This unbelievably strong stock market

0:10Very happy to welcome to Seeking Alpha to Investing Experts, Hardika Singh, economic strategist at Fundstrat. Welcome to the show, Hardika. Really great to have you on. I'm so excited to be here. It's great to have you. We're excited to have you. So talk to us about how you're thinking, maybe briefly speaking, give us a general overview of how you're looking at these markets. Smack dab in the middle of October. How are you thinking about things generally speaking these days? I am just completely shocked by how strong this market has been, even though there's been so many curveballs thrown at it.

0:48You have the shutdown right now and it's looking out, you know, It's not short by any means. It's been many, many days now. We have tariffs. We have a rise in geopolitical tensions and trade wars. And despite it all, this AI-driven bull market, it's been all gas, no brakes. So I'm just completely surprised and in a happy way about how strong this market has been. What would you say is the number one place that you're looking or you would encourage retail investors to be looking at this market in terms of capturing the most alpha? Is there a place that you're looking at that you would categorize as such?

1:30The most alpha, I think, can be, you know, this is going to sound like a cop-out answer, but it's really tech, you know, tech and utilities. This AI-driven bull run that we're seeing right now, it's not only benefiting tech stocks because of, you know, they're the chip makers, but we also have a huge surge in demand for power generation and, you know, these data centers that are being built out. And I think utilities has been a big beneficiary in that. I have to double check, but I think that utility sector in the S &P 500 is one of the top performers this year. So I think that's just, you know, another sign that you can look outside of tech, but still remain in this AI circle and, you know, benefit big from that boom.

2:18What would you say about the data centers and utilities? How would you encourage investors to think about the bigger players, the up and coming players? How do you think about that theme? I think that the biggest sign of that can be seen right now in what's happening with Russell 2000, you know, for the since since the market low in April, due to liberation day, you know, Russell 2000 has been on a steady climb higher. And it wasn't until the past month that people really started to pay attention to it. They're a very unloved group of the group of the market, you know, you're all large caps all the time, but then you have small caps, no one cares about them as much.

3:01But if you look inside, you know, this recent rally posted by small caps, you will see that a lot of these players that are winning are actually tied to technologies, industrials and utilities. So you have to look deeper in there. And if I could just name a few stocks, you know, you have Credo Technology shares. They've almost doubled this year. They make electric cables and obviously electric cables right now are benefiting from this current data center build out. You have Bloom Energy. Their shares have almost quintupled this year. They have fuel cells that can turn natural gas or hydrogen into electricity, which is in high demand right now.

3:41Again, we need power to have these data centers. And then you have Oklo, which is like a nuclear play, shares of which have more than sextupled, also lifted higher by the same AI enthusiasm. And full disclosure, after double, triple, quadruple, I kind of had to look out what comes next. You know, totally forgot that part. But yeah, you know, I think that this same wave of AI enthusiasm is also carrying smaller players and more. It's not just the legacy players anymore. You have smaller ones too participating. That's funny that like maybe the best way to synthesize what's happening in the tech space, which really, as we talk about a lot on this podcast, is ever reaching every day, ever, ever further.

4:27But to say like, what's the word for five times that? Yeah, that's where we're at. As we're talking, I realize for people that don't know, maybe would you give a little bit of your background about how you got into investing and maybe what has changed for you since the beginning until now and what maybe you've been rethinking, like you talked at the beginning about being surprised by the length of this run, maybe what that has catalyzed for you in terms of strategy or what has further entrenched your strategy, perhaps? For sure. For sure. Yeah. So I work as an economic strategist at Funstrad, and that's just really a fancy title for somebody who reads and writes and talks all day, every day.

5:16And it's a really fun job because who doesn't want to read and write every day, right? So I look at markets, I figure out, you know, what's the best way to look at the signals that are going on and synthesize them in a way that makes sense, makes it entertaining for people to read. I think that, you know, with this year's market, I personally was in the bearish camp when, you know, tariffs were being thrown around earlier this spring. and I was on vacation in Mexico and I had just landed and I was on, you know, I was headed to the hotel and I remember seeing all the news because I wasn't, you know, keeping in touch with my phone during the four hour flight.

