Latest / Paramount Wealth Perspectives / Cautious Greed: Markets Rise Amid Volatility and AI Momentum - 10/21/25

Transcript

Cautious Greed: Markets Rise Amid Volatility and AI Momentum - 10/21/25 · Paramount Wealth Perspectives

• 0:00
  Chris Coyle: Intro song
• 0:11
  Hello everyone.
• 0:11
  Welcome to Paramount Wealth Perspectives, your go-to podcast for the latest updates on global markets and current economic events.
• 0:19
  This is your host, Chris Coyle.
• 0:21
  I am the market director and an advisor here at Paramount Associates Wealth Management, and today I'm joined by Paramount's, chief Investment Officer Scott.
• 0:30
  Alright, Scott, let's start with a recap of last week.
• 0:33
  It felt like the market got its footing back after some midweek volatility.
• 0:38
  How did things shape up?
• 0:39
  Yes, sir.
• 0:40
  We saw a nice pop after those regional bank worries on Thursday.
• 0:44
  Markets rebounded into the weekend.
• 0:47
  The s and p 500 gained about 1.7%.
• 0:50
  Nasdaq 2.1% and the Dow was up about 1.6%.
• 0:55
  It was a clear by the DIP response, which continues to be the dominant theme, right?
• 1:00
  Those banking headlines stirred some short-term panic.
• 1:03
  Indeed, the news from Zion's Bank and Western Alliance about fraudulent commercial loans, definitely spooked investors, but big bank earnings had already painted a healthy picture.
• 1:15
  Strong loan growth.
• 1:16
  Steady credit metrics and healthy capital markets activity.
• 1:21
  Once it became clear, the regional bank issues were isolated.
• 1:25
  Buyers came right back in, and earnings overall still solid.
• 1:29
  They do about 12% of the s and p 500 has reported and roughly 86% have beaten estimates.
• 1:37
  We're tracking 8.5% earnings growth for the quarter, the ninth, straight positive year over year period.
• 1:43
  Revenues are up.
• 1:45
  6.6% and the early trend is resilience, especially in financials and tech, even with all the macro noise.
• 1:55
  But tech's still doing a lot of the heavy lifting, correct?
• 1:58
  Absolutely.
• 1:59
  AI continues to be the strongest secular story out there.
• 2:03
  We saw TSMC raise full year guidance.
• 2:06
  Oracle defend its margins and a MD pop on new GPU demand from Oracle Cloud.
• 2:13
  Even Walmart, believe it or not, got into the AI mix partnering with open AI on instant checkout.
• 2:20
  The AI investment cycle just keeps broadening data centers, chips, cloud infrastructure.
• 2:26
  It's an arm place.
• 2:27
  So if earnings are fine and AI is still fueling the narrative, what's keeping investors on edge?
• 2:34
  Two things in my mind.
• 2:35
  Sentiment and positioning.
• 2:37
  There's a lot of nervous optimism.
• 2:40
  On the one hand, you've got resilient retail inflows.
• 2:43
  Retail traders have been net buyers for seven straight weeks.
• 2:47
  On the other, institutional investors are stretched long according to recent funds.
• 2:51
  Surveys, cash levels are at the lowest level since last December, and equity exposure is at the highest since February.
• 2:59
  So if there is a shock positioning could amplify volatility spot on.
• 3:04
  You've got high positioning, narrow leadership, and complacency showing up in volatility markets.
• 3:10
  If the VIX volatility level falls back below 14, that's usually when markets get surprised.
• 3:17
  So while the setup isn't bearish, it may be fragile.
• 3:20
  A data surprise, a fed misstep or geopolitical flare up could unwind risk quickly, but we're still seeing a buy the dip mentality hold.
• 3:31
  Yeah, that's the thing.
• 3:32
  Even the regional bank scare only lasted today.
• 3:35
  The strength of the corporate balance sheets and the lack of alternatives as cash yields are falling again, keep drawing money back into stocks until something breaks that feedback loop.
• 3:47
  Dips will continue to be bought.
• 3:49
  Let's talk policy for a moment.
• 3:51
  We've got the fed meeting next Wednesday.
• 3:53
  What are you expecting?
