Episode summary
Wall Street Rides Stock Rotation as Tech Slides
Bloomberg Surveillance
· · Guests: Eric Freedman, Kyle Rodda
Summary
The guest says investors should be watching credit first and then equity signals when judging software risk, because lenders and bond markets often notice strain before stocks do. He argues that software is a meaningful part of the market, making up about 10% of the S&P 500, and that more narrowly focused software firms face greater disruption risk than diversified names like Microsoft.
He also frames the recent move out of U.S. megacap tech as part of a broader international rotation rather than a short-term trade. The guest points to a weaker dollar, shareholder-friendly changes in Japan, and stimulus plus corporate restructuring in Europe as reasons he remains favorable on international equities and sees a multiyear setup for the dollar.
On portfolio construction, he says Northern Trust is managing clients with a goals-based approach and using a broader toolkit that includes private markets and real assets. He says the firm likes natural resources and related transmission businesses because they can offer contracted revenue tied to inflation, while still producing risk-adjusted returns.
He is underweight fixed income because spreads are very tight, though he still sees selective opportunities in munis and believes TIPS remain useful as an inflation hedge for clients.
Key takeaways
- The guest says software is about 10% of the S&P 500, so weakness in the group is a material market issue.
- He thinks credit markets can reveal software stress before equities do, especially for companies with debt outstanding.
- He remains favorable on international equities, citing the weaker dollar, Japan’s corporate changes, and Europe’s stimulus.
- He says fixed income looks less attractive because spreads are ultra tight, even after a solid 2025 for bonds.
- He favors real assets, especially natural resources and contracted revenue businesses, for inflation-adjusted risk returns.
Notable quotes
“I think the first thing you look at, Tom, is first the credit”
“S&P actually 10% of the stock of the index, Tom, is software”
“we are sitting both in trade with in dollar terms as well as a D. Y on multiyear support for for the dollar”
“Again, bull market in public equities. Also lots of opportunities on the nontraditional side as well”
How the episode opens
I think the first thing you look at, Tom, is first the credit. Is there a move in credit if they issue bonds? Not every software company obviously issues bonds, but that's the first place you start.
As we always say, the credit folks are the most intelligent, the room, and so they want to get paid back first. So you look for the move their second on the equity front. How diversified is that revenue stream?
Think about a microsoft. I mean, they traded more on your growth rates and they didn't necessarily they're maintenance software sales. So but if it is a more narrowly focused software company, it's about look, how disrupted might they actually be and what are the trickle effects to other other areas.
S&P actually 10% of the stock of the index, Tom, is software. So it's a material issue, just to be sure. I mean, 10% of the S&P 500 is software.
And so I related know that. Yes, yes, yes. So we got to pay attention to this story, I think.
I guess that's something. I don't know, Alexa said. Tom Software.
That's today's word. Yeah, that was a3am meeting. So what are we.
So, Eric, I mean, we've seen really in 2025, we saw the U.S. equity markets did very well, but rest of world much of rest of the world did even better. And I think a lot of folks are asking, was that just kind of a short term trade, you know, sell America, maybe buy some other stuff, or is this a bigger, longer term trend?
Maybe we need to be thinking outside of the U.S. for opportunities? Paul I think that's very consistent with the thought process that we're having in lots of our competitors.
I think there's really two parts of the story.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- stock rotation
- tech earnings outlook
- ai software selloff
- semiconductor weakness
- labor market slowdown
Companies and tickers mentioned
- NTRS
- GOOGL
- GOOG
- NVDA
- AMD
- Northern Trust Wealth Management
- Capital.com
- Alphabet Inc.
- Nvidia Corp.
- Advanced Micro Devices Inc.
Watch the episode
Watch “Wall Street Rides Stock Rotation as Tech Slides” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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