2026 Midyear Outlook

This week on "Cappal Ideos" we're diving into our mid-year outlook for 2026. With equity portfolio manager Martin Jacobs and bond manager, Chit Perani. They share their perspectives on AI, interest rates, and the forces that could impact markets in the year ahead. This episode is adapted from a recent webinar. I'm your host Will McKenna and let's get into it. Martin, we have so much to cover. I'd love to just start with you. If you can give us your big picture outlook on the markets and economy, where are we today and where do you see us going from here? Well, thanks Will. It's a pleasure to be here. I think that there's always things to worry about in the equity markets. Today is no exception. Certainly for most of the year, we are very concerned about activities in Iran. Our hope is that we're now at the end of that journey, but that's something that we'll continue to watch. Here at home, I would have to characterize the consumer as a mixed story. On the one hand and the aggregate, consumer spending looks fine. But we know that certainly for the lower income and middle income consumers, they're facing affordability challenges, no doubt sticky and persistent inflation. It has continued to be a big part of that as well as very high rates for mortgages for instance. And then on top of that, we continue to struggle with the tariffs that were put in place last year, which not only has contributed to inflation, but as we meet with particularly industrial manufacturing companies, they continue to struggle from a margin standpoint. And also they are all looking at somehow retooling their supply chains. And then if that's not enough, then we've got this incredibly polarized political backdrop as we face the midterm elections later this year. Now having said that, as you mentioned, markets are doing well. And I think the number one factor is this booming AI economy. Hyper-scaler spending is up 80% this year, 750 billion. It was up 73% last year. And so there's been some great work that I've seen from empirical research partners, where they've peeled back the stocks that have really been contributing to the strong performance. We've seen not only this year, but the last few years, and they've identified these 68, what I call magical AI stocks, if you will. And those stocks represent 42% of the market cap of the S&P 500 today. And they've been compounding earnings in the mid-30s, whereas most of the rest of the companies outside of that group have been growing their earnings roughly mid-single digits. So this is really the singular nature of what's driving the market today. And the beneficiaries are certainly at the top of the list, we've got the semiconductor sector, which went from 6% to 7% of the S&P just three years ago to 19% today. And some of those companies have literally been hyperbolic. We had micron report earnings. Their gross margins have gone from 39% a year ago to 85% to 86% this year. And their stock has basically increased over 300% this year. And so that's kind of a poster child of what we're seeing out there in the AI space. But along with that, you've got storage companies like Western Digital and Seagate, you've got companies that participate on the power side like Constellation Energy or Caterpillar who make both backup and prime power that go into the AI data centers, as well as a number of others. You've got all the folks that supply the semiconductor equipment companies like A&Eplide Materials and ASML. So it's a long list. Now it's interesting as we reflect. If you go back to say 2011, Mark Andreessen of Andreessen Horowitz was very successful. Private Equity Venture Capital firms. He famously quoted this notion that AI is eating the world. Software is eating the world. And today that's been totally flipped on its head. So basically, AI is not only eating software, but is eating everything else in its way. And so there's a lot of AI victims out there as you will. There's consulting, there's cybersecurity, wealth management platforms, office outsourcing, payments, insurance, logistics. And then these platform companies like Uber and DoorDash, bookings.com, Airbnb, and so on. And so as we look to invest outside of the AI sphere, if you will, it's been difficult. And you've had to be very selective. And so when I sum that all up, I am cautiously optimistic. Because on the one hand, where a lot of the performance has been so concentrated, at the same time, many of us believe that artificial intelligence will be the most significant technological development of our lifetime. And so that is not lost on all of us. And we see easily $3 trillion of spending going into AI data centers over the next few years. And that will continue to bode well for the compute companies, the infrastructure companies as well. But at the same time, we're mindful that this is definitely a market that is driven by momentum. And that brings its own set of risks around volatility. There certainly will be more scrutiny around the return on investment of all of this AI capital. And that in turn will also probably contribute to some volatility. And our mandate is really a dual mandate to not only drive superior, absolute results relative to the benchmarks of our funds, but also to be mindful of risk via diversification. And that's a challenge in what is a highly concentrated single