• 3:55
  Well, the market's fully priced for a 25 basis point cut, which would be the third of this easing cycle.
• 4:02
  Powell will likely emphasize caution.
• 4:04
  The Fed wants to keep easing conditions without reigniting inflation.
• 4:09
  The Fed's blackout period's now in effect, so we'll get all the clarity we can from next week's statement and press conference.
• 4:16
  And the data vacuum from the government shutdown.
• 4:19
  Is that still a problem?
• 4:20
  Huge problem.
• 4:21
  We haven't had a clean read on jobs, retail sales, or producer prices.
• 4:27
  In weeks, we hear some tidbits from a DP on jobs and payrolls, but the only major data.
• 4:33
  We'll get this Friday is September's consumer inflation report, which has to be released for social security reasons.
• 4:40
  Markets expect a modest 0.3 headline and a 0.2% core print.
• 4:46
  Anything hotter than that.
• 4:48
  Would complicate the easing narrative heading into year end.
• 4:51
  Let's pivot abroad.
• 4:52
  The US China situation was noisy again last week.
• 4:56
  Where do things currently stand?
• 4:58
  The big one was China's rare earth export curbs.
• 5:02
  It spooked supply chains and had echoes of 2019, but by the end of the week, things calmed down.
• 5:08
  The US Treasury secretary spoke with China's vice premier and they'll meet again in Malaysia to prep for the potential Trump Z Summit in South Korea later this month.
• 5:20
  Both sides seem motivated to dial it down.
• 5:23
  Markets like that, so it's tense but not escalating, right?
• 5:28
  It's a push and pull dynamic.
• 5:30
  Political posturing and economic reality in the background, even Trump's language softened a bit saying a hundred percent tariffs.
• 5:38
  Aren't sustainable.
• 5:40
  That was enough to take pressure off risk assets late in the week.
• 5:44
  What's all on the docket for this week?
• 5:47
  Well, the big three R, I mean, the Fed decision is still looming for next Wednesday with a 25 point cut expected.
• 5:53
  We have Friday's consumer inflation report.
• 5:56
  It's a key input before the next fed meeting, and there's an earning floodgate this week, nearly 90 s and p companies report, including Tesla, Netflix, gm, ge, Coca-Cola, Proctor and Gamble, Ford and Intel.
• 6:11
  It's a full spectrum from heavy industry to consumer to big tech.
• 6:16
  So we'll get a strong read on overall momentum.
• 6:19
  Time for the lightning round.
• 6:21
  We doubled the questions this week because, well, there's a lot to unpack.
• 6:25
  Ready?
• 6:26
  Let's do it.
• 6:27
  What's the single biggest risk to markets right now?
• 6:30
  A hawkish surprise from the Fed.
• 6:33
  If Powell hints that inflation's not under control, you'll see a yield spike and a quick five to 7% equity pullback.
• 6:41
  Where's the best opportunity in quarter four?
• 6:44
  In my mind, industrial automation and AI infrastructure, semis, power equipment, and select cloud names also short duration, high grade credit still pays you decently with manageable risks.
• 6:57
  Any sectors you'd completely avoid.
• 7:00
  Well the regional banks, until we get clear data on loan quality, also long duration, utilities rates may fall, but the debt load there still worries me.
• 7:10
  How do you see consumer health heading into the holidays?
• 7:14
  Still solid Chase card data shows spending up 0.7% in September.
• 7:20
  Upper income consumers are doing the heavy lifting, and we haven't seen meaningful credit deterioration yet.
• 7:27
  W in your opinion, will inflation pick back up?
• 7:30
  Not dramatically.
• 7:31
  Uh, goods inflation has picked up and services and housing are definitely sticky.
• 7:37
  I think we end the year with core CPI or consumer inflation around 2.7%, but that is above the fed's target is the gold run.
• 7:46
  Sustainable gold's up 25% since summer.
• 7:50
  As long as real yields drift, lower and geopolitical stress stays elevated.
• 7:56
  The trend holds I trim into strength, but not abandon the trade altogether.
• 8:01
  If you are in, how about oil?
• 8:03
  Three straight down weeks?
• 8:06
  Yep.
