AI is the Big Story Amid Tariff Uncertainty, Says Keith Lerner

Market Rebound and Tariff Impact

• 📈 The market experienced a positive week with the S&P 500 and Nasdaq showing gains, driven partly by de-escalation of tariff uncertainty.
• 💡 This de-escalation reduced the market's pricing of a recession risk from 60% to approximately one in three.

The Resurfacing AI Theme

• 🧠 Keith Lerner highlights Artificial Intelligence (AI) as a major story that was overshadowed by tariff concerns.
• 🚀 Tech spending remains robust, with forward earnings estimates for tech and communications (40% of the market) continuing to rise.
• ⚠️ Even if the economy slows, tech spending is expected to remain healthy, making AI a re-emerging theme.

Bond Market and Fiscal Policy

• 📊 Bob Elliot discusses the bond market's reaction to potential fiscal policies, noting a shift towards more expansionary policy.
• 💰 The current reconciliation bill could expand the US government deficit by 1-1.5% of GDP, indicating a move from contractionary to stimulative fiscal measures.
• ⚠️ The bond market may not yet fully reflect the magnitude of this policy shift.

Consumer Resilience and Retail Earnings

• 🛒 Upcoming retail earnings from companies like Home Depot, Lowe's, and Target will be significant next week.
• ✅ One portfolio manager believes the consumer will remain resilient despite ongoing tariff impacts.