statement market today. But that's our mandate. Well, that's a great start. And there's so many things I want to follow up on there, which we'll dig into. That whole idea of how do you achieve diversification when the market is so concentrated? And you like some of those companies that are in that concentration. To our audience, magical 68, you heard it first here. But don't be surprised if you hear more about that. That's a great start, Chip. A similar question for you as a bond manager. What's your outlook on the macro environment and maybe including things that are up your alley like inflation, interest rates and so on? Yeah, first of all, thanks for having me here. I'm sensing a theme from you last year. I joined you here after the tariffs this year, after the war and a regime shift at the Fed. So I'll be-- You're our crisis guy. Yeah. When there's a problem we call Chip. I'm looking forward to the next calamity with you. But for now, the macro environment is quite interesting, right? Because despite all the headline risks, growth is indeed resilient. And I do expect that growth in the base case will be in line with trend. And when I say trend, it's like 2% GDP growth give or take. But my bigger focus is on the growing imbalances. There are at least a few. And Martin spoke about some of these. So we all know about the K-shape economy, which is very prominent in the headlines. It is the case that the top desial of income earners are lifting spending to a greater degree than in the past. Whether that's equity, market, momentum, or just wage growth. Whereas the bottom income cohorts are static, phenomenal wages, declining in real wages, and drawing down savings. So that's the first part of the imbalance that may have struggled persisting, especially in the face of equity market volatility. Second, investment is highly bifurcated. Again, Martin talked about this. But with AI CapEx spend and AI linked spending, generating roughly a 50 basis point contribution to GDP, maybe higher, depending on your assumption. Once you strip that out, the rest of the business environment in terms of CapEx is quite sluggish. So how far, how long can that persist? Because to grow in that level of contribution, you have to have disproportionate growth every year in terms of that spend. Even the labor markets imbalanced. Over the last couple of years, the concentration of job growth has been predominantly in two areas. First is healthcare services. Second is leisure and hospitality, which is more cyclical. And so the takeaway is that the underpinnings for growth are resilient. And I'm not fearful of an imminent collapse in growth or a pronounced slowdown. But I do think that these imbalances are underappreciated by risk markets, both equities and fixed income. So let's talk about inflation. We are unlikely to see core PCE or CPI get close to the Fed's target anytime soon. And we all know the reasons for that. Whether it's tariffs, whether it's the energy price shocked, resilient consumer, and even some AI CapEx spillover. That's feeding into PCE. But the good news for bond investors is we are seeing some pressure ease in terms of headline inflation with the close to 20% drop in energy prices month to date, which could ease any pass through to core goods inflation. Second, inflation expectations are pretty benign. You look at the tips market. What's priced in in terms of long run inflation expectations has been stable to even lower since the start of the year, depending on what part of the curve you're looking at. Third, two thirds of our economy is consumption and wages are steady. And as I mentioned before, real wages are declining. Savings are going lower. And so long as that's the case, it reduces the possibility that inflation, which is currently more supply side driven, will transition to the risk of a demand driven inflationary factor. And so all of this tells me that while I do expect a gradual disinflation trend over time, it's likely that if we don't see soon enough progress, the Fed might hike interest rates. Now, we already have that price to the market with just shy of two hikes priced by the end of next year. So there's some margin for error. Yeah, that's great. You both mentioned the term resilience and Martin, you talked about this idea of the magical 68, but certainly the AI. momentum really driving a pretty narrow market. We have seen markets being incredibly resilient, given everything that's going on in the world, not just in the US, but outside the US markets are doing even better and in emerging markets. Do you expect that to continue? We started to worry a little bit about frothingness. We are seeing volatility kind of rear its head a little more recently. How are you thinking about the state of the markets we're in today and how you're navigating through that? - Yeah. Well, the resilience theme I think has several components. I mean, first, when you look at the US, normally when you've got a big oil price spike, you would expect to see a lot of economic calamity here in abroad. - Okay. - But in the US, over the last 15 years, we've benefited from this shale revolution. So as a result, we're now an independent, basically self-sufficient energy provider. And so it has less of an impact from that standpoint. Also, over the last 30 years, our oil intensity across our economy has basically