Everything Is Outperforming the S&P 500 This Year | Animal Spirits 470

Summary

Michael Batnick and Ben Carlson examine a stock market where nearly everything is outperforming the S&P 500, driven by a broadening rally into small caps, value, REITs, and international markets as momentum stalls in the Mag 7. They explore how AI is reshaping industry dynamics—supercharging semiconductor margins while pressuring tech giants' margins through massive capex—and note extreme investor positioning in semis alongside high household cash levels. The hosts also touch on crypto's selective disruption of payments, housing market oddities, and the fading hype in self-help and prediction markets.

• Diversification is working again: Russell 2000, small-cap value, REITs, EM, and dividend stocks are all outperforming the S&P 500 in 2025.
• Mag 7 stocks are underperforming as hyperscalers shift from asset-light models to massive AI capex, compressing margins and reducing their safety premium.
• Semiconductor earnings and margins are surging, but hedge fund and retail positioning has become parabolic, raising risk of sharp drawdowns.
• Netflix is held by Ben Carlson as a value transition play; he would add on further weakness.
• Stablecoins and crypto are disrupting traditional payment networks, compressing valuations of Visa and Mastercard.
• Household cash as a percent of assets has risen to 8%, the highest since 1990, driven by boomers seeking yield and safety.
• Prediction markets are pivoting heavily toward sports betting; Kalshi faces fake trading scandals and insider trading risks.
• Consumer spending remains robust, with total card spending up 5.1% year-over-year in May, the fastest in nearly four years.