Looks Like a Bull Market, Feels Like a Crash | TCAF 230
Speakers
Christina Hooper — Chief Market Strategist at Man Group
— Chopping Block co-host
Josh Brown — Host
— Ritholtz Wealth CEO
Summary
- Man Group (managing ~$178B) presents a contrarian base case for 2026: A modest US recession is likely, driven by a potential slowdown in AI capex spending and a weary consumer base (growth currently relies heavily on high-income spending).
- While the US market feels "priced for perfection," international markets offer better valuations and specific catalysts (Japanese fiscal stimulus and European defense spending).
- There is growing skepticism around Private Credit, specifically regarding liquidity mismatches (citing Blue Owl) and heavy exposure to the software sector, which may face headwinds.
- The "AI trade" is shifting from a blind rising tide to a "murder mystery" where winners and losers will be sharply distinguished; the current environment favors active management and liquid alternatives over passive indexing.
Trade Ideas
Hooper states their 2026 outlook favors "emerging markets and favoring developed ex-US." She notes US valuations are stretched while international markets have catalysts. Specifically, Japan has a new PM focused on "fiscal stimulus," and Germany is ramping up "defense and infrastructure spending" due to geopolitical threats. US growth rests on "fragile pillars" (AI capex and high-end consumers). If the US slows or enters a modest recession, capital will rotate to regions with active fiscal support and lower valuations (Japan/Europe). LONG International Equities (specifically Japan and Germany) as a valuation and stimulus play. Global recession drags down all equities; stimulus measures fail to materialize.
Hooper notes that 2025 growth was driven by "AI capex spending." However, she warns of "speed bumps" for 2026: NIMBYism, power costs, and borrowing constraints. She points out MSFT has underperformed the S&P 500 since Nov 2022 despite the AI boom. If companies decide to "slow down and see the results before we throw more money at this," the primary driver of US economic growth (AI Capex) evaporates. This makes the Hyperscalers vulnerable to a rerating if spending pauses. NEUTRAL / WATCH. The "murder mystery" phase implies picking winners is hard; blind exposure to the group is risky. AI delivers productivity gains faster than expected, justifying continued massive capex.
Brown cites an FT article stating Blue Owl (OWL) will "permanently restrict investors from withdrawing their cash" from a retail debt fund. He also notes that many private credit funds have ~26% exposure to software companies, which are currently seeing volatile repricing. The combination of liquidity gates (investors can't get out) and exposure to a sector facing headwinds (software/SaaS) creates a systemic risk for private credit vehicles. If software valuations compress, the underlying collateral for these loans deteriorates while investors are locked in. WATCH / AVOID Private Credit (specifically retail-facing vehicles like OWL) due to liquidity and collateral risks. The "soft landing" occurs, software rebounds, and liquidity pressures ease.
Hooper notes that Europe, particularly Germany, has a "very real and immediate reason to increase defense and infrastructure spending" due to the Russia threat. Regardless of the economic cycle, geopolitical reality forces European governments to spend on defense. This provides a non-cyclical floor for defense contractors and infrastructure companies in the region. LONG European Defense/Infrastructure beneficiaries. Geopolitical tensions de-escalate significantly (unlikely in short term).
Up Next
This The Compound News video, published February 20, 2026, features Christina Hooper, Josh Brown discussing EWJ, EFA, MSFT, SKYY, BKLN, OWL, ITA, EWG. 4 trade ideas extracted by AI with direction and confidence scoring.
Speakers: Christina Hooper, Josh Brown · Tickers: EWJ, EFA, MSFT, SKYY, BKLN, OWL, ITA, EWG