been cut in half. So the lesson there is that we're much more resilient, relative to oil price shocks. And I think there's some element of that that's true both in Europe and Asia as well. We saw a lot of demand elasticity, for instance, out of China that really helped to mute what otherwise would have been a much, much higher oil price. The US consumer, as much as at the low end, is suffering from affordability. - This kind of case-shaped economy. - Yeah, exactly. And that cohort is actually very healthy, fully employed, and also benefiting from the wealth effect that's going on in the markets. Another factor I'd throw in there is that we've had a great improvement in productivity since COVID. Prior to COVID, productivity growth ran about 1.5% a year. And currently, it's been running about 2.1% per year. And that should continue as we continue to see the benefits of AI more broadly across- - This is the quad factor. - Exactly. - Exactly. And then lastly, I would say, and probably the biggest factor is just this boom that we've seen in capital spending, which first is being driven by this big pickup in AI spending, but it's broader than that. It's in semi-conductors, it's an infrastructure. It is in on-shoring by a lot of companies that are retooling their supply chains. - Yeah, and so when we look at the mega project, backlog, that's pretty broad across a lot of different parts of the economy, and that continues to provide a lot of tailwind for continued economic growth. And this continued resilience thing that we're seeing in the markets today. - Okay, so huge tailwinds, we're going to dig into some of the specifics of that and where you're finding specific opportunities. All right, shit. Crystal Ball time, I'm going to pin you down here. I know we have a raid steam thing steeply about this that you're a part of. It started the year again. Things have changed a lot. It was a four-gong conclusion, I think, that we would be cutting rates this year, but now with inflation on the rise, we've now got Kevin Warsh in the chair. That seems to be going in a different direction. How are you and the team thinking about that? And where do you see things handing out by the end of the year and beyond? - Yeah, the Fed has certainly been a hot topic for the bond markets this year, given the recent change in leadership. And Kevin Warsh in his first meeting and his press conference was certainly interpreted as way more hawkish than the markets anticipated. For at least a few reasons. The first is he made price stability central to his messaging, even reference the fact that inflation is above target, for has been above target for more than five years. Second, he backed away from forward guidance and decided to not submit a dot plot projection, which was expected by the markets, but it simply validates that the Fed reaction function is less certain going forward. And third, he announced some independent task forces that would do a range of things, such as analyze how the Fed communicates, how they use their balance sheet, how they measure the economy, and all these potential changes create uncertainty that injects volatility in the market. Now, what's not uncertain is that the emphasis will shift more towards the data, which means that upon shifts in the data or surprises in the data, we're likely to see more treasury market volatility. And as a result, as you alluded to, we went from pricing in two cuts by the end of this year, about a handful of months ago to now pricing in a little bit more than one hike. And in my view, I think that represents a market that is balancing between a couple scenarios. The first scenario is one where the Fed is patiently waiting as they monitor how the data evolves and to make a decision whether or not monetary policies tight or not. The other scenario is in the absence of any improvement in inflation or weakening in labor market data, it's a Fed that's going to re-engage into a hiking cycle. I fall personally into the former camp. I do believe that the Fed is going to want to remain patient and see how the data evolves, particularly whether inflation, which we know is higher and stickier this year, has a little bit more of that supply side effect as opposed to demand-driven inflation and whether labor markets which have witness this low-higher, low-fire dynamic, whether that creates enough tightening where the unemployment rate itself falls or wages start to show upward pressure. Either those scenarios which I'm playing close attention to would make me change my view, but for now I believe that they'll remain patient. Any credence to the idea that any change would come after the midterms in November or. I think it's quite clear with this FO1C that they're going to be honed in on the data in not letting political decisions drive their views. Got it. That's a great point. Okay, Martin, let's dig into some of this specific investment opportunities you and the team are focused on. You've been talking so far about obviously the potential opportunities all around the AI theme and also interested in hearing where we're finding things outside of that, whether that's the picks and shovels that are suppliers or the, I've heard them called the AI Roadkill where we're kind of left for dead. But take us into your thought process where are you and the team finding those