5:55And then I saw all the news and I was just like, oh no, we're, this is, the stock market is not going to handle this very well. And sure enough, the next few days, they were very, very volatile. And I think that I was in one of those bearish camps, because I was just like, I just don't see how consumers and corporations are going to take this in stride and say that, you know what, this is not a big deal. We're going to be just fine. But over the next few months and few weeks, I was surprised at how the stock market kept recovering. And I think part of that was due to how fast the stock market fell.

6:34The news was just announced. It wasn't even, you know, we didn't even know if they were going to go in and like if the tariffs were going to go into effect and actually cause, you know, a decline in economic activity. We didn't know all these things, you know, but still the stock market fell so much. And I think the reason why, you know, we have continued to recover from it is because so far, so it's mostly corporations and businesses that are paying these tariffs. a big impact hasn't been seen on consumers, at least from, you know, the economic data that was released before the shutdown. I think I saw this stat that data shows that about 51 % of the tariffs are being paid by U.S.

7:16businesses right now versus 37 % by consumers. You know, I think that the president pretty early on was really, really clear that he didn't want corporations to be charging consumers these taxes on the people, air quotes, you know, and I think that's what's helped keep the stock market afloat. And at the same time, we have this huge AI bull run that shows no signs of slowing down. And I think that has really helped, you know, change the sentiment. And for me, at least, you know, I think that instead of focusing on this glass half empty view, I'm focusing on this glass half full view. And I think that's what other investors are looking at as well.

7:54That was the biggest change for me. And it seems also that there's things that are priced in, which explains the sustained bull market. And it seems like that's a big factor in this run. Would you agree with that? Yes, I think so. And I think that's why when even just a little bit of bad news comes in, stocks get hit, and then the next day we recover. I think that people are just sitting on the edge of their seats right now. Investors are sitting on the edge of their seats right now. And I think they're just looking for any argument to not believe in this bull market. And that's something I've been writing about to our clients all year long that, you know, you can keep looking for a thousand reasons.

8:36But the fact of the matter is that this is a bull run that's relentless. And if you don't participate, you're going to get left behind. And what would you say about those those somewhat grizzled veterans or the not somewhat grizzled veterans, but those who have come from a more historical perspective and have looked at previous bubbles being popped and just prefer to be uber conservative. Would you say the flip side to that is you just have to pick your place so you don't get punished when the bubble does prick? Or do you think the bubble looks different this time? Or the pricking of the bubble looks different this time?

9:14You know, just the other day in one of our notes, we ran this code from Sir John Templeton that this time is different is some of the most dangerous words in the stock market. In life, probably. Yeah, in life, probably too, right? Something along those lines. And I think that's a very valid argument. There are, you know, there are valid concerns that this might be a bubble. these AR circular investments specifically are signaling that this might be a bubble. And I think that when you as an investor have lived through the dot-com bubble, the financial crisis, it changes the way you think about investing.

9:54It changes your psychology, right? And we have had a huge influx of investors since COVID-19 that are of this younger generation who haven't really been through these terrible, terrible periods in economic history. And they don't have that perspective. So they're helping push this market to new highs, whereas we have these like other veterans who are very, very bearish. Almost every day I see headlines, you know, from a top investor, a billionaire investor saying, no, this is not a good market. Sell, sell, buy gold. But I think these are all just like concerns that are keeping you from, you know, long term investing.

10:37If you're a long-term investor, you have to stay focused and you can't time the market. You don't know if it's a bubble. You don't know if it's going to pop or if it's going to pop next year. So I think you have to focus on the good side of things here. So the bullish argument here is that you keep seeing these circular flowchart variations all over the internet these days of how OpenAI is investing money into AMD and then Oracle's investing money into AMD. And then Nvidia itself is putting money into OpenAI. And they're all putting money into Core V and this like basically this circular bubble chart.

