AI Spending, Labor Market, and Portfolio Strategy (with Romaine Bostick, Katie Greifeld)

Jason Pride discusses the massive AI spending (3% of GDP, 2.5x Apollo program) and its dual-edged impact: potential job displacement vs. new business formation. He advises caution on equity valuations (90th percentile) and recommends active rebalancing. He is hesitant on private credit due to crowding, prefers equities over high-yield bonds, and sees no systemic contagion risk from private credit markdowns to banks.

implicit

RUT

Oil

Metals

USD

Glenmede 4.2
Wealth Manager
Jason Pride 8.5

AI Spending, Labor Market, and Portfolio Strategy (with Romaine Bostick, Katie Greifeld)

ndx

Equity valuations are at the 90th percentile, suggesting limited near-term upside and a need for active rebalancing to manage risk.

yields

He is hesitant on private credit and prefers equities over high-yield bonds, implying a view that yields are not attractive enough to compensate for risk, but not explicitly bearish.

Asks about macro concerns for the labor market and economy, given the AI capex boom and upcoming jobs report.

Romaine Bostick
Jason Pride

Companies are spending 3% of GDP on AI, 2.5x the Apollo program. This will likely lead to labor cuts for efficiency, but also a ramp-up in new business formation, as seen in historical tech cycles.

CEO after CEO is commenting on finding cost savings in their labor base. At the same time, we have one of the largest ramp-ups in new business formation.
Questions if the amount of money chasing AI has gotten too far ahead of itself.

Romaine Bostick
Jason Pride

There is a double-edged sword: either too much was spent without efficiency gains (bad for markets), or successful deployment leads to job losses (bad for economy). Long-term positive, but short-term disruption is likely.

It kind of cuts both ways. I think long-term, the story's probably still good positive story. But there may be this window here, just like every other technology cycle in the past.
Asks about the AI trade comparison between equities and fixed income, given the bond issuance for AI capex.

Katie Greifeld
Jason Pride

Equity valuations are at the 90th percentile, warranting active rebalancing to manage risk. He is hesitant on private credit due to crowding, and prefers equities over high-yield bonds for yield. Municipal high-yield is a different story.

We've been very hesitant to play in the private credit space... because of the magnitude of money that's been chasing the same dollars on investment there.
Asks about contagion risk from private credit redemption requests into public markets.

Katie Greifeld
Jason Pride

After haircutting all bank back-end ownership to zero, banks are still above required capital ratios. He sees no systemic risk to banks, with a possible question mark on insurance.

I have this marked as not a systemic item related to the banks.

SignalTube

markets at a glance