00:00 josh
Nvidia is the face of this AI trade, trend, and theme. Jose, how important is that to the overall U.S. economy at this point?
00:09 Jose
Well, that’s a big one, Josh. It’s great to be here. The market is now becoming a barometer for the economy, as low- and middle-income consumers have many challenges. Although such voices are heard in the retail industry’s financial results announcements, it is actually high-income consumers who are driving up consumption. This means that if there is a correction in the market, their behavior could become more portfolio driven. You know, everyone is looking at their phones and portfolios. When you realize that your sense of self-worth has declined, you will suddenly begin to withdraw from discretionary activities. So, it’s huge. On the subject of AI, will capital investment in AI deliver long-term capital returns or will it be lackluster? That remains to be seen, which is why the market here is waiting for these results to really pick a direction. We’re really sandwiched between the S&P 500 here. It has recovered from a 5% drawdown from yesterday’s highs. And today we tried to break above the 50-day moving average, but we couldn’t. So we’re right at these two critical points. The market is waiting for direction. I believe it will break out of the blockbuster guidance and pull out above the 50-day moving average. And don’t forget that the September jobs report will be released tomorrow. This could move interest rate cut expectations, which are currently around a coin toss.
01:21 josh
Jose, please listen. There was a good article in the Journal by Greg Yip. Reading this this week reminded me of you. He calls it the most joyless technology revolution ever. AI is making us both better off and worse off, he says. He says the discomfort around AI helps explain the disconnect between a strong economy and an anxious public. Do you agree with that as an economist? Does that mean it’s a disconnection?
01:46 Jose
To some extent. You know, we’re starting to listen to employers more and more, and they’re starting to realize that they’re hiring less because they’re adopting AI. So that’s what really hinders labor market performance. Oh, so we listened to the Fed minutes.
02:05 josh
And do you think that makes people anxious — let me ask you, do you think that makes people anxious?
02:08 Jose
I think so. I think so because many college graduates expect to enter the workforce. They have great grades, great grades, great recommendations, but they have a hard time getting into it. Probably because there are only 10 slots instead of 20. Because AI is doing a lot of the work. So I think there is some anxiety.