11:13And I think that is the biggest contrarian indicator itself. If people on Wall Street are making flow charts that look like really cute graphics, it's fine. We're going to be okay, you guys. I don't think the enthusiasm has run ahead of itself. Besides, I think that, you know, these large circular investments are necessary when we have a technological breakthrough, like the likes of AI happen. So that scale can be achieved faster. And that's why I think that, you know, we can't really compare this to previous build outs in history, like, you know, the railways, or the fiber optic grids, because it's just so different in that respect, we are still finding out ways in which AI will be beneficial in all the ways we can monetize it.

12:01I think that's why, you know, I'm not too bearish about this bubble yet, because we're still seeing a really high demand for this compute power. And if we didn't have this demand for compute power from these companies, I'd be like, okay, hold on, we've bit of the shares of these data centers and utility players, so much because of AI, and they're not even seeing demand for it. So in this case, it's better for these companies to, you know, be investing in others because they're noting demand for it. I think it was Greg Brockman who said, the OpenAI president and co-founder, he said that I'm far more worried about us failing because of too little compute than too much.

12:41So I think that the greater risk right now is that you don't build out enough. I think we need to keep building this out and see where it goes. And hopefully it's not a bubble, right? There's no good way of knowing, but yeah, I think that's what I tell to the veterans. Another change that we have seen in the intervening years from the last big bubble, let's say, or in just recent years in general, and I think that has inspired and attracted a lot of younger investors, newer investors, has been the influx of ETFs into investing. with these market highs, with this AI bull, you know, it gets more and more specified and more and more nuanced, but it also, the ETF market is still stays broad as well as it was originally, I think, marketed to investors as a broader way to be invested.

13:35It still has that. What would you say in terms of investing, specifically retail investors and what you're seeing out of the ETF space and how you think about in terms of, is this a stock picking environment? Is this a good place to get into ETFs? How are you thinking about that comparison with ETFs and stocks? Just by top level numbers, the mood right now for ETFs is good. September saw, I think, about 115 ETF launches, which is the highest yet for a single month in 2025. And that's up 55 % from August. That's really good because you have to remember that ETFs are a very long game. As an ETF manager, you're not going to go through all the hard work of getting the paperwork ready and filed and all the marketing pieces done if you don't feel confident enough that the market is in a good place right now.

14:31And I think that if ETF managers are putting out all these ETFs at this moment, then that means that, you know, they're bullish on the market. They think that there's demand for it. And as of now, I think the Roundhill meme ETF that might have made a comeback. I can't remember. Let me double check that real quick. But the Roundhill meme ETF, it was really like the poster child for, you know, the COVID era meme stock boom, you know, and just recently it announced that it's coming back with a new set of meme stocks in it. And I think that with investors, retail specifically, ETFs are a good way to get diversified, especially since, you know, especially if you're worried about a bubble, ETFs might be a good way to see that, okay, if I'm buying the S &P 500, I'm getting so much of NVIDIA.

15:27I'm getting so much of all these other big magnificent seven players in it. I don't really want to own all that. I want to own energy stocks instead because of how well they're doing or something, just throwing this out there. If they want to do that, then you can buy a sector specific or like, you know, something from Invesco or iShares that can help you get that diversification that you can get in a regular index fund at this moment, because it continues to be so overpowered by these tech players. I think in cases like that, it's better. And there's also so many stocks that don't ever make it into the S &P 500, you know, or even some of the other players.

16:12And I think in cases like that, it definitely makes sense for you to get your diversification from ETFs. For example, you have uranium. That's a huge topic right now. And there are a few ETFs that help you track it and help you invest in it, in stocks trading in it, even if you can't directly buy futures in the uranium market, because that'd be difficult for a retail investor to do. I think I am definitely a contrarian investor. I look at markets from a contrarian view. So earlier this year, when everybody was saying that Google's dead, no one's using it anymore, it's the era of looking up things on chat GPT.

16:52Now, we had some interns in our office, and they kept calling it, I'll ask chat. And I thought I miss her. I was like, did you say chat? Who's chat? And they said, No, that's chat. That's apparently they have a cute nickname for it and whatnot. So you know, you can tell the younger generations really excited about ChatGPT and whatnot, but I was curious. So I basically started to look up the same thing on Google and also ChatGPT to try to figure out, you know, is there any benefit to going on this, you know, instead of a search engine to going to ChatGPT? And honestly, I couldn't find all that many differences so far.

