Episode summary
Falling Rates. Rising Productivity. Are You Rooting for the Wrong Things?
Excess Returns
· · 31 min · Hosts: Jack Forehand, Matt Zeigler · Guests: Jim Paulsen, Dom Rizzo
Summary
The episode contrasts two very different macro readings: one guest argues that falling Treasury yields may stop being bullish if markets shift from inflation fears to growth fears, while another guest makes a bullish case that AI is already raising coding productivity and could reshape the economics of white-collar work. The hosts lean on chart-based arguments to show how the same move in rates can mean opposite things depending on whether investors are focused on inflation or recession.
On rates, the case is that recent economic-surprise data has weakened enough to pull the 10-year Treasury yield lower, potentially toward a three handle rather than the five handle many were expecting. The key distinction is sentiment: if yields fall because inflation is cooling, stocks can benefit, but if yields fall because growth is weakening, stocks and bonds can decline together.
On AI, the discussion centers on frontier models, coding tools like Claude Code and Codex, and whether enterprises are already seeing enough value to justify the spending. The argument is that coding productivity may be rising 20% to 30% or more, but the harder question is how that translates into measurable revenue, lower costs, and durable economic returns.
Key takeaways
- A guest argues that lower Treasury yields could become bearish for stocks if markets start fearing recession more than inflation.
- The hosts say the stock-bond relationship can flip from negative to positive when growth fears replace inflation fears.
- A guest makes the case that AI coding tools are already making average coders 20% to 30% more productive.
- The AI bull case is that enterprises are spending because they are getting real value, even if the gains are hard to measure.
- A guest argues that measured productivity can spike in recessions, so current gains may not prove a lasting AI-driven boom.
Notable quotes
“if rates fall, stocks are going up. But Jim made the argument but that maybe in this case the opposite will be true”
“I think we're shifting sentiment in the rest of this year from being worried about inflation to worried about growth”
“And why did coding go vertical? It's because you clearly made your average coder, you know, 20 to 30% more productive”
“I think enterprises are not stupid in general. I think actually most enterprises are quite thoughtful”
“I think that a lot of what's going on today is kind of a false productivity signal”
How the episode opens
Welcome to the Excess Returns Weekly Wrap. I'm Jack Forehand, joined as always by Matt Zigler. Matt, what's going on? — Oh, man. I'm excited to do this, you rascal ragamuffin, you. I crapped my
That was that, yeah. That was in the uh And we had we had a comment about that, but what's funny about these comments we get, by the way, is like you are clearly more plugged in to like pop culture, but also just like the world than I am. So, like half the time we get these comments like they're something that I just don't understand that I should understand, and the other half of the time they're just complete nonsense.
And like I cannot distinguish between which one is which, but so I don't know if this comment actually was making was like referring to something I don't know about, or if it actually just made no sense.
We are here for the things that make no sense. I am also here for can I the to the person who shouted out the Tiger's Jaw. That thank you, number one. Number two, I'm still I'm still offering those extra bonus points if you know where that that restaurant is that's on the cover of that album. Just throwing that out there. If you have that deep knowledge, I'm awarding bonus points.
You get so many comments on what's behind you in these episodes like all the time. — Like I literally have just like nothing behind me, which probably says more a lot about me versus you, but you there's always stuff about me random like I don't even know what's behind you, but like cuz like you're always small when I'm talking to you like in the thing, but like each poster, each like painting, everything gets commented on.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- treasury yields
- stock-bond correlation
- ai coding productivity
- frontier model growth
- measuring productivity booms
Companies and tickers mentioned
- OpenAI
- Anthropic
Watch the episode
Watch “Falling Rates. Rising Productivity. Are You Rooting for the Wrong Things?” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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