interesting opportunities? Yeah, well, I think the AI participants are well known and as I mentioned before, this group has a lot of momentum behind them, so as much as it feels uncomfortable, that is a group that is really well positioned for this continued spending boom that we will see for many years. And then that brings us to the question around these AI victims, if you will. And with that, our analysts are taking a hard look at a bunch of different areas because we know that there's definitely been some indiscriminate selling in those areas. And so maybe let me share a couple of examples that look interesting from our standpoint. One might be a company like, say, MasterCard. Like this is a quintessential deep-moat company with powerful network effects, global scale, and strong long-term growth from the continued, just digitization of money everywhere in the world. Their network is difficult, if not impossible, to duplicate. It provides both sides of the network integrity and reliability for both consumers and merchants. And so there's some concerns around stablecoin and AI disruption. But a company like that, for instance, looks very interesting to us. Another example might be a company like Uber. Uber falls in this class of companies that are what we call platform companies like Airbnb, bookings.com, DoorDash, those type of companies. And they've all come under a lot of pressure. And like MasterCard, Uber has this very competitive two-side network between drivers and consumers. They've got this advanced real-time algorithm that is very efficient. And it's really unmatched in terms of the network and the user experience. As a business where demand really is only limited by the number of drivers. And we're going to see a lot more of these autonomous fleets come into the marketplace that are partnering with Uber. So a company like that looks very interesting. I'll leave it there. But those are a couple of good examples. And a very dynamic CEO. Absolutely. A bit of very smart. And they're doing interesting things. Yeah. This is the autonomous piece of that coming to bear at Uber anytime soon. Or where do they stand on the-- I'm a big fan of Waymo here in Los Angeles to use that all the time. But where are they on the autonomous piece? So they have a partnership with Waymo in varying degrees. But they are also partnering with a list of 14 different autonomous vehicle startups because their mentality is, we're not sure who exactly is going to be the winner. But all of these companies have good technology and processes. And so we want to make sure we have a partnership with all of them. And as I mentioned before, the only limitation on their growth are really drivers. And so as these new fleets come into the marketplace, it only helps to enhance their growth profile. And take us a little deeper into this idea. How are you thinking about achieving that mix of, yes, we want to be engaged in this important theme, but also diversify beyond that? Is that a conversation among the team? Are you really looking for those opportunities? You mentioned a couple of examples here. Are there other areas where you all are pursuing that kind of diversification? Yeah. Well, it's a tough task for us. Because just by virtue of the 40 act, we can't even hold a lot of these companies in the size represented in the various indices. And then in addition to that, obviously, there's a level of diversification that we would like to have across our funds, particularly in our growth in income funds and income funds. And so that continues to be the character of the building blocks and the process behind which we build these portfolios. So we have to find that narrow window of our-- opportunities that are not AI companies that are in the potentially AI roadkill camp, if you will, but are unjustifiably down. And then this whole third category where there's interesting companies that exist just because they have some great idiosyncratic type of opportunity. So companies like a Starbucks where we have a new fantastic dynamic. Like it's a real, that's turning the company around or a company like GE Aerospace, which operates in the commercial Aerospace Engine market. And they have also a dynamic CEO that's turned the company around and they participate in a great market with the leading market position. So those are the types of things that we look at. And so we're always kind of making sure that we're kind of picking ideas from both baskets to AI basket as well as the non-AI basket. And then once again, right now, very intriguing is this whole basket of companies that fall in this AI victims basket as well. Right. And with GE Aerospace, I've heard the phrase, you can't vibe code a jet end. Yes, that's right. You know, the whole idea of the physical economy that is sort of immune from AI in a way. Let's go over to you, you know, I think similar kind of question. Maybe start with credit markets broadly. One of the themes there that you are interested in and focused on. Sure. You know, there's a lot to unpack here. But when I think about opportunities and fixed income credit markets, there are a few observations that are particular to today's environment that formulate where I find value or I don't. So the first observation is, yes, of course, valuations are tight across the board. But if you think about a company and the