17:31Maybe the things that we're looking up were too simple, but a lot the important context clues were missing in chat gpd searches so i was of the opinion that google's going to keep making it google's not going to disappear and fade away because of this uh worry that you know chat gpd is going to take over search engines and for me that ended up being you know an important thing because just a few months after that we saw google indeed recover albeit it was not because of you know it holding its place in chat g in holding its place in the search engine wars, but more so because of antitrust regulations seem to not be affecting it at this moment.

18:11It has, you know, really good business with its cars and whatnot. So I think that for me, that ended up being more of a contrarian trade because so many people were so negative about Google, but I was able to look through the noise and say that, well, I can't really imagine in a world without Google. I'm not sure if you can either, but I think you're just being influenced by groupthink at this moment. So what are the things that you're looking at? I hear from that answer that a lot of it is, or not a lot of it, but in this case, it was narrative driven and a bit of intuitive sense. What else are the things that you're thinking about or implementing when you're looking at the market?

18:57And also I'm curious, how much do you pay attention? Is it equal measure, let's say, earning season and economic data? And how many things are you putting into the mix as you're thinking about things and assessing them? I try to do just about all of them, especially as somebody who tries to have a macro view, 30 ,000 feet view. I try to look at almost all of them. But I think one of the most important things right now is buying the dip and how it keeps paying off this year and how it's spoiling this whole new generation of investors right now. I think there used to be a time where you would wait a much longer duration and you wouldn't get as much reward for buying the dip.

19:43But I think that's completely changed right now. And I think that's going to help keep powering this market to new highs. Just as a stat, you know, after each one day drop of 2 % or more, the S &P 500 has gained over the following week more than 85 % of the time. It posted an average rally of 2.6 % over that duration. But then if you go back to 1950, the S &P 500 usually advances over the following week about 58 % of the time with an average gain of 0.6%. So this new generation is waiting less and reaping more rewards from buying the debt compared to the older ones. And I think that any meaningful declines that we see will be shallow because more investors will be enticed to jump in.

20:31And I think, especially this week, that's what we've been seeing. Friday, markets fell. Then Monday, we saw some investors come in. Tuesday, too. Wednesday as well. And Thursday, there were separate issues regarding regional banks. But I think overall, buy the dip has just completely changed the way markets operate from here on out. And what would you say about the economic data coming out that, you know, many people are categorizing it as being a bit depressed if you're looking at the economic data. Others are pointing to optimistic notes. What would you say about the data that you're seeing coming out?

21:14What would you say about the labor market, the number of rate cuts that probably are coming down the pike from the Fed. What would you say about that in context for investors? It's been so difficult with the economic data recently because you're right. You can have this really optimistic view if you really focus on one data point within this release, or you can have this really pessimistic view depending on what you're looking at. And truly, it's been very puzzling to me. if you just look at you know the job market it's not looking good for young people at all young people can't find jobs you hear from you know people who've just graduated college it's nearly impossible and it's not just that it's hard it's also hard for people who studied really difficult things in school you have computer science those people can't find jobs and then on the other hand there's this flip in the narrative that parents are encouraging their children to study liberal arts because they need people who can have original thoughts, have critical thinking skills.

22:20It's just completely lopsided at this moment. And I think that with the shutdown, the fact that we didn't get a non-farm payrolls report, I didn't like that, personally. We didn't get CPI this week either. We may get it next week. But the Fed might have said that, yes, we're likely going to get rate cuts at the end of October, but I think it's still better for investors to have those data sets so we can look through it and say, okay, maybe the economy is in a more precarious position than we have thought. Maybe we need a greater rate cut or say that no, 25 basis points is right because economic data doesn't look too concerning.

