode and its artwork belong to The Compound. Octagon is not affiliated with the show; this page is an independent summary.