investments as a capital structure, they're also very compressed across that capital structure. So equity risk premium, if you flip the PE ratio into the earnings yield compared to bonds, it's at historically low levels, looking back over the last 20, 25 years within bonds. If you look at high yield spreads, the credit risk premium that you earn from buying high yield bonds versus investment grade bonds, that's also at a historically compressed level over the last couple decades. Same thing within investment grade, if you look at triple B rated bonds versus single A. So the point that I'm making here is that moving up in quality is a cheap pitch currently in the market. That's observation number one. Number two, it's interesting that the tight credit spreads that we're seeing, yes, it's in part strong credit fundamentals. But it's also a byproduct of the higher nominal yields that we've seen bringing in yield based buyers. And so the takeaway there is focusing on credit risk premium in bonds where we're being adequately compensated for the credit risk as opposed to just liking the all in yields. And the third observation, it's not necessarily a new one, but with the growth in flows into some passive fixed income strategies, you're seeing more money channeled into a narrower universe of eligible investment grade credit. And so for us, that means we're finding more value that lives outside of the index, especially given our ability to go deep and broad across markets. So those three themes permeate the way we think about sector allocation and security selection. Can you just briefly explain a little bit more? So moving up in quality, give us a sense of exactly what you mean by that and the mechanics of that. Yeah. So historically, if one expected a certain number of basis points to go from a triple B times, a triple B type risk or a single A type risk, or in some cases, single A corporates versus triple A rated securitized product, which is a sector that we like and I can get into more detail. You would expect proper proportionate risk premium for moving down that capital structure or that quality curve. Nowadays, it's compressed to anywhere from one to two standard deviations tighter than historically has been. So as an investor, if you're defensive on the market due to valuations, you have simplistically two options. Either you hold cash and wait for a better entry point or you could take advantage of the attractive yields but move up in quality because it increases-- A higher rated bond. Right. A higher rated bond is less economically sensitive. It increases the resilience of the portfolio. And it gives you some risk of dry powder in case you do see volatility and you can reengage further down the quality spectrum. Got it. Yeah, so that's what the cheap hedge comes from. Martin, you know, it appears that we're in a hot IPO season. Yeah. Not just with SpaceX, but I know others coming down the path. You've been around this business for a long time and seen other periods like this. How are you thinking about this IPO seasons? Maybe start with SpaceX and think about some of the others coming. Yeah, it's an interesting market for IPOs, both in terms of magnitude as well as the number of new issues that are coming up. And now with SpaceX, which is already a $2 trillion market cap company, we've still got an anthropic and open AI. So those are two of the three big model builders that potentially each could come to market at trillion dollar plus valuations. And so this is the environment that we're seeing. A lot of people are worried that that will move funds out of the current market into these new hot IPO issues. People selling other holdings exactly. Exactly. Right. On the other hand, there's more than $8 trillion of money market cash sitting on the sideline that potentially could move into a lot of these new issues. Historically, when IPO markets have been very hot, it typically is the potential sign that we're nearing a market top. That's what I was wondering. I think that's what our crowd is asking. So that goes along with the concerns around momentum and higher valuation levels. And all of those factors are certainly something that we look at and we are vigilant about trying to mitigate some of the downside risk associated with that. And we look back to the fact that a lot of us were around during the tech bubble in the late 90s and there's a lot of parallels there. But there's a lot of differences as well. There's some stark contrast between the level of profitability underlying these big mega-cap companies and what we saw back then as well as the level of debt, which was much more abundant back in the those days. Yeah, debt fund is exactly. Global cross. Yeah, in places like that. Yeah, so it's a much healthier market financially if you will despite all the concerns we're seeing around private credit. So these are hard questions, but these are kind of discussions that we have every day and our investment calls to figure out what the right strategy is. I like how you framed it, though, as it's an idea of a dual mandate. In other words, what we're trying to do is participate in those exciting themes in that potential upside-down while also trying to protect by diversifying into other areas that may not be as fraughty. Yeah, given our approach. Shit, I want to come back to you because you