23:04But for me, I think the lack of that has also contributed to investors being on the edge of their seats so much right now because we don't have that confidence. And we really need that confidence because, you know, we love to know what's going on with ADP2. We love to know what's going on with other data sets, but we don't really have that because of the shutdown. And something that I was surprised to learn was also that so many of these private data reports are also benchmarked to the BLS data sets or they get their data from the BLS. So I was surprised that, you know, even they couldn't put out their reports during this time.

23:46So it's like, my gosh, what do I have? Some weird report from some random place I've never heard of before. Or this isn't really giving me confidence that the economy is in a good place right now. But until we see evidence to the other wise, I think that, yeah, the Fed can confidently cut rates 25 basis points. We need it. And I think that that's going to help keep powering the market to new highs. Do you have any takes about data being released if the shutdown is prolonged? Or have you heard any good takes or interested to hear if you have anything further to say about that? I know this is added to the list of like unprecedented part of what makes this unprecedented times.

24:27Yeah, I think honestly, I haven't heard any good takes. And I think that's the most surprising thing for me, because I don't think investors are caring at this moment that we don't have these really important reports that previously our whole monthly schedule was tied around to. You know, I would wake up early to watch the jobs report or CPI. And I think the fact that nobody cares about that at this moment is a little concerning. You know, the lack of concern is concerning. Yes. It's the complacency. It's we're good, you know. And in the office itself, we've been having lots of conversation about what what it's been like to go through an airport at this moment.

25:10I went to personally, I went to like the Social Security office last week and everything's been fine. You know, I haven't had any delays. I you know didn't wait in line too long I didn't have to like go through a random inspection or anything none of that has happened so personally in real life we haven't been able to see the impact of shutdown and I think investors have been surprised by that and that's why I think it's not a really big concern for them that we don't have these really really important reports at this moment. Yeah, yeah, yeah. From an economic perspective, do you have any sense of how long this might last or how long we could do without data?

25:51And then when we do get it, is it going to be from the time that we miss? Do you have any idea of how that works? If we go another month without data points being released, and the data points do get released after, say, that one month, and they're not good. The market would be in for a reckoning. And I'm not saying that it would be long lasting, entirely possible that it ends up being short term. But I think that the market will have to adjust to price that in, efficient markets, right? They'd have to adjust to price that in. And then we can start moving higher again once the Fed steps in and is like, okay, don't worry about this.

26:34We're gonna give you guys great cuts. Everything's gonna be fine. Don't worry about it. But I think that if this economic data this whole time has been brewing under the surface and it's not good and we find that out many, many weeks from now, it's not going to be pretty for the stock market at first. I think there would be some there would be a correction probably. And then after that, we could recover. But until we know that for sure, it's hard for me to worry about it too much. Anything to say like with gold hitting record highs, anything to say about those themes, sectors, points of the market?

27:07I do, actually. So I've been surprised by Gold's recent rally. I used to be a Gold reporter at the Wall Street Journal. And when I used to write about it, my editor and I would say that, you know, if it's above one or two percent, we can easily do a story about it. And it seems like these days, that's almost an everyday move, which is just so bizarre to me. I think that a lot of people are jumping in, especially retail investors right now are jumping in because they're like, oh my gosh, look at gold. I should be diversified. I'm way too heavy in tech. And then I'm seeing this stat being floated around that since the turn of the millennium, gold has rallied way more than the S &P 500.

27:52And I think that's not a full picture of gold. if you look over an even longer duration, gold has actually not kept up with equities. And this whole argument that gold is helping outperform equities is not right. You have to look at a longer duration than just 25 years, because guess what? Most of us are investing for longer than 25 years. And I think that when people don't talk about that, I just, I'm like, No, you're missing half the picture. You're only, you know, the whole joke that share price performance can be whatever you want it to be if you pick your time period correctly. I think it just, it goes into that.

28:36You have to look at it from a longer term perspective. And I think that if you just look at it, it's rally from 2000, you're going to miss, you know, the bigger picture here. And it's that stocks are always going to outperform just about everything. As we're talking about the markets, and you mentioned tariffs at the beginning, what would you say geopolitically, internationally speaking, how are you seeing things in terms of China and tech and Trump getting into some tech names or the government getting into some tech names? What would you say about all of that or anything to add to that conversation?