Will the Fed Buy Stocks? | Animal Spirits 473

Summary

Michael Batnick and Ben Carlson discuss the unsustainable free cash flow shift from hyperscalers to semiconductors, potential risks for semis. They highlight the S&P 500 ex-technology index reaching new highs, attractive bond yields including high-yield munis, and challenge bearish AI narratives. The hosts favor high yield munis and broad bonds while questioning semiconductor capex sustainability.

• Hyperscaler capex may be unsustainable, potentially hurting semiconductor stocks.
• S&P 500 ex-Technology index (SPXT) hits new all-time high, signaling broad market strength.
• High yield municipal bonds offer 9% taxable equivalent yield, competitive with private credit but more liquid.
• Investment-grade bond yields are at generational highs, providing margin of safety.
• Small caps are rallying partly due to AI exposure within industrials and tech.
• Nvidia's P/E ratio is near multi-year lows, but market may be discounting growth sustainability.
• Analysts are accurate at forecasting earnings outside of recessions, but P/E predictions remain elusive.
• The stock market's share of household net worth is at a record, intensifying its economic importance.