covered credit at a broader level, but take us a little deeper into some of the other parts of the market, the sectors where you and the team are finding interesting opportunities. Sure. So anchoring off the themes that I mentioned earlier and starting in the corporate bond space. First off, I've been focusing on corporate bonds that are less economically sensitive. Given some of the valuation concerns and imbalances that I talked about earlier, examples would be bonds in the pharmaceutical space, select insurance names, utilities as well, essentially consistent with that up-and-quality theme. However, there's a part of the corporate bond market that's often talked about, which is this sizeable issuance of AI linked that hyper scalers, data centers, etc. Now, I often ask the question, whether this represents an opportunity or a risk, and the answer is yes. So the reality is the growth has been tremendous. And with that growth, it's important to know that the market is not a monolith. When we look at different deals where highly selective on isolating unique credit risks in the deals, the potential for releasing risk, if it's the data center deal that has a finite term of the underlying less ease. The residual value risks of the data centers, to the extent that we're exposed to that, as well as embedded options, because a lot of these structures are somewhat unique and bespoke. Once we adjust for all of those risks, we are finding value selectively in the space. And so that's also been a growing part of the portfolios in addition to that defensive theme in corporate space. Moving away from corporates, there's a lot of value that I find as well in securitized credit sectors. Also consistent with the up and quality theme, where we look at highly rated securitized product backed by diversified range of collateral. So think auto loans, not agency commercial backed, residential mortgage backed securities, CLOs, even aircraft finance and some other types of collateral, where the common theme is that our analysts are comfortable with the underwriting. They're comfortable with the structured self and the structural protections. And of course, we like the price. And so that's a great segment of diversification to the portfolio that also provides yield, where we think that we're getting paid an adequate credit risk premium. It's not just the all in yields. And speaking of unique bond structures, even our munit team is finding value across tax exempt space in structures that have more nuance, like housing packs or housing back bonds that have amortization profiles in the tax exempt market, as well as corporate linked debt related to gas prices. So in these sectors, including securitized, including AI, there's a common theme where we prefer harvesting attractive yields in parts of the market where you do have to roll up your sleeves and do the credit work. But they're not typically parts of the market that have a high degree of sponsorship from passive investing. And so because of that, we can extract a little bit more premium. That's great. Got it. And just give us kind of the brief view around private credit. I know there's some questions around that. is it fair to say not all private credit is created equal? What's your perspective on this as you look at that part of the market? Yeah, I think it's fair to say that, but taking a step back, you know, the evolution of private credit, which really started growing in the low interest rate era, comes with a lot of growing pains. Part of those growing pains is that the initial middle market loans were to more levered companies and at perhaps more favorable terms. And so when you look at the last couple of years, defaults and distrust exchanges in general across private credit has been trending higher than your traditional, broadly syndicated loan market as well as your public high yield markets. So that's been an understandable evolution with growth. Then we have the idiosyncratic risks with software loans linked to AI that facing some acute stress. Whether or not that stress is warranted is still to be seen, but it's increased the concerns around private credit above and beyond some of the cracks that we're seeing from the easier underwriting standards. But to what you just stated, it's not a homogenous market. There are differences between asset-based lending, direct middle market lending, and all different types of variations. And so, like most credit cycles for products, the emphasis should be more about looking at private credit in the context of a broader diversified portfolios and emphasizing the relative value opportunities when you shift between public and private and different markets. Martin, when you think about the dividend value strategy, which is one of our more popular, how is that positioned as you look ahead to the rest of this year and into 27 and beyond? Yeah, well, it is a core growth and income fund. So let me first start with the growth side. And so for many of us, we continue to have an attraction to have exposure around this AI data center theme, if you will. And so that would be mainly focused around the picks and shovel companies that are benefiting from all the spending that's happening. So at the top of that list would be the compute side, so the semi-conductor companies, as well as the semi-conductor suppliers, like an