Two competing narratives: AI selloff vs. strong labor market (with Romaine Bostick, Katie Greifeld)

Asks if the selloff is a buying opportunity or a time to run for the hills, given the 2-year yield at 4.2%.

Romaine Bostick

Mona Mahajan

There are two competing narratives: the selloff in AI/semiconductors (still up 70% YTD) and the healthy labor market rebound with job growth above expectations and steady unemployment.

A steady labor market implies steady consumption. No wage-price inflation spiral was seen in the jobs report.

Notes that money is rotating into defensive sectors (healthcare, consumer staples, utilities), suggesting this is not a broad-based selloff but a selloff of the most parabolic moves.

Romaine Bostick

Mona Mahajan

Would be more worried if there were cracks in the broader U.S. economy. With a steady labor market and double-digit earnings growth for 2026, this is not a scenario for a deep, prolonged bear market.

After a 20% rally since March 30 lows, some digestion and volatility are expected, but dips are usually opportunities to add to parts of the market you were not exposed to.

Asks about the impact of bond market pricing in a full rate hike for 2026 on small caps, which were predicated on interest rate relief.

Katie Greifeld

Mona Mahajan

Small caps have outperformed large caps YTD partly due to the rate story, but they are highly leveraged and have more zombie companies. Edward Jones remains overweight large and mid caps.

The other part of the small cap story was a steady economy and labor market, which is holding in.

Asks about the trend of corporate America issuing more shares (Meta, Alphabet) and its impact on the equity market.

Katie Greifeld

Mona Mahajan

This is a trend we've been seeing, starting with debt raises. Companies are raising capital for CapEx spending (data centers) at a benign cost of capital, but it dilutes existing equity and debt holders.

We need to be cautious and ensure that the spending has a return on investment.

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