WSJ’s Take On the Week: The AI Trade’s Next Phase Is Here. Are You Ready?
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What is the main topic discussed in this episode?
Listen at schwab.com slash washingtonwise.
Take a listen and be sure to tune in on Sundays for new episodes of WSJ's Take on the Week.
I'm Gunjan Banerjee, lead writer for markets here at The Wall Street Journal.
And I'm Telus Demos.
What are the episode's focus and who are the hosts?
I write for the journals heard on the street call. This is WSJ's Take on the Week, the show where we give you a leg up on the world of money and investing. That's the stuff that we think and talk about every day here at The Wall Street Journal. And every week, we're going to bring you into those conversations. They're going to be with insiders. They're going to be about markets, economy and finance.
And for today's show, we're going to dive into big tech stocks and artificial intelligence. And of course, what's been the splashiest event of earnings season, NVIDIA, which reports in just a few days. We chatted with a really big AI bull, Dom Rizzo. He's a tech portfolio manager at T. Rowe Price. And he shared with us why he thinks AI is the biggest productivity enhancer since electricity.
Electricity, that's a big one. I use that.
I'd say so. And which companies specifically he thinks could be some of AI's unexpected winners. You're going to hear that conversation in just a few minutes. Before that, though, let's get to what's been happening in the news and in markets. There's been a ton going on with crypto and we have some upcoming earnings from Target and Walmart. But first, we're about two weeks post the U.S. presidential election and the Trump trade still seems to be on everyone's minds. Tell us, what do you think? Do you think it's already losing steam?
Well, first, let's break down what is the Trump trade, right? The Trump trade really comes down to two big macro moves, and that's stock prices are up and bond yields are up. So let's talk about bonds. Yields on 10-year treasuries are still much higher than they were three months ago.
How is the 'Trump trade' defined and why does it matter for stocks and bonds?
Three months ago, they were under 4%. Now, they're flirting with 4.5%. There was a surge on November 6th. That didn't quite continue. They've been a little up and down from there, but they're still up. And why are treasuries part of this Trump trade? Well, on the good side, because faster economic growth generally means that the Fed is going to have to raise rates in the long term. But on the bad side, people are worried about how tax cuts, Trump promised a lot of cuts, how those things might impact the deficit. And a wider deficit means the government is just going to have to keep selling more and more treasuries, supply and demand. Those yields go up.
Why are rising Treasury yields influencing investor decisions now?
So, Gunjan, tell me about what's been happening with the stock market. Has that trade started to lose any steam as well?
You know, it's so interesting. Throughout the week, the biggest question investors posed to me over the phone was, when will the volatility that we're seeing in treasuries in the bond market, when and if will that start to stir volatility in the stock market, right?
Of course, everything's connected.
It is. And investors are constantly making this calculation of, should I put my money in super safe treasuries and government bonds, or do I take a riskier bet and put it into the stock market?
And treasuries have been tempting. Those high yields mean... You get paid a lot to own.
Right. So there's this ongoing trade-off there. But at the same time, so far at least, those higher yields have not caused anyone to panic. But I do think it's something a lot of people are keeping an eye on. And those higher yields also haven't dampened a lot of the euphoria out there in markets. You know, I think things have been a little bit more range-bound in recent sessions and maybe even ticking lower as opposed to right after the election where you saw this crazy move up.
Yeah.
But what I'm seeing in positioning data, what I'm hearing from investors is they are still kind of positioning for this year-end melt-up and for this rally to continue.
Melt-up.
Melt-up.
I've heard of meltdowns, melt-ups.
Could be exciting. And, you know, my favorite indicator of stock market euphoria has been flashing bright green.
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Chapters
5 chapters
1
What is the main topic discussed in this episode?
0:01–1:00
2
What are the episode's focus and who are the hosts?
1:00–2:27
3
How is the 'Trump trade' defined and why does it matter for stocks and bonds?
2:27–2:59
4
Why are rising Treasury yields influencing investor decisions now?
2:59–5:22
5
What signals show continued stock-market euphoria after the election?
5:22–24:21
Speakers
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