Episode summary
Will the Fed Buy Stocks? | Animal Spirits 473
Animal Spirits
· · Hosts: Michael Batnick, Ben Carlson
Summary
The hosts argue that the market is being driven by a narrow but powerful set of forces: hyperscaler capex, semiconductor earnings, and the persistence of AI spending. They frame the current setup as unusually active, with IBM’s selloff, inflation cooling, and rates backing off recent highs all feeding the same debate about whether the market is normalizing or simply rotating beneath the surface. Their core view is that valuations are not the main bearish case; instead, a real downturn would likely require a recession or a slowdown in AI spending.
They also push back on the idea that the AI trade is already over. Even though they acknowledge bubble-like behavior in some capex and memory names, they note that Nvidia’s valuation has compressed and that analysts have generally been accurate on forward earnings outside recessions. The argument is that earnings are still the anchor, and as long as corporate profits keep rising, the market can absorb a lot of anxiety.
Beyond stocks, they say the stock market has become more central to household wealth than real estate, which makes it more likely policymakers will intervene aggressively in a future crash. They connect that to investor behavior, small-cap strength, and the idea that performance chasing still exists even if it is less extreme than in past cycles.
Key takeaways
- The hosts think the strongest bearish case is not valuation but a recession or a real slowdown in AI spending.
- They say Nvidia looks cheaper on a P/E basis than it has since early 2019, even as the AI trade remains dominant.
- They argue analysts are usually accurate on earnings outside recessions, so the hard part is forecasting the P/E investors will pay.
- They believe the stock market is now more important to U.S. household net worth than real estate, making policy intervention more likely in a crisis.
- They say investors still chase performance, but the behavior gap is narrower than in prior cycles.
- They think small-cap strength is partly an AI trade, not just a broad-based rotation.
Notable quotes
“most of the hyperscaler capex is just circular”
“The bearish arguments are way flimsier because the bullish reasons are happening now”
“Nvidia's valuation is the cheapest since early 2019 for on a PE ratio which is kind of nuts”
“investors keep chasing performance but they never seem to catch it”
“the stock market is significantly greater component of total household net worth than real estate now”
How the episode opens
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Welcome to Animal Spirits with Michael and Ben. It is Tuesday, July 14th at 9:04 in the morning, and it is a busy morning. We have the bank supporting this morning.
We got Wells Fargo, Bank of America, JP Morgan, Goldman Sachs. We had IBM announcing uh disappointing results. The stock is down 23% pre-market, taking
Wait, do we really have to pretend that IBM still matters? — You You don't know anything about IBM? — I nor I know. I know it's coming back, but come on. Let's This is Maybe this is the go- go years then.
How so? — I don't know. People are pretending like IBM's a market moving event today. It's like when is the last time IBM mattered as a company? 1993. — Um — I know this that came back and — Come on dude. IBM
Is a what? It's got to be a $200 billion market cap, right? Or more. — Uh $270 billion. That kind of matters. — If we're worried about IBM, this is this is the doldrums of the summer market. — You're being too dismissive, dude.
Billion dollar stock.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- ai market outlook
- semiconductors vs hyperscalers
- bond yields
- investor behavior
- personal finance
Companies and tickers mentioned
- NVDA
- Nvidia
Watch the episode
Watch “Will the Fed Buy Stocks? | Animal Spirits 473” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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Animal Spirits, this episode and its artwork belong to The Compound. Octagon is not affiliated with the show; this page is an independent summary.