• 8:07
  Crudes around$57.
• 8:09
  Supplies fine.
• 8:10
  Demand soft.
• 8:11
  Unless China or OPEC does something dramatic, I think oil grinds sideways into year end.
• 8:18
  Are we in an AI bubble?
• 8:20
  You can make an argument that parts of the AI buildup are trending into bubble territory, but I'm not in that camp right now.
• 8:28
  It's not 1999.
• 8:30
  There's real revenue and infrastructure behind it.
• 8:33
  Semis, power Cloud, it's just a question of timing and valuation discipline.
• 8:39
  Investors need to separate AI theme.
• 8:42
  From AI fundamentals, these companies have real cash flows for CapEx, and they're even buying back stock if the economy slows.
• 8:52
  What's the Fed's next move after this cut?
• 8:55
  Well, I would think that there would be another 25 basis points in December.
• 8:59
  After that, I do think that they pause and watch the labor data.
• 9:03
  They don't wanna burn all their ammo before 2026.
• 9:07
  What are bond investors missing right now?
• 9:11
  They're underpricing the stickiness of inflation.
• 9:15
  Real yields might not fall as fast as people expect, and there is some risk still to duration.
• 9:22
  What's your take on small caps?
• 9:24
  Well, small caps are cheap, but tricky.
• 9:27
  If the fed sticks, the landing and grows stabilizes, they could rip for a minute.
• 9:33
  But right now, funding costs still pinch.
• 9:36
  So selective exposure only, and I am not on the small cap train.
• 9:41
  What's one contrarian idea for the next six months?
• 9:46
  It's not contrarian to me because I've been in this boat, but Europe valuations are discounted.
• 9:51
  The ECBs done hiking and earnings expectations are so low.
• 9:56
  They're low enough to beat.
• 9:58
  Any major bright spots in housing, well sentiment's improving.
• 10:03
  The NAHB index jump from 32 to 37.
• 10:08
  Builders are cutting prices and and they're finding some demand.
• 10:12
  If rates do drift down, housing stabilizes faster than people may think.
• 10:18
  Our retail investors driving this rally.
• 10:21
  Well, they're definitely participating seven weeks of net buying, but the market's still institutionally led.
• 10:28
  Retail's just adding fuel to the momentum right now.
• 10:31
  What is your favorite defensive play right now?
• 10:34
  Well, on paper, people will think high quality staples with pricing power and strong balance sheets.
• 10:41
  However, I am not a believer.
• 10:43
  My defensive plays are more in the infrastructure space.
• 10:47
  How do you read the global picture?
• 10:49
  After the IMF meetings, the message was resilience with.
• 10:53
  Fatigue.
• 10:54
  The world's adjusting to Trump era tariffs as the new normal, but no one's collapsing.
• 11:00
  So growth is slowing, but not stopping.
• 11:04
  What's one metric you are watching more than usual?
• 11:08
  Real time jobless claims estimates the sell side has'em around 217,000 and any sustained uptick would signal labor softening.
• 11:19
  In your opinion, is crypto relevant again?
• 11:23
  Well, Bitcoin's off its lows, but still consolidating.
• 11:26
  It's behaving more like a risk asset than a hedge.
• 11:30
  The next leg really depends entirely on liquidity, not the hype.
• 11:34
  Last one.
• 11:35
  If you could summarize market psychology in one phrase right now, what would it be?
• 11:41
  Well, one phrase, I guess I would say cautious greed.
• 11:45
  People know risks are building, but they can't resist the momentum.
• 11:50
  Perfectly said.
• 11:51
  Alright, we'll wrap it up there.
• 11:53
  Sounds good.
• 11:54
  Well, next week we got the Fed and a tidal wave of earnings.
• 11:57
  Plenty to digest.
• 11:59
  Appreciate it, Scott, catch you again in two weeks.
• 12:01
  Thanks Chris.
• 12:02
  See you then.
• 12:03
  I also want to thank our audience for tuning in and remember to please submit your questions via email to general at Paramount A-S-S-O-C.
• 12:13
  Dot com.
• 12:14
  For now, stay informed.
• 12:16
  Stay ahead and join us next time for more key updates shaping the global economy.