applied material, that would also include networking companies like Asisco or Naurista, would also include other kind of ancillary players like Acorning, which makes the optical fiber that goes into all of these AI data centers. So that I think is kind of a core part of the portfolio, but then there's also the growth companies that might fall, let's say, kind of outside of the typical AI realm, if you will. So that would include a company like Eli Lilly, which is basically like an island in the storm of a very difficult healthcare sector. But this is a company that is the dominant player in these obesity drugs, and they have all of these other beneficial healthcare benefits around dementia and sleep apnea and all these other things that we're learning about, right? And today, the obesity market itself is only 3% penetrated globally, so that's huge growth run rate for them. And so that would be an example of something that might fall outside of the AI realm. Another company I might highlight would be a company like Viking Products. Viking is the cruise line company came public a few years ago. Cruising is a great vacation experience for a lot of people. It has a very high repeat rate. This is a cruise company that tends to cater to the discerning more senior cruiser. And if you look at the baby boomer generation, these folks are sitting on $90 trillion of savings, and they want to participate in experiences and all these folks are retiring. So cruising sounds like a really great opportunity for them. So that would be an example. And then finally, we moved to the income basket, and we touched on tobacco. So that would be companies like British American tobacco and Philip Morrison. I'll tree it to name a few. And then finally, I would touch on Starbucks again, which was actually a very attractively yielding company, and it's run also by a dynamic new CEO. So it's a lot of idiosyncratic opportunities, if you will, as much as there might be a few top-down themes, they're a lot more accidental and intentional. But what bubbles out of that is you still see certainly a favorable disposition to AI data spend, if you will, but particularly around the picks and shovels companies. I love hearing about some of these analog right examples. I think your colleague, Chris Bookbinder, said about cruising, AI is not going to disrupt cruising anytime soon. So again, a lot of opportunities beyond and sort of that dual approach. Okay, there you have it. Special thanks to Chip and Martin for coming on the show. Capital ideas is brought to you by Capital Group, one of the world's largest and most experienced active investment managers. If you like what you heard today, please follow us on your favorite podcast platform. Thanks for listening, and we'll see you next week. Hyperscalers are large-scale cloud service providers that operate massive software-driven data centers, capable of dynamically scaling computing, storage and networking resources to meet global demand. K-shaped economy refers to an economy in which growth and decline occur simultaneously across different groups, sectors, or industries, creating a wide gap. CapEx stands for Capital Expanditure. The S&P 500 is a market capitalization weighted index based on the results of approximately 500 widely held common stocks. PCE stands for Personal Consumption Expanditures, a measure of consumer spending on goods and services in the United States. CPI, or the Consumer Price Index, measures the overall change in consumer prices based on a representative basket of goods and services over time. Tips or Treasury inflation-protected securities are marketable U.S. Treasury securities whose principal and interest payments are adjusted for inflation. FOMC is the Federal Open Market Committee within the Federal Reserve responsible for setting monetary policy. The FOMC's 40 Act refers to the Investment Company Act of 1940, a U.S. Federal law that regulates how investment companies are organized, operate and disclose information to investors. Equity Risk Premium is the additional return investors expect from investing in stocks over risk-free assets compensating for the higher risk of equities. P.E. is the price-to-earnings ratio of a company's share or stock price to the company's earnings per share. Credit-risk premium is the additional return that lenders require to compensate for the risk of default by a borrower. The investment-grade refers to bond-graded triple B and above. IPO is initial public offering. A CLO is a collateralized loan obligation. Housing PACs refer to planned amortization class bonds. A stablecoin is a cryptocurrency designed to maintain a stable value. Credit spread is the extra-yield investors' demand to own a corporate bond instead of a U.S. Treasury. GDP is gross domestic product. This content is intended to highlight issues and be of a general nature. Investments should not be considered advice, an endorsement, or a recommendation. Products mentioned are not an offer of the product and may not be available for sale or purchase in all countries. All investments have risk and you may lose money. Past results are not a guarantee of future results. Investments in private credit and related strategies involve significant risks, including limited liquidity and potential loss of capital. 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