00:00 Speaker A
this potential $2,000 tariff dividend, that could be another tailwin. How how do you see that, let’s say that plays out. What would that mean, Chris know for, I mean, through the lens of, what would it mean for the consumer earnings, the market? How do you try and think through that?
00:19 Christian
Yeah, one of the things that we’ve been worried about is this K-shaped recovery. And everybody’s talked about it. And what we’re seeing is that both legs of the K are getting a little bit thicker. Uh meaning more people are doing well because of the wealth effect in equities. Um and then more people are struggling because we’ve seen wage growth, particularly at the lower end of the wage spectrum, um start to decline. And as inflation is sticky, I think that will have a really impactful um impact on the lower-end consumer because of how much they have to spend on some of these day-to-day necessities. So that $2,000 dividend check will be I think a boon for them. Long-term, I think that’s probably not great for the economy in terms of what it does to our debt levels. Um but for 2026, that could certainly be helpful.
01:03 Speaker A
You talk I I know you talk about that sort of K-shaped economic reality, the low activity labor market, and the risk you point out of what that could mean for the unemployment rate. How much of a risk is that, Christian, in your opinion?
01:15 Christian
Uh, I think it’s a big risk. And when we think about 2026 in the big risks in the uh in the equity market and certainly in the economy at large, to me, it’s the labor market. We’re seeing companies um slow down certainly their hiring and firing practices. And what that does is it makes the unemployment rate unusually susceptible to surprises if we get a spike in layoffs like we did last month, that’ll go right to the uh to the unemployment um rate because you don’t have any uh cushion from incoming job growth.
01:52 Speaker A
Let’s bottom line this. Where do I want to put my money? You say, stay home. Despite higher valuations, the US is the place to be.
02:02 Christian
Um I think it is because of um the myriad of tailwinds that we see in the US economy. To me, that means the US economy itself will broaden out relative to this year, and that also implies a broadening of S&P performance.
02:18 Speaker A
So, if I want to stay stay in the US, let’s get more specific. W- w- which sectors do I want to overweight, Christian?
02:24 Christian
Uh I like right now financials, um because of bank deregulation that I think we’ll see in 2026. Um healthcare is, you know, kind of much maligned because of these regulatory concerns. Um but that’s a nice cheaper AI adjacent um area to play because of the impact that you might have on healthcare. And then I think about all these data centers that we’re building and how you have to power them. Um so energy and energy infrastructure, I think are other ways to uh to play the AI theme.
02:59 Speaker A
Do you in terms of the health the healthcare sector, the health sector, do you typically would say, okay, I’m going to move there, valuation, safety, play defense. Is that still the reason people move to that sector or or actually no, it’s like something’s changed with GLP-1s, people looking for growth. Are the reasons people move into healthcare the same?
03:19 Christian
Um I think today it’s it’s a bit of everything. But what you point out is what I’m picking up on as well is the ability of AI, the ability of these generate of of uh you know, some of these technologies to speed up the process of developing drugs, custom drugs, all of those things, I think will help uh be a good tailwind for the healthcare sector.
03:39 Speaker A
Very last one. So those are the sectors you like. Are there sectors you’d say, listen, I’d probably underweight in 26?
03:47 Christian
Uh a little concerned about the consumer for what we talked about in terms of that K-shaped recovery. Now, it’s tough to tell exactly, you know, how that will all even itself out and clearly the consumer sector is really, really broad. Um but we are uh quite wary of the lower end consumer at this point.
04:06 Speaker A
The lower end. All right, Christian, always great to see you. Thank you, sir.
04:10 Christian
Thanks for having me.