Watch CNBC's full interview with White House National Economic Council Director Kevin Hassett

Caterpillar is highlighted as a top performer in the Dow, and Hassett views this as "100% consistent" with current economic fundamentals. Two forces are driving this: 1) Trump's tax policies allow companies to "expense" (immediately write off) capital equipment, creating high demand for heavy machinery. 2) AI integration is increasing operational efficiency and profit margins for industrial giants like Caterpillar. Hassett notes "big demand for Caterpillar stuff" and cites the stock as the biggest outperformer in the Dow recently. A reversal in tax policy or a slowdown in construction/industrial spending.

Hassett pushes back against the market fear that big software companies (like Salesforce) will be "cannibalized" by raw AI chatbots. While AI is powerful, large enterprises rely on deep, trusted relationships and historical data held by incumbents. Clients will not abandon established platforms for a generic chatbot immediately because the "trust moat" is too wide. Hassett cites conversations with Silicon Valley insiders noting that while productivity is up, the client base is sticky due to "relationships... and data these firms have built over time." Rapid advancement of AI agents that can autonomously replicate complex enterprise software functions.

The economy is in a "productivity boom" similar to the 1990s. AI allows companies to maintain or increase output with fewer employees (lower costs). When productivity rises, profit margins expand. Since profits are the "mother's milk of stocks," this supports a continued rally in equity valuations. Software engineer productivity has increased 50-80% in the last year; GDP growth is tracking at 3-4%. If the labor market contracts too sharply (mass unemployment due to AI) before new roles are created, consumer spending could collapse.